Botswana Telecommunication Corporation Limited (BTCL), the country‘s home grown and only listed telecom giant continues to sow and maintain profitability amid a transformation stage and stiff competition from new industry entrants.
The Botswana Stock Exchange (BSE) listed telecommunications group has declared a total dividend of 13.43 thebe per share for the 2017/18 trading year despite declined profits after tax for the year. This is increased dividend payable compared to 11.9 thebe per share paid in the previous financial year. The company recorded an 8% decrease in profit after tax to 217 million pula from P237 million in the previous year ended March 2017.
BTC Board Chair Lorato Boakgomo-Ntakhwana explained on Thursday when the company was presenting its financial performance that the Group reported a sound financial position and sustainable cash flow. “Despite our revenue contraction and consequently shrunk Profits after tax we are still sitting on very sound financial stance, the company has no debts, successfully managed cost during increased spending and declined revenue,” she said.
Ntakhwana further explained that it was under that backdrop that her board took a decision to pay their shareholders more. “We are making profits, our figures only declined because of clear increased expenditure due to refurbishment of the head office, increased administrative expenses and other industry challenges that are clearly attributable to our decline in profits, but the company collectively has more money sitting in our reserves hence the increased dividends share,” explained Ntakhwana.
During the trading year under review the company registered a 3% decline in revenue to P1.567 billion from P1.615 billion compared to the previous year. Abel Bogatsu, BTC General Manager – Finance explained that BTC had registered higher administrative expenses of P440 million compared to P402 million in the previous year due to a number of in house infrastructure improvement and system upgrade at the company headquarters and service centres country wide.
“We also recorded a P10m increase in the tax charge from prior year,” he said. The company’s Gross profit however grew by 3% due to 11% reduction in cost of sales to 601 million pula against 676m million pula in 2017. “We made significant savings on transmission and bandwidth costs on negotiated and competitive price offerings from our suppliers,” noted the Head of Finance at Megaleng House. Bogatsu further explained that the revenue decline was mainly attributable to pressure on mobile revenue observing that other revenue lines remained relatively flat.
“We however saw an increase in the uptake of data-centric products in line with market trends. The business during the year made P121million worth of investments in fixed broadband expansion and LTE/4G mobile broadband optimization to increase network coverage and enhance our value proposition,” he said. Total comprehensive income increased by 13% to P269m as a result of the revaluation of land and buildings which is done every 3 years.
BTC Managing Director Anthony Masunga explained that during the trading year under review overall economic environment for the year was subdued, which led to the reduction in ICT spend from enterprises and government entities, with most entities negotiating for lower prices on new and existing services. “The slowdown in spending also impacted the consumer segments as households were faced with prioritizing their income on basic necessities,” he said.
Masunga also added that competition in the telecommunications sector continued to intensify with the entry of new internet service providers leading to a downward pressure on prices. “This had an impact on our performance for the year,” he said. Masunga observed that his company was still on a transition and transformation period. “We are still making alignments and adjusting to create a shrewd model we can better serve our customers and increase our share value,” he said.
He noted the company made investments to improve the work and retail environment adding that in the coming financial years BTC will start getting return on investment. “This increased expenditure is expected to improve employee productivity, performance and customer experience. In response to technology trends, we have adopted modernized, faster and cheaper technologies which are aligned with our customer demands,” he said.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”