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Standard bank exits high risk sectors

Standard Chartered Bank Botswana Limited has reflected on a challenging market with harsh conditions by registering a 6 percent decrease on their operating income. Even so the bank has says that it remains liquid with a 25 percent liquidity ratio. The Group has noted that Retail banking remained resilient delivering strong performance despite a competitive environment.

The bank has also said that the Commercial banking segment continued in its strong positive stride since inception; reducing its loss position and almost breaking even. Even though this may be the case, the bank has noted that the Corporate and Institutional Banking segment has exited high risk sectors and improved the concentration risk in its asset book hence improving the overall credit quality of the book.

“The segments are now well positioned for accelerated growth and positive contribution to the Group performance, the Group Chairperson Bojosi Otlhogile explained. The chairperson further explained that the Overall balance sheet is well positioned to accommodate good growth and take advantage of the opportunities offered by the promising economic activities in Botswana.

The Group noted that it had a challenging financial year which it attributed to constrained revenue growth, a significant loan impairment charge on one client and increase in costs. Interest rates remained low in 2017; the group said this was further strained by a reduction in the bank rate and negatively impacting margins.

The Implementation and adoption of the International Financial Reporting Standards (IFRS) 9, the group noted, will materially influence Banks’ financial statements, with impairment calculations affected the most. In preparation for this, the Bank said that it has reviewed its capital management plan with a view to enhancing its capital base.

The Bank which has noticed a 9 percent customer deposit growth has highlighted through its results that the bank remains liquid with a 25 percent liquidity ratio. The Ministry of Finance had reported that the real Gross Domestic Policy (GDP) was expected to register a year-on-year growth of 4.7 percent in 2017.

The results show that Operations expenses with impairment excluded had a 15 percent increase due to continuing technical support and investment in staff’s Botswana Economic Environment (BEE). The bank has stated that the rebound in economic growth is expected to benefit from the recovery in the global economy, while that of non-mining sectors should be supported by the impact of Government’s interventions relating to policies and strategies adopted to diversify the country’s sources of growth.

The Bank of Botswana, through its monetary policy reduced the bank rate by 50 basis points to 5.0 percent during 2017. This, the group said was to provide added stimulus to the domestic economic environment. Inflation on the other hand is also expected to be moderate in the short-term and the Central Bank expects it to remain within the 3-6 percent target band in the medium term.

Business and Financial Position Review

Despite the challenging period Standard Chartered Bank has endured, the Group remained resolute. In addition, the Group draws support and benefit from the parent through tested ideas in driving sustainable financial growth and increased value for its shareholders.

In 2018, the Bank says, it will seek ever more impactful partnerships to drive sustainable and lasting projects in communities across the country in line with Vision 2036’s mandate of prosperity for all. A dividend of BWP 49.7 million (16.66 thebe) per ordinary share was declared and paid during the year out of the 2016 profits.

The Group with 120 years of existence in the country notes that it has made good progress on the refreshed strategy and achieved steady progress against its strategic objectives.  It further noted that building strength and efficiency into all areas of the business, increased focus is on clients, people and leveraging on strong international networks has contributed to that. This, it said, remains important in their mandate of delivering better value and returns to their stakeholders.  The bank ended the December 2017 period with total assets amounting to 15 million following 2016’s 13 million.

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P230 million Phikwe revival project kicks off

19th October 2020
industrial hub

Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status.  The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.

This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago.  In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.

However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced.  Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.

The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.

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IMF projects deeper recession for 2020, slow recovery for 2021

19th October 2020

The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.

On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April.  For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.

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Botswana partly closed economy a further blow of 4.2 fall in revenue

19th October 2020

The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.

Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.

Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).

“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.

Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.

This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.

For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.

Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers.  “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.

‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’

According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.

Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.

“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.

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