The bank with the second largest stock in the market has announced a 13 percent or P 558 million profits before tax. Barclays Bank Botswana, which will be operating as ABSA in July 2018 notes that it strives for excellence and they will continue holding on to the rights to trade as Barclays in Bank in Botswana.
The bank highlights that its Retail Banking market which was characterized by continued job losses in the mining sector and industries affected by the closure of a key mine in 2016 remain slightly affected. The Barclays Botswana Managing Director Reinette Van Der Merwe, has on Thursday highlighted that they have necessitated a revision of the lending criteria to the affected customer segments.
The released statements for the year which ended December 2017 show that there had been a continuous modest growth in household income which resulted in constrained demand for credit from households. The pressure on household incomes consequently led to a reduction in the savings and deposits from individuals and therefore a decrease in the Bank’s retail customer deposits. Despite the headwinds in the market, Retail Banking registered a strong overall performance. Profitability increased year-on-year driven by a marked improvement in impairments. While total revenue remained flat year-on-year, non-interest income registered a notable growth of 9 percent
The Bank Financial Director (FD), Mumba Kalifungwa notes that they forecast inflation to be at an average of 3.7 percent in 2018. This forecast comes after Inflation had been stable and averaged 3.3 percent in 2017. The moderate increase in economic activity, alongside slow growth in personal incomes which resulted in weak activity resulted in low inflationary pressures. As the cost of living including fuel, electricity, service tariffs, transport and water rose, the results note that it did not do much harm as it only moderately impacted inflation in 2017.
Imported inflation therefore is reported to have been restrained given low inflation among trading partner countries and the relatively stable Pula exchange rate. However in 2018, they note they expect inflation to pick up gradually on the back of rising international oil prices and expansionary government budget.
In line with their business strategy to grow fee income, the bank stresses that it will continue seeking better and improved ways of service provision. Deposits are reported to have grown by 6 percent while loans balances increased by 3 percent year-on-year. Barclay’s financial results show that significant strides were made in delivering strategic priorities during the 2017 financial year. The FD explained that they will continue to review the number and location of their physical distribution channels as increasing number of customers continue migrate from brick and mortar to digital channels.
The Business Banking strategy continued to deliver results with an 11 percent year-on-year growth in profit before tax. This growth in profitability is evident to have been driven by both net interest income and fee commission income. The main driver to net interest income was on the back of strong asset growth on loans and advances to customers then business strategy forecast shows that there will be a continued focus on embedding strong banking relationship in order to deliver client service that would differentiate service to customers.
The results show that the Bank through the launch of the Enterprise Supply Development (ESD) is positive the initiative will enable them to serve the Small Medium Enterprise (SME) market better through supporting the corporate value chain. “We will be rolling out new products and services during the year which we believe will continue to enhance our offering and in implementing our strategy,”
Loans and advances to customers increased by 14 percent year-on-year to P10.7 billion. This growth is largely associated with Corporate, Retail and Business Banking segments that grew by 36 percent and 6 percent respectively. This bank notes was mainly in their chosen business segments, where various debt and transactional banking solutions were offered. Customer liabilities decreased by 2 percent year-on-year largely driven by corporate deposits where we saw a reduction of 4 percent to P6 billion. We continue to strive to improve our customer service and product offering to existing and potential customers with a view of providing access to finance as well as various payment solutions.
This has continued to contribute positively to the momentum that the bank continues to build on. The results emphasizes that it remains important to insure there is growth in the fee income remains critical to their strategy and this will continue to be an area of focus in expanding the banks revenue base. The bank notes that it will continue to focus on controlling costs, and managing impairments by selective credit processes and maintaining the focus on collections throughout 2018.
The FD highlighted that their balance sheet remains solid at a total position of P15 billion, with strong liquidity and capital levels. He explained that they remained well above the regulatory Liquid Asset Ratio (LAR) requirement of 10 percent for the year ended 31 December 2017 ending at 15.49 percent. The Bank’s regulatory capital position was P2 billion representing a ratio of 19.8 percent above the regulatory limit of 15 percent.
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.
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.
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.