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Asset management boosts BIHL profits

Botswana Insurance Holding Limited’s operating profits increased by 18 % in the last financial year.

Sharing the results this week, BIHL Group Chief Executive Officer, Catherine Lesetedi-Letegele revealed increased total assets under management which seats at 26.7 billion pula including Zambia’s 4.1 billion in 2017 compared to 25.9 billion at the close of 2016 trading year indicating a 4 % increase. The BIHL subsidiary, Botswana Insurance Fund Management (BIFM) outperformed other segments by showing a continued trend in growth and profitable returns, Lesetedi-Letegele said.

Lesetedi-Letegele noted that her company was pleased with the asset management business performance: “Our assets under management (AUM) portfolio have continued its upward trajectory and the business has also successfully driven increased operating profit margins.”
“A relatively stable market performance in BIFM’s local and regional businesses also delivered a positive impact on asset management fee incomes consequently boosting our entire Group balance sheet,” she highlighted.

BIHL revealed that the Zambia asset management business performed well due to stable market performance and a favorable Kwacha performance.  “All these factors had a positive impact on the outcome of this key segment of our business, we continue to efficiently manage and control costs across all business to ensure good overall business performance,” said Lesetedi –Letegele .

Further deliberating on Botswana Insurance Fund Management performance Letegele highlighted that profit before share of profit of associates and joint ventures under BIFM increased by 13% to P78 million in 2017 from P67.6 million in the corresponding period. The subsidiary‘s total profit for the year increased by 16% from 65.8 million in 2016 to P78.2 million in the year under review.

For other businesses Botswana Insurance Holdings Limited reports that their Life Insurance segment which is housed under Botswana Life realized net premium income growth of 12 % from 2.07 billion in 2016 compared to 2.32 billion in 2017 with all income lines posting growth of at least 7 % and above. Still under the Life Insurance segment total new business written grew by 11 % underpinned by strong single premium income performance.

Under short-term insurance business, BIHL reports that premium income was 6 % lower compared to the previous year mainly due to increasing defaults from clients failing to meet their premium obligations. “Improved claims administration on the new administration platform saw operating profit increasing from 0.5 million in 2016 to 1.3 million in 2016,”  Lesetedi-Letegele shared. She observed that this were commendable results considering the one-off restructuring costs amounting to 2 million pula that were incurred during the year under review.

Further financial highlights at Group level indicate that BIHL total net income increased by 30% to P3 billion compared to P2.1 billion in 2016. The company’s group total assets increased by 7% to P15.6 billion compared to P14.4 billion in the previous year. However the BIHL Group profit before tax decreased by 18% to P469.6 million from over P575 million pula in 2016, this, according to the Group Chief Executive was underpinned by significant resources invested into refining business operations.

Lesetedi-Letegele also shared with stakeholders that Botswana Insurance Holdings Limited received approval from the shareholders on the BIFM Citizen Economic Empowerment initiative tabled at the Emergency General Meeting. “We are pleased to state that 25.1% of the BIFM shareholding will be given to staff through a staff performance share scheme,” she said

She further stated that her company continues to focus on key twin strategies of growth and profitability. “Though prospects for the economy remain mixed, reflecting both slower domestic growth and international economic uncertainty, we have successfully maintained capital management and solvency targets and the group remains well positioned,” she stated.

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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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