First National Bank Botswana (FNBB) continues to swim through difficult times of slow economic growth caused by amongst others the fall out of BCL Mine and generally sluggish economy.
The Group which is listed on the Botswana Stock Exchange (BSE) as FNB Holdings registered 9 percent increase in profits before tax for half year trading period ended 2017 December 31st . This was revealed by the company’s top brass at a financial results briefing in Gaborone on Wednesday. FNBB Chief Executive Officer (CEO), Steven Bogatsu shared that his bank continues to deliver positive results despite the unfavorable environment. He attribute the bank’s gains to innovative customer tailored products that best satisfy FNBB clientele.
Bogatsu highlighted that 95% of volumes were accumulated from clicks, that is to say growth in digital banking transactions significantly contributed to their positive financial output. “Click transactions involve both online banking and cell phone banking. These are platforms the bank continues to provide to customer to ensure ease of banking,” he said.
Bogatsu revealed that in response to the aftermath of BCL closure and general sluggish economy, his bank has remained cautious on lending and focused more on recoveries and operational efficiencies which are positively impacting the profitability growth and ensuring sustainability of the banks’s performance into the future.
Giving an in-depth look into the financial results FNBB Chief Finance Officer (CFO), Makgau Dibakwane highlighted that the 9 % increase in profit before tax was due to over 444 million pula registered compared to 407 million pula recorded in the six month ended 31st December 2016. The Bank also realized 10 percent increase in noninterest income registering over 548 million pula compared to 499 million pula accumulated in the previous corresponding half year period.
This, according to the FNBB CFO, was due to significant increase in the volumes of electronic transactions. “This reflects success of promotional campaigns over the period to encourage customers to make less use of branches and greater use of the lower-priced electronic options, with a view to providing customers with greater convenience,” said Dibakwane.
A further scrutiny of the financial highlights indicates that advances to customers did not record any significant change in figures. Deposits from customers climbed by 4 percent from 17, 077, 199 000 in half period ended 31st December 2016 to 17, 818,762, 000 in trading period under review.
Dibakwane said although advances growth fell slightly below the market rate, the Bank still holds the largest market share of advances of 30% , adding that Growth of 10% was achieved in retail advances, mainly through employer schemes, while muted demand for business credit of the right risk profile subdued the overall advances growth. “There have, however, been recent signs of improved business confidence for 2018,” he said.
The bank also revealed that in overall their balance sheet grew by 6.7% from P22.4 billion to P23.9 billion on the back of growth in its retail and business deposit base, particularly in current accounts, which strengthens the Bank’s customer base. The Chief Finance Officer explained that this growth was posted in the term deposits, coupled with a further issuance of senior debt during the second quarter. “Both these initiatives are aimed at further lengthening the Bank’s funding profile. As a result, the deposits to customers and borrowings which represent senior debt posted growth of 4% and 21% respectively leading to a stable loan to deposit ratio of 85%.”
FNBB executives also shared that the Bank redeemed non-compliant Tier II capital instruments and reissued compliant instruments to enhance the capital position of the Bank and lengthen the maturity profile. As such, the Bank’s total capital adequacy ratio before dividend has been maintained at 19.88% as at 31 December 2017. “This is well above Bank of Botswana’s required minimum ratio of 15%,” said FNBB Chief Finance Officer explaining that as at 31 December 2017, Tier I capital ratio stood at 15.41% above the regulatory minimum of 7.50% whilst Tier II capital ratio was 4.47% in the same period.
He noted that the current Tier II capital ratio can be built up to the regulatory minimum of 7.50% over time, depending on the Bank’s strategy, capital demand and supply dynamics. “However, as per the regulations, the entire minimum capital adequacy ratio of 15% can be covered with Tier I capital. When the strategy dictates, the Bank would keep on tapping the capital markets for Tier II capital instruments in line with the Capital Management Framework,” he said.
INVESTING IN CAPITAL AND SKILLS
Meanwhile the Chief Executive Officer of FNBB, Bogatsu said Botswana needs to differentiate itself as a destination for investments in capital and skills. He indicated that the local growth slowed to 1.8% year on-year in the third quarter of 2017, 0.5% lower than at the same time in 2016. “Growth was led by the services sectors of transport, communications and financial services, whereas the trade sector has suffered from the downturn in the mainstream cutting and polishing diamond industry,” he said.
Bogatsu said In the short term, growth prospects were anticipated to reach 4% by 2019 with a medium-term average of 4.1% however he underscored that local growth should improve saying government must take deliberate actions in oiling growth dynamics, such as improving business confidence, policies and business regulations that will allow for more business to operate effectively as well as identifying specific economic zones.
The FNBB Boss noted that moving forward his bank will be focused on specific strategies such as building partnerships, improving customer service, investing in digital transformation and automation as well as banking efficiencies. "It has been an environment of efficiencies and we will continue building momentum for growth. The bank has worked on improving costs efficiently and as a result the bank has experienced 3.0% growth on assets,” he said.
Bogatsu also shared that despite resistance from some customers, FNB was 97% compliant of "Know Your Customers" popularly known as KYC. The company directors proposed an interim dividend of 5.0 thebe per share, the group says cautious approach to lending in recent times, has impacted on its net interest income growth, but reduced the Bank’s exposure to impairments, leaving the Bank well-placed to take advantage of future opportunities
In the coming months prices will go up and inflation will shoot sharply above the target of 3 percent to 6 percent towards the third quarter of 2021, the Bank of Botswana on the other hand will continue to withhold its knife on the Bank Rate. This is according to a forecast made by Kgori Capital in its recent Market Watch Segment.
Statistics from Statistics Botswana show that the recent 1.8 percent increase in the September inflation, from 1 percent in August, was a reflection of the upward adjustment in public transport fares (Transport (from -6.9 to -3.9 percent) in September 2020, which is estimated to have increased inflation by approximately 0.64 percentage points.
Local anti-trust body, Competition and Consumer Authority (CCA), this month received back to back acquisition proposals from South African clothing retailers to wipe out their former rivals, Edcon, from Botswana malls.
Last week BusinessPost was in possession of Merger Notice No 23 of 2020 whereby a South African clothing retailer owner, Retailability Proprietary Limited, through Oclin Proprietary Limited, proposed to acquire parts of the Edgars business conducted by Edcon in Botswana (through Edcon Botswana), as a going concern, consisting of certain assets and identified liabilities.
South African government’s Business Rescue Practitioners earlier this year announced that Retailability will buy Edgars, after the latter filed for a business rescue plan in April after it failed to pay suppliers. This move will see Retailability add Edgars to its portfolio consisting of brands such as; Legit, Beaver Canoe and Style.
Retailability landed on Botswana shores 18 years ago with its flamboyant urban fashion Style which had 17 stores. Style, having almost the same target market as Edgars as it offers men’s and ladies’ contemporary and formal fashion, gave the 91 year old legendary clothing retailer a run for its money, and has won the battle as its parent company has taken over Edgars.
Retailability brands are synonymous with Botswana shopping centres and there are currently five (5) Beaver Canoe stores, 10 Style stores and seven (7) Legit stores across this country. The Beaver Canoe stores sell clothing apparel for men and boys only. The Legit stores have a fashion store format which focuses on the retailing of clothing, footwear, accessories, colour cosmetics and cellular products.
Retailability operates in over 460 stores across South Africa, Namibia, Botswana, Lesotho, and Eswatini. Many observers suggest that because of the deal with Retailability to swallow Edcon, most Edgars stores in Botswana will change their name and be branded Style. A sad tale for religious consumers of the Edgars trademark who got used to love their favourite brand for years.
According to CCA’s Merger Notice No 23 of 2020, Retailability is controlled by Clifford Raymond Lines (through a company which functions solely as a holding company of his interests in Retailability) and Metier Investment and Advisory Services Proprietary Limited (“Metier”). Metier is a private equity enterprise with investments in a number of industries spanning from healthcare, hospitality, FMCGs and telecommunications.
Retailability directors are mostly South Africans; Clifford Raymond Lines, Mark Richard Friday and Norman Victor Drieselmann. Only Nasreen Essack, who was appointed February this year, is a Motswana. He comes after Brian Thuto Tsima left on the same date. Retailability 100 percent owns Oclin Proprietary Limited, the company it is acquiring Edgars with, by a capacity of 3000 shares.
The target business, Edgars, offer textiles, cosmetics and cellular products. Edcon has a Motswana director, Charles Mzwandile Vikisi, a South African, Shane Van Niekerk and Zimbabwean Jethro Kamutsi.
“The Target Business comprises of two (2) Edgars franchise brands and private label stores across Botswana. These stores target middle to upper income customers and are home to a range of private label brands such as Free2BU, Charter Club and Stone Harbour, and a wide range of market label brands (such as Levi’s and Guess) for clothing, footwear and cosmetics.
In addition, the Target Business operates iconic Edgars Home and Edgars Beauty stores as store-in-store formats rounding out the department store offering in Botswana,” said CCA. Foshini also lines up to take Jet Botswana from Edcon.
The Foschini Group (TFG) released a statement confirming its latest intentions to acquire Edcon assets or Jet for a cash purchase consideration of R480 million. This was after the business rescue practitioners offered TFG to buy Jet by that amount.
CCA is currently mulling on a proposed merger by TFG to take over Jet operations in Botswana. Merger Notice No 21 of 2020 from TFG came a few days before the Retailability proposal. In this merger TFG, acting through Foschini Botswana, want to take over “parts” of the Jet business conducted by Edcon through Jet Supermarkets Botswana.
TFG will be willing to add Jet to its portfolio of 30 retail brands that trade in clothing, footwear, jewellery, sportswear, homeware, cell phones, and technology products from value to upper market segments throughout more than 4085 outlets in 32 countries on five continents. TFG will also get Jet’s distribution centre located in Durban and certain stores in Botswana, Lesotho, Namibia and Eswatini. Also part of this fat deal is that the company is looking to also acquire JET Club and all existing JET stock of no less than R800 million.
Johannesburg listed TGF owns Foschini Retail Group which owns the local operations called Foschini Botswana, the acquiring enterprise according to CCA merger notice. “TFG is not controlled by any enterprise/s and for completeness, the three largest shareholders of TFG holding shares greater than 5% as at 27th March 2020 are: Government Employees Pension Fund (16.2%) Public Investment Corporation (13.2%); Old Mutual Limited (6.7%); and Investec Asset Management (6.3%). The remaining issued share capital in TFG is widely held,” said the merger notice.
Only Abdool Rahim Khan is a Motswana in the Foschini Botswana directorship, the rest; Ganeswari Shani Naidoo, Anthony Edward Thunström and Gustav Jansen (alternate director) are South Africans.
According to the CCA merger, the Jet Business is Edcon’s discount department store division, selling clothing, footwear, homeware and some cosmetics as well as cellular products and targets lower-to-middle income consumers throughout Botswana. The Jet Business does not directly or indirectly control any enterprises, says the notice. CCA seeks any stakeholder views for or against the proposed merger, which may be sent within 10 days from date of this publication to the following address.
Botswana Communications Regulatory Authority BOCRA signed a memorandum of Agreement (MoA) with the Ministries of Transport and Communications (MTC), Basic Education (MoBE) as well as Local Government and Rural Development (MLGRD).
The MoA seeks to continue the collaboration that dates back to 2016 when the three parties first agreed to work together in a project aimed at computerizing and providing broadband Internet to primary schools in remote and underserved areas of Botswana.
The project benefitted 68 primary schools and 9 secondary schools through the construction of Local Area Network (LAN) in each primary school, provision of 5 Mbps dedicated broadband Internet to each Primary School and provision of Wi-Fi enabled tablets, laptops and related peripherals such as printers and copiers.
Further, the project will see the augmentation of computers in 9 Junior Secondary Schools with 30 laptops per identified school and employment of Information Technology (IT) officers at each primary school.
When speaking at the signing ceremony in Gaborone, Chief Executive of BOCRA and Chairperson of Universal Access and Service Fund (UASF) Board of Trustees Martin Mokgware said the project’s ultimate goal is to facilitate pupils in schools and host villages to be able to play a meaningful role in the digital economy.
Mokgware indicated that this necessitates upgrading of existing Telecommunications infrastructure to high capacity broadband that will support delivery of education, accessibility to the quality Internet and usage of ICTs.
The Fund began its inaugural programme by sponsoring the provision of WiFi hotspots in public areas around the country as its first project. Following the successful implementation of public WiFi hotspots, the Fund identified Kgalagadi, Ghanzi and Mabutsane areas for mobile network upgrades, schools computerization and internet provision.
Conscious that the project would not be possible without buy-in and support from MoBE, MTC and MLGRD, the Fund facilitated the signing of the first MoU between the three parties in 2016 for implementation of the project.
BOCRA Chief Executive said the signing of this agreement is aimed at benefitting the Kweneng District, adding that they have already assessed the area and have determined that they will be covering 62 underserved villages and 119 schools, 91 of which are primary schools.
“This is a project for which the partner Ministries need to re-commit for its success. Lessons from the previous schools’ computerization and internet connectivity project require that we increase our involvement and resources dedicated to the project for it to be successful. It is my belief as the project coordinator, that we will not do things the way we did them during the first project, for if we do, then we will not have learnt anything,” he said at the signing ceremony.
The purpose of learning is so that there can be continuous improvement to minimize the length of time and amount of resources utilized, he said expressing confidence that their partners will step up to the plate and ensure they play their part in the implementation of the project and that it will progress smoothly having already tread along a similar path.
UASF’s role lies mainly in funding and project management. According to Mokgware, once the project is completed, the work to integrate ICTs into the classroom begins in earnest. Therefore, he said, the project will not succeed without full cooperation and oversight of partners.
“MoBE will put in place the necessary content and ensure that the curriculum is available to all. MLGRD will provide, among others, the enabling environment by ensuring readiness of the school’s infrastructure and necessary security.”