FNBB positive results defy sluggish economy
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
Business
LLR transforms from Company to Group reporting
Botswana Stock Exchange listed diversified real estate company, Letlole La Rona Limited (“LLR” or “the Company” or “the Group”), posted its first set of group financial statements which comprise the Company and Group consolidated accounts, which show strong financial performance for the six months ended 31 December 2023, with improvements across all key metrics.
The Company commenced the financial year with the appointment of a Deputy Chairperson, Mr Mooketsi Maphane, in order to bolster its governance and enhance leadership continuity through the development of a Board and Executive Management Succession Plan.
At operational level, LLR increased its shareholding in Railpark Mall from 32.79% to 57.79% and proudly took over the management of this prime asset.
The CEO of LLR, Ms Kamogelo Mowaneng commented “During the period under review, our portfolio continued to perform strongly, with improvements across all key metrics as a result of our ongoing focus on portfolio growth and optimisation.
“We are pleased to report a successful first half of the 2024 financial year, where we managed to not only grow the portfolio through strategic acquisitions and value accretive refurbishments but also recycled capital through the disposal of Moedi House as well as the ongoing sale of section titles at Red Square Apartments. The acquisition of an additional 25% stake in JTTM Properties significantly uplifted the value of our investment portfolio to P2.0 billion at a Group level. Our investment portfolio was further differentiated by the quality of our tenant base, as demonstrated by above market occupancy levels of 99.15% and strong collections of above 100% for the period”.
The growth in contractual revenue of 9% from the prior year’s P48.0 million to the current year P52.2 million, increased income from Railpark Mall, coupled with high collection rates, has enabled the company to declare a distribution of 9.11 thebe per linked unit, which is in line with the prior year.
In line with its strategic pillars of ‘Streamlined and Expanded Botswana Portfolio’ as well as ‘Quality African Assets’, the Group continuously monitors the performance of its investments to ensure that they meet the targeted returns.
“The Group continues to explore yield accretive opportunities for balance sheet growth and funding options that can be deployed to finance that growth” further commented the CEO of LLR Ms Kamogelo Mowaneng.
Ms Mowaneng further thanked the Group’s stakeholders for their continued support and stated that they look forward to unlocking further value in the Group.
Business
Botswana’s Electricity Generation Dips 26.4%
The Botswana Power Corporation (BPC) has reported a significant decrease in electricity generation for the fourth quarter of 2023, with output plummeting by 26.4%. This decline is primarily attributed to operational difficulties at the Morupule B power plant, as per the latest Botswana Index of Electricity Generation (IEG) released recently.
Local electricity production saw a drastic reduction, falling from 889,535 MWH in the third quarter of 2023 to 654,312 MWH in the period under review. This substantial decrease is largely due to the operational challenges at the Morupule B power plant. Consequently, the need for imported electricity surged by 35.6% (136,243 MWH) from 382,426 MWH in the third quarter to 518,669 MWH in the fourth quarter. This increase was necessitated by the need to compensate for the shortfall in locally generated electricity.
Zambia Electricity Supply Corporation Limited (ZESCO) was the principal supplier of imported electricity, accounting for 43.1% of total electricity imports during the fourth quarter of 2023. Eskom followed with 21.8%, while the remaining 12.1, 10.3, 8.6, and 4.2% were sourced from Electricidade de Mozambique (EDM), Southern African Power Pool (SAPP), Nampower, and Cross-border electricity markets, respectively. Cross-border electricity markets involve the supply of electricity to towns and villages along the border from neighboring countries such as Namibia and Zambia.
Distributed electricity exhibited a decrease of 7.8% (98,980 MWH), dropping from 1,271,961 MWH in the third quarter of 2023 to 1,172,981 MWH in the review quarter.
Electricity generated locally contributed 55.8% to the electricity distributed during the fourth quarter of 2023, a decrease from the 74.5% contribution in the same quarter of the previous year. This signifies a decrease of 18.7 percentage points. The quarter-on-quarter comparison shows that the contribution of locally generated electricity to the distributed electricity fell by 14.2 percentage points, from 69.9% in the third quarter of 2023 to 55.8% in the fourth quarter. The Morupule A and B power stations accounted for 90.4% of the electricity generated during the fourth quarter of 2023, while Matshelagabedi and Orapa emergency power plants contributed the remaining 5.9 and 3.7% respectively.
The year-on-year analysis reveals some improvement in local electricity generation. The year-on-year perspective shows that the amount of distributed electricity increased by 8.2% (88,781 MWH), from 1,084,200 MWH in the fourth quarter of 2022 to 1,172,981 MWH in the current quarter. The trend of the Index of Electricity Generation from the first quarter of 2013 to the fourth quarter of 2023 indicates an improvement in local electricity generation, despite fluctuations.
The year-on-year analysis also reveals a downward trend in the physical volume of imported electricity. The trend in the physical volume of imported electricity from the first quarter of 2013 to the fourth quarter of 2023 shows a downward trend, indicating the country’s continued effort to generate adequate electricity to meet domestic demand, has led to the decreased reliance on electricity imports.
In response to the need to increase local generation and reduce power imports, the government has initiated a new National Energy Policy. This policy is aimed at guiding the management and development of Botswana’s energy sector and encouraging investment in new and renewable energy. In the policy document, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi stated that the policy aims to transform Botswana from being a net energy importer to a self-sufficient nation with surplus energy for export into the region. Moagi expressed confidence that Botswana has the potential to achieve self-sufficiency in electric power supply, given the country’s readily available energy resources such as coal and renewable sources.
Business
MMG acquires Khoemacau in a transaction valued at P23Bn
MMG Limited, the Hong Kong-based mining company specializing in base metals, has successfully concluded the acquisition of Khoemacau Copper Mine, a state-of-the-art, world-class copper asset nestled in the northwest of Botswana.
On Monday, MMG announced that the acquisition of Khoemacau Mine in Botswana was finalized on 22nd March 2024. “This acquisition enriches the company’s portfolio with a top-tier, transformative growth project and signifies a monumental milestone in the Company’s journey,” MMG communicated in an official statement published on the Hong Kong Stock Exchange.
Upon completion of the acquisition, MMG remitted to the Sellers an Aggregate Consideration of approximately US$1,734,657,000 (over P23 billion), a sum subject to potential adjustments post-Completion.
In addition to the Aggregate Consideration, MMG, in accordance with the Agreement, advanced an aggregate amount of approximately US$348,580,000 (over P4.5 billion) as the Aggregate Debt Settlement Amount, to settle certain debt balances of the Target Group (Cuprous Capital/Khoemacau).
On November 21, 2023, Khoemacau announced that the shareholders of its parent company [Cuprous Capital] had agreed to sell 100% of their interests to MMG Limited.
MMG is a global resources company that mines, explores, and develops copper and other base metals projects on four continents. The company is headquartered in Melbourne, Australia, and has a significant shareholder, China Minmetals Corporation, which is China’s largest metals and minerals group owned by the Government of the People’s Republic of China.
On December 22, 2023, Khoemacau Copper Mining (Pty) Ltd received the approval from the Minister of Minerals and Energy of Botswana regarding the transfer of a controlling interest in the Project Licenses and Prospecting Licenses associated with the Khoemacau Copper Mine, a result of the Acquisition.
The Botswana Competition & Consumer Authority (CCA) on January 29, 2024, notified the market that it had given its approval for the takeover of Khoemacau Copper Mining by MMG Limited.
On January 29, 2024, the CCA issued a merger decision to the market, stating that after conducting all necessary assessments, it was ready to proceed.
The Competition Authority affirmed that the structure of the relevant market would not significantly change upon implementation of the proposed merger as the proposed transaction is not likely to result in a substantial lessening of competition, nor endanger the continuity of service in the market of mining of copper and silver ores and the production, and sale or supply of copper concentrate in Botswana.
Furthermore, the CCA stated that the proposed merger would not have any negative impact on public interest matters in Botswana as per the provisions of section 52(2) of the Competition Act 2018.
Earlier this month, Minister of Minerals & Energy, Lefoko Maxwell Moagi, informed parliament that his Ministry was endorsing the Khoemacau acquisition by MMG Limited. He noted that not only was the company acquiring the existing operation but also committing to an expansion program that would cost over $700 million to double production, create more jobs for Batswana, and increase taxes and royalties paid to the Government.