Recent economic data from Botswana shows that the country is bucking the trend of surrounding Southern African countries, with GDP growing by 3.2% for the year ending in June 2017. One of the biggest non-mining sectors showing a lot of potential is the financial services sector, which had an interesting year.
To begin with, First National Bank Botswana (FNBB) and Bank Gaborone opened new branches; Ford Finance developed partnerships in Botswana, and the Southern African operation of Zurich Insurance, now known as Bryte Insurance, launched in Gaborone in February with the intention of expanding into other African countries. Fintech is also taking root in Botswana, with companies like Direct Pay Online opening shop in April, while cryptocurrencies and mobile wallets are gaining more users and offering greater financial inclusion to consumers in the country.
This investment is good news for a sector that has demonstrated over several years that it is stable and robust. According to the African Economic Outlook 2017, Botswana has been making steady progress in increasing access to financial services for its population. Since 2009, the banked population has increased by 25%. From a low base, cell phone banking rose by over 370% and Internet banking by 200% during the same period.
This growth in the sector is good news, too, for employment, which continues to be a challenge for the Botswana economy. While unemployment is starting to show a slight decrease according to the latest statistics, it is still considered to be too high at 17%. Botswana suffered historic job losses following the global financial crisis, especially in the mining sector. State owned enterprises have also retrenched hundreds of employees over the past decade.
The good news is that there are plenty of opportunities for accounting professionals in the country – the bad news is that there are not currently enough people able to take these up. The Botswana Institute of Chartered Accountants (BICA) says there is a huge need for chartered accountants, professionals and technicians. There are currently 3,136 registered BICA members (1,223 accounting professionals and 1,913 being accounting technicians) which falls short of demand. The shortage means that Botswana has to import expatriates for accounting services. Many qualified accountants also leave the country to work overseas.
To take advantage of growth in this sector in order to reduce unemployment in the country, more needs to be done to ensure that people – especially young people – have the relevant skills and are encouraged to consider a career in the financial sector. Many young people, for instance assume because they are not strong in mathematics at school that finance is not a viable career option for them, but this is in fact not the case. Many thousands of accounting students graduate each year around the world and many of them did not have an A-level in Maths when they started their studies.
So what can government do? According the African Economic Outlook, the Botswana government is already doing a good job of creating an enabling environment for business and ensuring good regulation and oversight of the sector – considered vital for its continued growth. The 2016/17 Global Competitiveness Report ranked the country 65 out of 138 in financial market development.
Government can also intervene more directly in targeted skills development such as it did in 2016, when the Department of Treasury and Funding sponsored 600 students in studies with AAT (the Association of Accounting Technicians) to equip them with skills to work in the fast-growing financial services market.
AAT is not new to Botswana. It is the UK’s leading qualification and professional body for vocational accountants and has offered its AAT Accounting Qualifications in Botswana to over 4,000 students a year – the largest cohort of students outside the UK – for 26 years. AAT works with the Botswana Institute of Chartered Accountants (BICA), to give students the opportunity to gain practical skills that fast track their careers in finance – without the need to go to university or study for many years.
While government involvement is critical, the private sector and business networks also need to step up to create opportunities for employment and advancement in the industry – in the form of internships and other opportunities – or by investing in their employees directly to upskill them.
Such an approach benefitted Pyoka Mfuni, a manager at accounting and auditing giant Grant Thornton. Mfuni says that after finishing high school, he noticed that many jobs advertised were finance and audit related so he decided to pursue a career in the field. “That was when I discovered the AAT course at the Botswana Accountancy College. It was shorter than and relatively as good as an accounting degree.” After successfully completing his studies he was able to secure a foot on the ladder that led to his current role.
It is possible to replicate this success story. The World Bank report, Doing Business 2017, ranks Botswana among Africa’s best performers. For the second successive year, the country’s ranking improved, from 72 to 71 out of 190 economies (from 74 to 72 in the previous year), making it the third best performer in Africa. The country is poised for growth and with the right investment and training, its people can take advantage of this.
The added advantage of investing in financial skills is not only will it boost the finance sector itself, it is also good for business and entrepreneurship more broadly, fuelling the growth of the economy in other sectors too. According to the Global Entrepreneurship Monitor, Botswana has one of the most entrepreneurial populations in Africa, but a lack of financial skills is holding it back from making a greater impact on the economy.
The message is clear, investing in finance skills makes sense and should be a priority for business and government alike in 2018. With wise investment and by working together, they can continue to ride the wave of growth towards low unemployment and a high tech future!
Andrew Williamson is Director of Marketing and Commercial at AAT (the Association for Accounting Technicians).
Botswana has recorded its first trade surplus for 2021 since the only one for the year in January.
The country’s exports for the month of July surpassed the value of imports, Statistics Botswana’s July International Merchandise Trade data reveals.
Released last Friday, the monthly trade digest reports a positive jump in the trade balance graph against the backdrop of a series of trade deficits in the preceding months since January this year.
According to the country’s significant data body, imports for the month were valued at P7.232 billion, reflecting a decline of 6.6 percent from the revised June 2021 value of P7.739 billion.
Total exports during the same month amounted to P7.605 billion, showing an increase of 6.1 percent over the revised June 2021 value of P7.170 billion.
A trade surplus of P373.2 million was recorded in July 2021. This follows a revised trade deficit of P568.7 million for June 2021.
For the total exports value of P7.605 billion, the Diamonds group accounted for 91.2 percent (P6.936 billion), followed by Machinery & Electrical Equipment and Salt & Soda Ash with 2.2 percent (P169.7 million) and 1.3 percent (P100.9 million) respectively.
Asia was the leading destination for Botswana exports, receiving 65.2 percent (P4.96 billion) of total exports during July 2021.
These exports mostly went to the UAE and India, having received 26.3 percent (P1. 99 billion) and 18.7 percent (P1.422 billion) of total exports, respectively. The top most exported commodity to the regional block was Diamonds.
Exports destined to the European Union amounted to P1.64 billion, accounting for 21.6 percent of total exports.
Belgium received almost all exports destined to the regional union, acquiring 21.5 percent (P1.6337 billion) of total exports during the reporting period.
The Diamonds group was the leading commodity group exported to the EU. The SACU region received exports valued at P790.7 million, representing 10.4 percent of total exports.
Diamonds and Salt & Soda Ash commodity groups accounted for 37.8 percent (P298.6 million) and 6.2 percent (P48.7 million) of total exports to the customs union.
South Africa received 9.8 percent (P745.0 million) of total exports during the month under review. The Diamonds group contributed 39.9 percent (P297.4 million) to all goods destined for the country.
In terms of imports, the SACU region contributed 62.7 percent (P4.534 billion) to total imports during July.
The topmost imported commodity groups from the SACU region were Fuel; Food, Beverages & Tobacco, and Machinery & Electrical Equipment with contributions of 33.3 percent (P1.510 billion), 17.4 percent (P789.4 million) and 12.7 percent (P576.7 million) to total imports from the region, respectively.
South Africa contributed 60.1 percent (P4.3497 billion) to total imports during July 2021.
Fuel accounted for 32.1 percent (P1.394 billion) of imports from that country. Food, Beverages & Tobacco contributed 17.7 percent (P772.0 million) to imports from South Africa.
Namibia contributed 2.0 percent (P141.1 million) to the overall imports during the period under review. Fuel was the main commodity imported from that country at 82.1 percent (P115.8 million).
During the months, imports representing 63.5 percent (P4.5904 billion) were transported into the country by Road.
Transportation of imports by Rail and Air accounted for 22.7 percent (P1.645 billion) and 13.8 percent (P996.2 million), respectively.
During the month, goods exported by Air amounted to P6, 999.2 million, accounting for 92.0 percent of total exports, while those leaving the country by Road were valued at P594.2 million (7.8 percent).
Founders from twenty companies have been accepted into the program from Botswana, Namibia, and South Africa
The 4th Cohort of the Stanford Seed Transformation Program – Southern Africa (STP), a collaboration between Stanford Graduate School of Business and De Beers Group commenced classes on 20 September 2021. According to Otsile Mabeo, Vice President Corporate Affairs, De Beers Global Sightholder Sales: “We are excited to confirm that 20 companies have been accepted into the 4th Seed Transformation Programme from Botswana, Namibia, and South Africa. The STP is an important part of the De Beers Group Building Forever sustainability strategy and demonstrates our commitment to the ‘Partnering for Thriving Communities’ pillar that aims at enhancing enterprise development in countries where we operate in the Southern African region”. Jeffrey Prickett, Global Director of Stanford Seed: “Business owners and their key management team members undertake a 12-month intensive leadership program that includes sessions on strategy and finance, business ethics, and design thinking, all taught by world-renowned Stanford faculty and local business practitioners. The program is exclusively for business owners and teams of for-profit companies or for-profit social enterprises with annual company revenues of US$300,000 – US$15million.” The programme will be delivered fully virtually to comply with COVID 19 protocols. Out of the 20 companies, 6 are from Botswana, 1 Namibia, and 13 South Africa. Since the partnership’s inception, De Beers Group and Stanford Seed have supported 74 companies, 89 founders/CEOs, and approximately 750 senior-level managers to undertake the program in Southern Africa.
Minergy, the coal mining and trading company with the Masama coal mine, this week released results for the year ended 30 June 2021. The company achieved revenue of P193 million (2020: P81 million) with significant improvement in sales volumes surpassing 415 000 tonnes sold for the year.
The performance was divided into two distinct periods with very different operating environments. The first eight-month period (July 2020 – February 2021), was negatively impacted by delayed funding, COVID-19 impacts and excessive rain; and the last four-month period (March – June 2021), was a more stable production environment moving toward nameplate capacity.
According to Minergy CEO, Morné du Plessis, production and sales initially recovered in July and August 2020 with the easing of COVID-19 restrictions and recoveries were further bolstered by the successful launch of the rail siding. Delays experienced in concluding the funding contributed to contractors limiting operations to manage arrears.
“However, the heavy rains we experienced from December 2020 through February 2021 flooded the mine pit making access difficult and impacting both production and sales. Fortunately, the rain subsided in March 2021, and we entered a more stable environment, with a positive impact on operations. Good recoveries in production and sales were experienced during the last four-month period of the year, with the mine moving closer toward a breakeven position.”
“Despite these operational constraints, including the effects of COVID-19 on logistics and manning of shifts, we expect to reach consistent nameplate capacity in the 2022 financial year,” du Plessis added.
In addition to the revenue reported above, the company incurred costs of sales of P256 million (2020: P150 million) with operating costs of P23 million (2020: P31 million). This effectively resulted in an operating loss of P86 million (2020: P100 million). Finance costs of P51 million (2020: P17 million) were incurred, bringing the net loss before taxation to P136 million (2020: P117 million).
Du Plessis explains that the adverse conditions in the first eight-month period contributed to 86% of the gross loss, while the more stable four-month period alone contributed to 50% of total sales value, helping to decrease monthly gross losses, albeit below breakeven levels.
The company benefited from a strengthening in the South African Rand (“ZAR”) supporting higher back-on- mine sales prices.
“As announced, we’re pleased to have secured P125 million of additional convertible debt funding through the Minerals Development Company Botswana (Proprietary) Limited (“MDCB”). Minergy remains grateful for this support.”
He added that the first tranche of additional funding provided by the MDCB had been received in December 2020, which allowed Minergy to settle the majority of the contractor’s arrears and allowed their teams to be remobilised. The second and final tranche was paid post the financial year-end and will allow the business to reach nameplate capacity in the new financial year.”
COAL SALES AND MINE PERFORMANCE
Sales volumes increased by 110%, supported by increased sales in Botswana and internationally in South Africa and Namibia. Sales for June 2021 exceeded 56 000 tonnes, a record since the inception of the mine, with pricing increasing late in the financial year on the back of buoyant international prices and a strengthening ZAR.
Minergy also concluded a further 12-month off-take agreement to the existing off-take agreement, with a further agreement finalised post year end.
Overburden moved during the reporting period increased by 86% and extracted coal by 50%. Coal mined in June 2021 alone exceeded 100 000 tonnes. “This is a good performance considering the challenges faced such as sacrificing pre-stripping activities for a period to manage arrears, excessive rain and COVID-19,” du Plessis indicated.
“The wash plant was initially starved of coal due to the factors noted already. Despite this, overall plant throughput performance was 37% higher than 2020. Consistent output was supported by the completion of the Stage 2 rigid crushing section as well as the water saving dewatering screen with filter press contributing to a reduction in water usage of 60% per tonne of coal. A record throughput of more than 84 000 tonnes was achieved in March 2021 and this consistency has been maintained.”
According to du Plessis, the completion of Stage 4 of the Processing Plant, the rigid screening and stock handling section, remains a key optimisation step, which has associated benefits. “The completion was unfortunately delayed by a southern African wide shortage of structural steel but was commissioned post year-end.”
Minergy expects the positive momentum in international coal pricing for southern African coal to remain in place. Higher coal prices have resulted in coal being withdrawn from the inland market in favour of lucrative international markets. Du Plessis added that the regional market is currently under- supplied with sized coal, which supports higher pricing and new customer opportunities for Minergy.
“Our objective for the 2022 financial year is to achieve nameplate capacity by completing final ramp-up of operations. This will enable the company to generate sufficient cash flow to stabilise the business at breakeven or better. The bullish coal market is also providing support. COVID-19 will still be closely managed, and we look forward to the lifting of the State of Emergency, as announced, and trust that vaccination programmes will achieve herd immunity in Botswana during the next 12 months.”
Du Plessis expressed his excitement on prospects stating that, “The Eskom due diligence process is continuing, and we are hopeful of receiving feedback during the current financial year. In addition to this opportunity, Minergy is also investigating participation in the request by the Government of Botswana to provide a 300MW power station for which the company has been shortlisted.”
The approved process to issue shares for cash is showing positive leads and he concluded by saying that a listing in London is still being investigated.