Letshego Holdings Limited, Africa‘s largest micro financing entity has registered a significant growth at half financial year. According to the Group‘s financial performance released on Friday last week reflecting results for the half year ended 30th June 2017, the Group‘s total assets rose to 8.7 billion from 7.3 billion pula in 2016.
The group’s financial results also indicate that Letshego accumulated profit before tax of P498million, a 2 percent increase compared to 489 million registered in 2016 at half year. In addition, the group also registered a 15% to the 1.2 billion pula of total revenues registered in 2016 at half year.
Interest income increased by 14% to P1, 112,293 against a lesser performance of P952, 284 as of June last year .Letshego, which operates in more than 10 countries continues to grow as it recorded return on average equity of 18% compared to 16% last year by end of June as well as a return on average assets of 9% which did not move compared to that of 2016. Letshego also reports that total shareholders’ equity increased by 3% to P4.2billion against P4.1 billion of 2016 half year.
Letshego Group Managing director, Chris Low asserted that the company’s positive loan growth will continue to benefit from their increasing diversification into savings solutions, with successful pilot launches in Tanzania and Nigeria’s education and housing sectors. “Our award-winning agency model currently being rolled out in Mozambique is evidence of our commitment to extending our reach into the most rural areas,” he said.
Early this year Letshego acquired east African micro-lender Afb Ghana in March. The March 2017 transaction continued Letshego‘s Pan African quest, making the Ghana entrance its 11th country of operation. Already the Ghana acquisition is contributing significantly to the Group’s positive financial performance. “Ghana features for the first time in these half year results, following the Group’s 100% acquisition of Afb Ghana, effective in March 2017. The Group’s strategic agenda to build Africa’s leading inclusive finance group is underpinned by embedding future capability with investment in people and systems to enhance customer experience,” reads the Group’s half year financial results statement.
According to Low, strategic partnerships remain an important catalyst to achieving expansion ambitions within “all of our markets”. “In Rwanda and Ghana, for example, we have partnered with a fintech business and local mobile operators to pilot projects which stand to reach many thousands of new customers,” he revealed. The Group MD also added that home improvement and affordable housing now constitutes 5% of the company‘s total loan portfolio, “a percentage we aim to raise in the medium to long term,” he said.
Letshego Group’s consumer lending segment is 88% of the overall loan portfolio with MSE (micro and small entrepreneurs) at 12%. Loans and advances to customers are up 19% in BWP terms year-on-year (14% excluding Ghana), supported by stable interest margins and cost of funding. The group’s loan book remains at targeted levels with the exception of Rwanda, where the Group has taken additional provisions on a specific segment of the loan portfolio.
Customer deposits grew marginally, however the impact of Letshego customer savings solutions is only expected to reflect in subsequent reporting periods. Letshego introduced new funding lines resulting in a 45% increase in borrowings, and a strong funding pipeline is in place to support the business growth going forward. Letshego Holdings Namibia Limited (LHN) has achieved another significant milestone for the Group by securing regulatory approval for its inclusive Initial Public Offering (“IPO”), on the Namibian Stock Exchange (NSX). Letshego Namibia will be the first primary listing by a local company on the Namibian Stock Exchange in four years.
Letshego Holdings Limited was incorporated in 1998 and is headquartered in Gaborone and has been publicly listed on the Botswana Stock Exchange since 2002. Today it is one of Botswana’s largest indigenous groups, with a market capitalization in excess of USD500 million, placing it in the top 50 listed sub-Sahara African companies (ex-South Africa), and with an agenda focused on inclusive finance. Through its eleven country presence across Southern, East and West Africa (Botswana, Ghana, Kenya, Lesotho, Mozambique, Namibia, Nigeria, Rwanda, Swaziland, Tanzania and Uganda), its subsidiaries provide simple and appropriate consumer, microfinance and savings solutions to the financially underserved. Since listing on the BSE the group has raised P646 million from the shareholders while returning P1.9 billion by way of dividends.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”