Botswana Building Society (BBS) members have given management the go ahead to demutualize the entity from a society to a limited company. This will see BBS, currently a mutually held organization convert the interests of its members into limited shareholdings.
As a building society, demutualization will see BBS turn into a commercial bank. The company would then either be listed on the stock exchange or closely held by its shareholders. BSE hopes to list Botswana’s first indigenous commercial bank once the transformation has fully occurred.This watershed milestone in the society’s transformation quest comes after a special general membership meeting held on Thursday 24th August which confidently voted to demutualize the business. According to a public notice shared by BBS, out of all people present at the meeting and those who represented their absent proxies 99.96 % supported the transformation. This is far above the minimum of 75 % required in terms of the BBS Rules for special resolution to succeed.
The man in the driving seat of this historic undertaking, BBS Managing Director, Mr. Pius Molefhe expressed his delight regarding the meeting’s outcome. “The decision by the shareholders is a vote of confidence on the direction we would like to take our society, which is to become Botswana‘s first indigenous commercial bank,” he said. According to a communiqué from BBS, the next step would see BBS submit an application for conversion to the Registrar of the Building Society who is the Permanent Secretary in the Ministry of Finance and Economic Development.
If the Registrar is satisfied with how the demutualization process was conducted he will issue a conversion Certificate and the society will the invite its shareholders to indicate how many shares they would like to take up in the new entity. “Once that has been done BBS will submit an application to the Registrar of Companies for it to become a company known as BBS Limited,” reads the notice. Thereafter in December 2017 or January 2018, BBS Limited will file an application for a banking license with the Bank of Botswana. The application will take about 6 months to be evaluated and the hope is that BBS will start operating as a commercial bank from the first quarter of 2019.
BBS was established on the 13th of December 1976.Ever since then the society has grown tremendously to become an indigenous household name for financial services especially amongst low and middle income Batswana. The exceptional growth of the Society over the past 41 years can best be measured by the phenomenal increase in its reserves, from only P2, 100 in March 1977 to just under P203 million in March 2012. The Statutory reserve alone increased from a mere P200 to almost P2, 460 billion over this period. The Society has consistently met its dividend obligations to its shareholders every year over the past 41 years of its existence.
BBS CURRENT FINANCIAL PERFORMANCE
The latest figures from the society’s financial performance indicate a 13 % decline in profits. That is according to the report of financial year review ended March 2017. The entity registered P47.885 million in the 2017 financial year compared to P54.906 million in 2016. This decline in profits is viewed as testament that the society’s business model is behind time and needs to catch up with innovative and digital financial service space operations of today further confirming the need for commercialization. According to the Chairman of BBS Board, James M. Kamyuka the society’s ability to weather the storm is a result of a strong leadership team, dedicated employees and an ever improving customer service culture. “However, the performance confirms the need to transform the business,” he said.
For the financial year ended March 2017 the BBS Board recommended a dividend of P59.376 million compared to P59.847 million the previous year to Shareholders which is a decrease of 0.8% to that declared in the prior year. Under the current setup BBS states that the society had to dig deep into their reserves to augment the dividend payout. “The current business model where Shareholders are paid a dividend rate without necessarily taking into account the performance of the institution during that financial year is not sustainable. However, the situation is expected to change once the Society starts operating as a commercial bank,” states the Board Chairman in the report.
Kamyuka also adds that the society transformation will better place BBS into the financial service competition space, “We are preparing to transition from a building society to a commercial bank and this will place our organization in a stronger position to face the future. This change will strengthen the long term prospects of the BBS,” he said. Further highlights from the society’s financial performance states that the assets also decreased by 11% from P4.087 billion in 2015/16 to P3.653 billion in 2016/17. On the positive the society’s Paid Up and Subscription Shares increased by 1.04% from P503.352 million in the previous year to P508.619 million in the year under review.
Fee and commission income registered a decrease of 10% from P25.099 million in the previous year to P22.465 million. Interest income decreased by 2.5% from P307.018 million in 2015/16 to P299.384 million 2016/17. The society Managing Director Pius K. Molefe said these are a commendable set of results as they were delivered in the midst of a challenging economic environment characterized by a subdued housing market and squeezed household incomes. “The situation was made even more difficult by the fact that our business has a very limited product range compared to its competitors,” he said explaining that it is exactly that which demutualization seeks to address.
According to the BBS Managing Director the demutualization comes at the right time when there is need to provide customers with diversified products and services. “We are looking forward to the Society becoming a commercial bank,” he said adding that the transformation will result in a stronger BBS financially and operationally which will also deliver high shareholder value over the coming years. Botswana Building Society expects to operate fully as a commercial bank by the first half of 2019 subject to obtaining the relevant regulatory approvals. Botswana has 10 commercial banks, all foreign owned, and the IMF has argued in a country report that there is room for consolidation in the sector.
Newly established wholly indigenous citizen owned retail chain Payless Retail (PTY) Ltd is set to partake in the first session of Botswana Stock Exchange (BSE)’s Tshipidi Mentorship Program (TMP) on Monday June 29th.
The TMP aims to train and capacitate SMEs so they can operate as corporates and eventually list on the local bourse. According to local bourse, BSE, the program aims to provide practical training to potential issuers through a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.
Payless Retail is a newly established supermarket chain whose mission is to become a convenient one-stop shopping destination as it is one of the Botswana oldest retailing brands. It started off as Corner Supermarket in January 1976, and to date boasts of nine stores in, among others, Gaborone, Mochudi, Molepolole and Tlokweng. Payless was recently acquired by Ellis Retail Group, which is led by businessman Elliot Moshoke.
The takeover catapulted Ellis Retail to the envious position of being the first wholly indigenous owned major retail chain. “We jumped at this opportunity because it gave us a chance to prove to Batswana that the retail business is open and lucrative.”
The objective is to create a proudly Botswana retail chain that fully supports our national Vision, economic development and citizen economic empowerment ambitions,” Moshoke told BusinessPost.
He further emphasized that Batswana are capable and able to run large scale businesses hence they need to accept invite foreign investors who will come in to support us not take the business. “Our win as Payless in the Fast Moving Consumer goods (FMCG) industry is a win for Batswana. We need their support in this difficult and challenging journey.
As you are aware, Payless is the only retail chain in the hands of Batswana ba Sekei. We need to take advantage of this to generate employment and create small businesses in retail and Agri businesses,” he explained.
The retailer has also partnered with Botswana Investment & Trade Center (BITC) on their #PushaBW campaign with a view to initiating earnest engagement with local producers to iron out bottlenecks and ensure seamless trading.
“Local producers have to be part of the phenomenal growth of the Payless brand. This will in turn facilitate employment creation and economic growth. We did this because we have the utmost respect for local manufacturers and producers,” he mentioned.
Payless is currently restocking all of its stores; a development that Moshoke says is testament to the retailer’s commitment to growing the brand and ensuring continuity of business. He further revealed that renowned retail suppliers like PST and CA Sales have reignited their trust in Payless, opening their doors for Payless as they have faith in the retailer’s new owners.
The takeover has reportedly saved more than 200 jobs and gave a new lease of life to the previously fledging Payless brand. According to a press release from the management team, the Payless work forces are also extremely excited about what the future holds. The TMP is a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.
The program is administered by experts within the listing ecosystem and seeks to bring the potential issuers closer to the listings advisers, investors and leaders of already listed companies. “As a strategic initiative, the BSE decided to set up this mentorship program in a bid to assist SMEs to strategize, corporatize and acclimatize in order to list to access equity finance and expand operations,” said the BSE.
The TMP will avail to SMEs practical insights, knowledge and feedback from institutional investors, increased awareness of the BSE listing requirements as well as an intimate network of advisors and CEOs of listed companies. After training, Payless will graduate with improve governance structures and better knowledge of articulating its business strategy. The retailer will also gain increased visibility through BSE marketing platforms.
Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.
In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.
The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.
With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.
Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.
BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.
During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.
BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.
As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.
In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.
BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.
The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.
BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.
Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.
According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).
With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.
In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.
Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.
The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.
The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.
The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.