Standard Chartered Bank Botswana Limited recently announced the Bank’s full year results for the period ended 31 December 2016. The Group’s performance in 2016 grew by 3% on income in the face of the challenging macroeconomic environment.
Business performance was impacted by a once off significant impairment charge in Retail Banking. Profit before tax improved by 51% and the Group is making good progress against its strategic objectives. Disciplined focus on costs has created more capacity to invest in the key areas of infrastructure and people. The balance sheet remains strong and fit for growth in 2017 and beyond.
Key figures include: Operating profit at BWP 77 million; Retail Banking revenue up 9%; 20th retail outlet In Botswana opened at Sir Seretse Khama International Airport in December 2016; Commercial Banking revenue up 6%; Loans and advances increased 38% while deposits increased 19%
Commenting on the results, Standard Chartered Bank Botswana Limited Chief Executive Officer, Mr Moatlhodi Lekaukau said ‘2015 was a challenging year for the Bank, it was important for us to turn the situation around and our results today show that the initiatives we undertook and commitment by my team have realised significant gains. Despite the challenges of 2015, the group remained committed to delivering on medium term strategy into 2016 that was underpinned by people, service delivery, stronger control environment, and employee banking. Collectively these have contributed to ensuring that our balance sheet remained resilient whilst creating value for our customers and stakeholders.’
Mr. Lekaukau further indicated that 2016 brought with it key achievements, “we are committed to growing, in December we opened our 20th retail outlet at the Sir Seretse Khama International Airport – the first bank to do so at the country’s main gateway to the globe in addition we rolled out a greatly enhanced online and mobile banking platform that offers a dynamic banking experience that underpins our commitment to digital.
The Commercial Banking segment registered a 6% increase in total income despite the challenges in the operating environment, thanks to a greater deepening of client relationships and a greater uptake of our Straight2Bank online platform. Corporate and Institutional Banking continued to support large corporate through advisory and structured financing solutions, registering a year-on-year increase of 14% in customer liabilities.”
When delivering the results, Chief Financial Officer, Mpho Masupe, commented that ‘2016 reflected the consolidated efforts taken to ensure that the Bank delivered value and provides a good pathway into 2017. The Group led a number of marquee transactions, strengthened relationships with sovereigns and parastatals and identified opportunities to connect pools of capital with financing demands across the market. The ongoing implementation of our revised strategy will deliver great benefits to our clients, enabling the Group to contribute meaningfully to the much needed growth of the economy.”
‘The Group continues to ensure that our Brand Promise of being “Here for good” remains a conscious call to action for each and every member of staff not only in their day-to-day responsibilities but in extension to the communities across our global footprint, including in Botswana. Our global flagship project, Seeing is Believing continues to avail itself to make a meaningful impact in the country as it seeks to alleviate preventable blindness. In addition, our staff continue to effect change through our Employee Volunteering (EV) programme that realised contributions from Maun to Jwaneng and in between,” concluded Lekaukau.
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”