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Barclays records 49% Profit Before Tax

Barclays Bank of Botswana Limited on Thursday announced its financial results for the year ended 31 December 2016.

The Bank delivered an excellent overall performance despite severe economic disruptions such as the slowing economic growth and a general slow rebound in commodity prices. The Bank continued to make progress in growing the key business segments in various sectors of the economy.

The Bank achieved a 49% growth in Profit Before Tax in comparison to the year ended 31 December 2015, growing from P332 million to P494 million. This strong performance was mainly driven by sustained revenue growth in our Retail and Business Banking (RBB) segments which grew by 11%, as well as significant growth of 30% in the Corporate and Investment Banking (CIB) segment.

Barclays Bank of Botswana declared a final dividend of 14.669 thebe per share subject to regulatory approval for the year ending 31 December 2016, after considering its strong capital levels and internal capital generation capacity. Given the economic environment and the company’s current performance, Barclays Bank of Botswana is undertaking a set of actions to drive value creation over time. In addition, the focus on certain sectors of the economy will be important contributors to its strategy of improving product portfolio and financial performance.

Reinette van der Merwe, Managing Director of Barclays Bank of Botswana said, ‘Our performance reflects the commitment of our colleagues and all our stakeholders. We believe that as we continue our journey to foster comprehensive, cutting-edge financial solutions, we ultimately simplify and improve the customer experience, achieving our goal to be the “Bank of Choice” in Botswana.’

Net interest income increased by 9% year-on-year, mainly driven by balance sheet growth and optimal utilisation of funding sources, which resulted in net reduction in our interest cost yearon-year by 26%. Net fee and commission income increased by 16% year-on-year. This growth was driven mainly from our RBB segment where we had an increase in transactional volumes and activity from our various digital channels.

Net trading income increased by 70% year-on-year. This growth was driven by increased volumes from client acquisition and execution of cross selling opportunities, during the year. Operating costs have remained well contained with a cost-to-income ratio of 49% for the current year, compared to 55% in the previous year. This is in line with our continued focus of managing costs through various cost control programmes and rationalisation activities, while continuing to invest in our people and systems.

On a year-on-year basis our impairments grew by a modest 7% in comparison to the prior year. This positive performance is attributable to our enhanced collections capability and selective credit extension to high risk sectors. During the year, management took a prudent view to accelerate recognition of Retail impairments provisions related to personal loans of employees of one of our mining clients.


Excluding the impact of this significant event, our impairments would have reduced 50% year-on-year. Consequently on a normalised basis our overall loan loss rate would have been at 1.2% from the previous year’s levels of 2.4%. Due to accelerating impairments provisions, our impairment loss rate is 2.7% compared to 2.4% in the prior year.

As we continue to focus on delivering on our strategy, we were able to realise a 5% growth in our overall balance sheet. The major components of our balance sheet remained largely unchanged, with customer loans and liabilities representing the most significant parts. Loans and advances to customers decreased 4% year-on-year. This decrease was mainly driven by the early settlement of a loan facility by one of our mining clients. Therefore, on a normalised view, our customer assets grew by 3% year-on-year. Deposits due to customers increased by 2%, largely driven by positive flows from our CIB segment that drives a significant portion of our funding.

Our regulatory capital position was P1.9 billion at financial year end, representing a ratio of 19.8% against the regulatory minimum of 15%. The Bank remains well capitalised to support future balance sheet growth and will continue to review its capital position in line with capital demand and regulatory changes. Reinette concludes: “We are determined to attain a leading market position in various sectors, in full support of our customers and all other stakeholders countrywide. With financial and business power to invest in future growth, Barclays Bank of Botswana is ready to seize the opportunity that will support the long term strength of our business.’

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New study reveals why youth entrepreneurs are failing

21st July 2022

The recent study on youth entrepreneurship in Botswana has identified difficult access to funding, land, machinery, lack of entrepreneurial mindset and proper training as serious challenges that continue to hamper youth entrepreneurship development in this country.

The study conducted by Alliance for African Partnership (AAP) in collaboration with University of Botswana has confirmed that despite the government and private sector multi-billion pula entrepreneurship development initiatives, many young people in Botswana continue to fail to grow their businesses into sustainable and successful companies that can help reduce unemployment.

University of Botswana researchers Gaofetege Ganamotse and Rudolph Boy who compiled findings in the 2022 study report for Botswana stated that as part of the study interviews were conducted with successful youth entrepreneurs to understand their critical success factors.

According to the researchers other participants were community leaders, business mentors, Ministry of Trade and Industry, Ministry of Youth, Gender, Sport and Culture, financial institutions, higher education institutions, non-governmental institutions, policymakers, private organizations, and support structures such as legal and technical experts and accountants who were interviewed to understand how they facilitate successful youth entrepreneurship.

The researchers said they found that although Botswana government is perceived as the most supportive to businesses when compared to other governments in sub-Saharan Africa, youth entrepreneurs still face challenges when accessing government funding. “Several finance-related challenges were identified by youth entrepreneurs. Some respondents lamented the lack of access to start-up finance, whereas others mentioned lack of access to infrastructure.”

The researchers stated that in Botswana entrepreneurship is not yet perceived as a field or career of choice by many youth “Participants in the study emphasized that the many youth are more of necessity entrepreneurs, seeing business venturing as a “fall back. Other facilitators mentioned that some youth do not display creativity, mind-blowing innovative solutions, and business management skills. Some youth entrepreneurs like to take shortcuts like selling sweets or muffins.”

According to the researchers, some of the youth do not display perseverance when they are faced with adversity in business. “Young people lack of an entrepreneurial mindset is a common challenge among youth in business. Some have a mindset focused on free services, handouts, and rapid gains. They want overnight success. As such, they give up easily when faced with challenges. On the other hand, some participants argue that they may opt for quick wins because they do not have access to any land, machinery, offices, and vehicles.”

The researchers stated that most youth involved in business ventures do not have the necessary training or skills to maintain a business. “Poor financial management has also been cited as one of the challenges for youth entrepreneurs, such as using profit for personal reasons rather than investing in the business. Also some are not being able to separate their livelihood from their businesses.

Lastly, youth entrepreneurs reported a lack of experience as one of the challenges. For example, the experience of running a business with projections, sticking to the projections, having an accounting system, maintaining a clean and clear billing system, and sound administration system.”

According to the researchers, the participants in the study emphasized that there is fragmentation within the entrepreneurial ecosystem, whereby there is replication of business activities without any differentiation. “There is no integration of the ecosystem players. As such, they end up with duplicate programs targeting the same objectives. The financial sector recommended that there is a need for an intermediary body that will bring all the ecosystem actors together and serve as a “one-stop shop” for entrepreneurs and build mentorship programs that accommodate the business lifecycle from inception to growth.”

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BHC yearend financial results impressive

18th July 2022

Botswana Housing Corporation (BHC) is said to have recorded an operating surplus of P61 Million, an improvement compared to the previous year. The housing, office and other building needs giant met with stakeholders recently to share how the business has been.

The P61 million is a significant increase against the P6 million operating loss realized in the prior year. Profit before income tax also increased significantly from P2 million in the prior year to P72 million which resulted in an overall increase in surplus after tax from P1 million prior year to P64 million for the year under review.

Chief of Finance Officer, Diratsagae Kgamanyane disclosed; “This growth in surplus was driven mainly by rental revenue that increased by 15% from P209 million to P240 million and reduction in expenditure from P272 million to P214 million on the back of cost containment.”
He further stated that sales of high margin investment properties also contributed significantly to the growth in surplus as well as impairment reversals on receivables amounting to P25 million.

It is said that the Corporation recorded a total revenue of P702 million, an 8% decrease when compared to the P760 million recorded in the prior year. “Sales revenue which is one of the major revenue streams returned impressive margins, contributing to the overall growth in the gross margin,” added Kgamanyane.

He further stated professional fees revenue line declined significantly by 64% to P5 million from P14 million in the prior year which attributed to suspension of planned projects by their clients due to Covid-19 pandemic. “Facilities Management revenue decreased by P 24 million from P69 million recorded in prior year to P45 million due to reduction in projects,” Kgamanyane said.

The Corporation’s strength is on its investment properties portfolio that stood at P1.4 billion at the end of the reporting period. “The Corporation continues its strategy to diversify revenue streams despite both facilities management income and professional fees being challenged by the prevailing economic conditions that have seen its major clients curtailing spending,” added the CEO.

On the one hand, the Corporation’s Strategic Performance which intended to build 12 300 houses by 2023 has so far managed to build 4 830 houses under their SHHA funding scheme, 1 240 houses for commercial or external use which includes use by government and 1 970 houses to rent to individuals.

BHC Acting CEO Pascaline Sefawe noted that; BHC’s planned projects are said to include building 336 flat units in Gaborone Block 7 at approximately P224 million, 100 units in Maun at approximately P78 million, 13 units in Phakalane at approximately P26 million, 212 units in Kazungula at approximately P160 million, 96 units at approximately P42 million in Francistown and 84 units at approximately P61 million in Letlhakane. Emphasing; “People tend to accuse us of only building houses in Gaborone, so here we are, including other areas in our planned projects.”

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Commercial banks to cash big on high interest rates on loans

18th July 2022

Researchers from some government owned regulatory institutions in the financial sector have projected that the banking sector’s profitability could increase, following Bank of Botswana Monetary Policy Committee recent decision to increase monetary policy rate.

In its bid to manage inflation, Bank of Botswana Monetary Policy Committee last month increased monetary policy rate by 0.50 percent from 1.65 percent to 2.15 percent, a development which resulted with commercial banking sector increasing interest rate in lending to household and companies. As a result of BoB adjustment of Monetary Policy Rate, from 1.65 percent to 2.15 percent commercial banks increased prime lending rate from 5.76 percent to 6.26 percent.

Researchers from Bank of Botswana, the Non-Bank Financial Institutions Regulatory Authority, the Financial Intelligence Agency and the Botswana Stock Exchange indicated that due to prospects of high inflation during the second half of 2022, there is a possibility that the Monetary Policy Committee could further increase monetary policy rate in the next meeting in August 25 2022.

Inflation rose from 9.6 percent in April 2022 to 11.9 percent in May 2022, remaining above the Bank of Botswana medium-term objective range of 3 – 6 percent. According to the researchers inflation could increase further and remain high due to factors that include: the potential increase in international commodity prices beyond current forecasts, logistical constraints due to lags in production, the economic and price effects of the ongoing Russia- Ukraine conflict, uncertain COVID-19 profile, domestic risk factors relating to possible regular annual administered price adjustments, short-term unintended consequences of import restrictions resulting with shortages in supplies leading to price increases, as well as second-round effects of the recent increases in administered prices “Furthermore, the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices could add upward pressure to inflation,” said the researchers.

The researchers indicated that Bank of Botswana could be forced to further increase monetary policy rate from the current 2.15 percent if inflation rises persistently. “Should inflation rise persistently this could necessitate an upward adjustment in the policy rate. It is against this background that the interest rate scenario assumes a 1.5 percentage points (moderate scenario) and 2.25 percentage points (severe scenario) upward adjustment in the policy rate,” said the researchers.

The researchers indicated that while any upward adjustment on BoB monetary policy rate and commercial banks prime lending rate result with increase in the cost of borrowing for household and compnies, it increase profitability for the banking sector. “Increases in the policy rate are associated with an overall increase in bank profitability, with resultant increases in the capital adequacy ratio of 0.1 percentage points and 0.2 percentage points for the moderate and severe scenarios, respectively,” said the researchers who added that upward adjustment in monetary policy rate would raise extra capital for the banking sector.

“The increase in profit generally reflects the banking industry’s positive interest rate gap, where interest earning assets exceed interest earning liabilities maturing in the next twelve months. Therefore, an increase of 1.5 percentage points in the policy rate would result in industry gains of P71.7 million (4.1 percent increase), while a 2.25 percentage points increase would lead to a gain of P173.9 million (6.1 percent increase), dominated by large banks,” said the researchers.

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