Banks report higher earnings
Business
In a stunning comeback after the shock resignation of the bank’s CEO, six cautionary statements and widely expected views that Standard Chartered Bank Botswana will report lower earnings, the oldest bank in the country has boldly stated that they are expecting higher earnings.
“In line with the Botswana Stock Exchange listings requirements, the Board of Standard Chartered Bank Botswana Limited (“the Company”) hereby advises shareholders that the consolidated results of the Company for the year ended 31 December 2016 will be significantly higher than those reported for the year ended 31 December 2015,” the bank announced in the latest cautionary note.
The upbeat note is a conspicuous departure from uncertainty that has been looming large over the bank following several cautionary announcements that the bank has significant exposure to the BCL Group that has since been put under liquidation. Standard Chartered Bank Botswana becomes the second bank to beat analysts’ projected lower earnings. Expectations were high that First National Bank Botswana (FNBB), the country’s biggest bank, will report lower earnings following revelations that it has significant exposure to the BCL group.
However, the bank beat analysts’ estimates by reporting a 9 percent jump in profit after tax. Another listed bank, Barclays Bank Botswana was the first to announce that it has no significant exposure to BCL and later became the first bank again to declare that they are expecting higher earnings.
The growth in earnings for major banks comes after three years of a tough trading conditions characterised by low interest rates, a moratorium on banking charges and fees, liquidity squeeze and low growth in personal incomes. While the banks continued to rake in the profits, they were lower compared to previous periods.
The decision by Bank of Botswana to lift the moratorium on banking charges and fees have allowed for banks to increase their non-interest revenue in a low interest rate environment. The banks are also benefitting from increased government expenditure to offset the depressed household incomes.
In its latest Monetary Policy Statement (MPS) for 2017, the central bank has indicated that it will continue with its accommodative monetary policy, a small risk to banks that were expecting interest rate hikes. The central bank says domestic monetary policy was conducted against the backdrop of below-trend economic activity (a non-inflationary output gap) and a positive medium-term inflation outlook.
Meanwhile the MPS report reveals that despite an accommodative monetary policy stance, annual growth in commercial bank credit decreased from 7.1 percent in December 2015 to 6.2 percent in December 2016, against a background of subdued economic activity and restrained growth in personal incomes. The slowdown in annual credit expansion was mostly associated with the decrease in growth in lending to households from 12.8 percent in December 2015 to 7.6 percent in December 2016, largely reflecting the effect of restrained growth in personal incomes.
“The lower rate of increase in lending to households was mostly due to a slowdown in the yearly rate of expansion in unsecured loans to this sector from 15.5 percent to 8.3 percent in the same period. Meanwhile, the annual growth in mortgage lending to households also slowed from 7.2 percent to 6.3 percent in the same period. The share of mortgages in total bank households' credit decreased from 28.8 percent in December 2015 to 28.4 percent in December 2016. The lower growth of mortgage lending appears to be consistent with the weaker residential property market in 2016.”
For businesses, year-on-year growth in lending accelerated from a contraction of 0.3 percent in December 2015 to growth of 4.2 percent in December 2016. Even then, while lending to manufacturing, “other”, and construction expanded, credit growth to agriculture decelerated, while it was negative for other sector. Notably, there was a significant decline in credit for the mining sector, mainly as a result of the BCL group loan repayment in December 2016.
“In general, the non-inflationary increase in credit for consumption as well as business investment and operations is positive for the economy. In the circumstance, accommodative monetary policy stance and restricted liquidity absorption through BoBCs was appropriate.”
The report concludes by projecting that growth in personal incomes will continue to be restrained, contributing to modest overall domestic demand, with a dampening effect on inflation in the medium term. Given prospects for benign external price developments, it is projected that inflation will remain within the 3 – 6 percent objective range in the medium term. The forecast incorporates the effect of the expected increase in fuel prices as well as water and electricity tariffs.
“Any substantial upward adjustment in administered prices and government levies and/or taxes as well as any increase in international food and oil prices beyond current forecasts present upside risks to the inflation outlook. However, there are downside risks associated with the restrained global economic activity, technological progress and falling commodity prices.”
In 2017, the Bank's implementation of the exchange rate policy entailed a 0.26 percent upward rate of crawl of the NEER to stabilize the REER, given that inflation is projected to be around the lower end of the medium-term objective range of 3 – 6 percent. The crawling band exchange rate policy supports international competitiveness of domestic industries and contributes towards macroeconomic stability and economic diversification. The MPC this week decide to maintain the bank rate at 5.5 percent
Business
Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Business
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.
Business
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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