First National Bank Botswana (FNBB) has beat analysts’ expectations to report a 9% increase in profit despite earlier cautions that its exposure to BCL group might affect drag down performance. This was revealed in the bank recently released half year results for the year ended December 2016.
The country’s largest bank by market value and assets has reported a 35% increase in Net Interest Income to P580.7 million. This was achieved in part by a 10% increase in Interest and similar income which came at P705.6 million and a massive 40% reduction in interest expense and similar charges. The Net Interest income was reduced by a spike in impairments of advances which surged to P150.3 million or up by 56% to bring down the Net Interest Income by 28%.
However, a 7% increase in Non Interest Income(NII) brought in P499.6 million, bringing the total Income from operations to P930 million, up by 16%. The growth in NII was spurred by the resultant increase in transactional volumes. In August last year the bank increased its bank charges and fess after the Bank of Botswana lifter the two year moratorium on banking charges and fees.
The total income from operations was subsequently eroded by increases in operating expenses (up by 28% to P271.3 million) and employee benefits (up by 15% to P235.9 million). FNBB says significant investment costs were incurred in establishing customer-focused initiatives and in developing and maintaining systems platforms.
Further investment costs were incurred from opening two additional branches (Mogoditshane and Mochudi), expanding the Bank’s branch representation to 24. The bank says the success of the above, together with other initiatives to improve and diversify services, resulted in customer numbers growing from 445k to 477k, being a 7% increase year-on-year.
In the end profit for the period was up by 9% to P317.7 million, bringing to an end a slump in profits that the bank has been experiencing in the last two years. The bank’s profit was 15% down in its last previous full year results. An improvement in the first half of the year results will buoy FNBB to double down on its efforts to beat analysts’ estimates for the next reporting period even though the bank itself is cautions about future prospects.
“The business environment continues to be challenging, and characterised by business closures and restricted consumer spending power. The most significant closure was that of BCL, with an impact on banks both through direct and indirect credit exposures. The prudent provisioning adopted by the Bank against the BCL exposures caused impairments to increase by 56%. Discounting the BCL effect, impairments would otherwise have increased by 23.6%, reflecting the Bank’s credit structures, and its careful and selective approach to lending”, said Steven Bogatsu, FNBB CEO, in a written statement accompanying the results.
The bank’s balance sheet grew by 9% to P22.4 million on the back of a 13% increase in Net Advances to Customers which now stands at P15 billion. The 13% increase in advances is above the average level in a market where national bank credit extension was at 7.8% in the last 6 months.
Another notable increase in the balance sheet was cash and short term funds which increased by 24% to P3.7 billion. Still on the balance sheet, the bank’s investment securities and other investments went down by 16% to P2.7 billion, reflecting the downturn equities markets especially in Botswana where the benchmark index declined by as much as 11%.
The group is made up of five segments; retail banking, business banking, Rand Merchant Bank (RMB), Wesbank and treasury. The retail segment grew by 41.4% from the previous period and is the largest contributor to revenues. The segment contributed P520.9 million to the group’s operating income, reflecting a 48% contribution. The business banking segment registered modest growth of 15.3% and has contributed 28.8% to the total operating income after bringing in P577 million.
The investment arm of the bank, RMB, showed slight growth of 7.3% from the previous period. RMB’s contribution to total operating income stood at P171.3 million, representing a contribution of 15.8% to the group. Another notable performance was from the vehicle and asset financing division, Wesbank, which grew by 77% while contributing P69.1 million or 6.4% of the group’s operating income. The treasury segment, which manages the group’s liquidity and funding, was the worst performer as interest expenditure continues to depress income margins. The segment’s operating income declined by 87.2% to P7.6 million from the previous year.
The latest results from FNNB will help quell shareholders and investors who have been losing faith in the stock which plummeted by 20% in 2016 and has since dropped by 9.12% this year to trade at P2.69. Despite the fall in stock price, FNBB remains the largest company on the local bourse with a market capitalization of P6.9 billion. FNBB says in line with the impact of the market conditions on the bank’s profitability, the Board of Directors believe that it is appropriate to continue with the prudent approach to capital management and proposed an interim dividend of 5.0 thebe per share.
“Despite facing a number of uncertainties and subdued current economic conditions, the Bank continues to adopt a positive approach to future growth, and has positioned itself to take advantage of any turn in the economy through continuing to invest appropriately in people, infrastructure, and innovation. The results of this strategy are partly evident in the results for 31 December 2016 notwithstanding future benefits to be derived when the economy improves”, the bank said.
FNBB also added that given the challenging business environment, the bank will continue with its focus on efficiency which will culminate in its overall goal of being a customer centric bank and the pursuits of diversifying revenue streams.
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.