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Stan Chart CEO in shock resignation

The Chief Executive Officer of Standard Chartered Bank Botswana, Mr. Moatlhodi Lekaukau, on Wednesday resigned from the troubled bank, leaving more questions than answer.


The resignation of Mr. Lekaukau comes amid allegations of improper behaviour by the bank in handling one of their client’s accounts, possible investigation by the regulator and falling profits. However the board chairman, Prof. Bojosi Botlhogile, and Mr. Lekaukau have denied insinuations that the CEO was pushed out in the face of the emerging scandal. Instead they offered that Mr. Lekaukau, a chartered accountant and former partner at PriceWater House Coopers, will be pursuing other interests.


Mr. Lekaukau’s departure marks five years since he walked through the banking corridors in early 2012 at the time when the economy was recovering following a slump in diamond production caused by subdued global demand. The bank that year recorded a 0.9% decline in profit despite strong set of results that showed slight increase in net interest income and a reduction in bad debt impairment charge. Also contained in the 2012 final year results is a small clue that offers a rare view in what has come to haunt the bank, its obsession with strengthening the balance sheet and its affinity for the risky yet lucrative mining sector.


Standard Chartered Bank Botswana under Mr. Moatlhodi continued with its plans and risky appetite to be the choice financier for the mining industry.  It seemed to have been working out for them as the bank’s corporate segment recorded an impressive growth of about 21%. Furthermore, during that period the bank opened two branches (Gaborone and Francistown) and also introduced the first of its kind in the local banking industry, a 24-hour full service call centre. Despite the 0.9% decline in profit that year, the bank paid P200 million in dividends.


The year 2013 was definitely a good one for the Bank and its CEO. In that period, for the first time ever, the bank exceeded the P1 billion revenue mark. And not only that, the bank was hitting good numbers: profit before tax increased by 28%, total impairment decreased by 57%, and of course the bank emphasised that the balance sheet continues to strengthen with loans to customers increasing by 26% and deposits from non-bank customers increasing  by 8%. For that period, the bank paid P192.9 million in dividends.


The momentum slowed in 2014 when Standard Chartered Botswana recorded profit after tax of P319.184, a decline of o.74% from the previous period. However the bank was satisfied with growth in total income that was 7% above that of 2013, with the balance sheet growing by 28% on the back of advances to customers that grew by 29%. The bank also managed to reduce impairment by 94%. The bank was once more generous with the dividend payout that amounted to P213 million.


Now this is where things started going downhill for the bank. In 2015 delivered its worst set of results in terms of bottom line. The bank’s profit after tax declined from P319.1 million to P47.3 million. The group’s performance in 2015 was impacted by the challenging trading environment characterised by subdued macroeconomic conditions, low interest rates and significant decline in market liquidity. Operating income was down by 18% from 2014 reflecting the challenging market conditions.

 

In 2014, Bank of Botswana had imposed a two year moratorium on banking fees and charges, effectively starving off banks from increasing their revenues through hiking charges and fees. In what shocked shareholders and investors, the oldest bank in the country announced that the shocking decline in profit should not be much of concern. In fact, the bank said part of the reason operating income went down was because they took a strategic management decisions to strengthen the balance sheet at the expense of short term performance. And for all those efforts the balance sheet only grew by 3%.


While the shocking drop in profit was downplayed, the pressure in the bank was becoming more palpable. Other banks were posting declining profits but not as steep as Standard Chartered Bank Botswana. Then details started to emerge, painting a picture of a bank caught off guard by the commodity slump in 2015. The commodity slump in 2015 was a result of waning global demand that resulted in lower productions and lower prices.

 

The bank which has set out to be a financier of choice in the mining industry found itself in a vulnerable position. The bank was later to admit that part of the fall in profit was a result of one of their top corporate client that was having a difficult time financing its loan following the slump in diamond production and sales. As a sign of pressure mounted for the bank, they announced that to maintain capital resilience of the bank and to manage growth expectations in the near future, the Board will consider a dividend declaration in 2016.


In the last know financial performance, the bank’s interim profit for the half year ended June 2016 dropped by 5% from the corresponding period, sparking fresh fears that the bank’s 2016 year end results might be as dismal as the previous year if not worse. The results were once more impacted by a 42% surge on net impairments losses  that resulted in the bank posting profit before tax of P80.1 million, while the profit after tax fell to P63 million.


Despite the fall in profit, the bank remained bullish: they had grown the balance sheet by 3% and they were bolstered by a significant earnings recovery in the first half of the year culminating in first half earnings exceeding total earnings for 2015. However, the optimism was now tampered with caution. The bank announced that it has further strengthened its capital position, tightened risk tolerance and established more robust controls as it continues to focus on driving initiatives to realise long term sustainable gains. During the period, P90 million dividends were declared and paid.


With recovery in sight, the bank had the rug pulled under their feet when the government announced that BCL Group will be put under provisional liquidation. The announcement created a flurry of chatter and confusion, with no doubt that this liquidation is going to have a serious impact on the economy. As it is normally the case, the financial services industry soon found itself affected by the contagion.

 

When the noise settled and calm returned, Standard Charted Bank Botswana dropped a bombshell: they had significant exposure to the BCL group and it was likely to impact their financial performance for 2016. With the hopes of a quick recovery up in smoke, the company’s stock took a drubbing at the Botswana Stock Exchange (BSE).


The shareholders who were used to large and consistent payouts were rattled and they acted. When 2015 came to an end, Standard Chartered Bank Botswana’s stock plunged by 11%. The selloff extended to 2016 as the stock became one of the worst performers, plummeting by as much as 30%. The stock is now trading at P7.60 after losing 1.92% in the past two months.


Mr. Lekaukau’s exit could not have come at a worse time, prompting analyst to ask questions if he was pushed out over dismal results or the man is simply pursuing greener pastures. Those who contend he is pushed out point to the bank’s past performances and the falling stock price while those who are convinced he is jumping shipping are saying he actually took longer than expected given the frustrations of the job. Industry insiders and those familiar with the matter say the banking industry in Botswana is controlled from outside by parent companies (Botswana has no indigenous commercial bank).


While banking heavyweights like First National Bank Botswana and Barclays Bank Botswana also answer to superiors outside the country, Mr. Lekaukau was in different circumstances altogether. FNBB and Barclays Botswana are owned by parent companies that are based in South Africa hence understand the African business dynamics and can respond quickly to opportunities and threats.

 

As for Standard Chartered Bank Botswana, despite being the oldest bank in Botswana, the shots came from Kenya to Dubai, Singapore and London. Standard Chartered Bank Plc, the global banking group, has most of the time treated its Botswana operations as an extension of the Kenya operations. This has made it difficult for the Botswana operations to be innovative and responsive.


But for now, Mr. Lekaukau’s resignation will be the least of the bank’s worries after the bank found itself embroiled in a scandal that is expected to unveil the shadowy operations of the banking sector. The bank is being accused by Mr. Majakathata Pheko of Oseg Group for playing fast and loose with his businesses accounts. Mr. Pheko has made damning allegations that the bank was negligent and gave unauthorised overdrafts.

 

Furthermore, the businessman says the bank’s handling of the issue bordered on clear violations of the bank’s own internal controls and runs afoul of the regulations set by the regulatory body. Still on that, Mr. Pheko has written to the central bank to intervene while in the meantime he has lodged a lawsuit against the bank.

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Grit divests from Letlole La Rona

22nd March 2023

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.

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Stargems Group establishes Training Center in BW

20th March 2023

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.

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Business

Food import bill slightly declines

20th March 2023

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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