GetBucks Botswana Limited has announced the opening of offer for the first tranche of its Domestic Medium Note Programme. The micro financing company is in the process of establishing and listing a P500 million Domestic Medium Term Note Programme and it intends raising between P100 and P200 million as a first tranche of the Note.
The Botswana Stock Exchange (BSE) has approved the Programme Memorandum for the Note and it is anticipated that the Note will be listed on the BSE on Monday, 30 January 2017. Proceeds from the first tranche of the Note of up to BWP 200 million will be used by the Issuer to reduce the cost of funding.
GetBucks Botswana is 100% owned by GetBucks Limited, a Mauritius entity with MyBucks, the Guarantor, being the ultimate beneficial owner. The GetBucks Botswana Group provides micro-financing and insurance products. The Issuer has 14 service points, 49 employees, 88 agents and has disbursed over 100,000 loans amounting to P345 million since its inception.
The GetBucks Botswana Group consists of three operating entities; GetBucks Botswana, TU Loans (Proprietary) Limited and CashCorp (Proprietary) Limited. The Issuer and TU Loans (Proprietary) Limited provides term loans for a period of six to sixty months and CashCorp (Proprietary) Limited provides short term credit of one month loans. Their customer base is primarily employees of the Government of Botswana, employees of forty-three Local City Councils’ in Botswana and those employed in the private sector.
The issuer also provides insurance products through their insurance corporate agent entity, Regent Insurance, to the same customer base including Botswana Teachers Union members. GetBucks Botswana Group provides their products using their IT system proprietary Fincloud software which is complemented by a physical footprint.
Other than use the proceeds from Domestic Medium Term Note programme for reducing the cost of funding, the company says Pula denominated facilities backed by the US dollar intercompany loans held as offshore deposits with Botswana banks have had a significant negative impact on the profitability of GetBucks Botswana due to the depreciation of the pula. Furthermore, GetBucks Botswana seeks to access local funding to limit currency exposure risk.
“The Issuer will be able to expand its ongoing normal operations which will be primarily used to expand the loan book of the Issuer which will see the issuer introducing new products such as Educational and SME loans as well as offer longer terms on the current product offering (with a maximum term of up to 60 months),” the company said in the programme memorandum.
The company which was incorporated in Botswana on 12 March 2012 and obtained its certificate to commence business on the same day now has an asset base of around P99 million, bolstered by the net loan book that stands P61.4 million. For the year ended June 2015, the company’s revenue surged by 70% to P61.2 million on the back of interest income and fee income which recorded significant growth.
The strong performance was offset by a jump in impairment of loan book which stood at P5.9 million, up by 310%. But the biggest drag was operating expenses as they increased by 125.5% to P31.2 million. This resulted in operating profit of P23.9 million, up from the previous year by 16.5%. However, the profit before taxation was down by 14% from the previous period after a 118% increase in finance costs. The finance costs went up as a result of money paid to shareholders, financial borrowings, and loss on foreign exchange which greatly increased to P4.6 million, an increase of 773%. In the end the company delivered profit for the period of P10.7 million, down slightly by 6%.
GetBucks Botswana operates in a highly competitive industry that currently has 300 players registered. There is also direct competition between Micro Finance institutions (MFIs) and commercial banks due to high credit risk within the corporate sector and commercial banks have been competing with MFIs to lend to individuals who are regarded as lower risk.
“Increased competition from commercial banks that have large balance sheets and have set up dedicated units for SME banking as a way of capturing market share may negatively affect GetBucks Botswana’s financial performance..As a way of mitigating this risk, GetBucks Botswana embraces technology as a means of differentiating itself to provide financial products and services to its customers with a quick turnaround time,” the company said.
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”