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Barclays doubles profits

Barclays Bank of Botswana has delivered strong performance in their half year results for the period ended June 2016 as the bank continues with its journey to be the leading bank in the country. The latest strong results were achieved amidst a challenging trading environment marked by slow economic growth and declining commodity prices.

“Every business faces challenges especially in the current turbulent economic environment. However I’m excited to inform you that despite the challenges we face daily, we remain optimistic and excited about the future. We are committed to maximising shareholder value through our strategy. We are about to see that indeed our strategy is working and resilient despite the challenging environment,” said Reinette van der Merwe, Managing Director of Barclays Bank Botswana.

Ms. van der Merwe says their numbers will show they have achieved and exceeded their objectives and they are now moving into becoming the leading bank in Botswana.  She highlighted that they were able to deliver a strong set of results despite the challenging environment. Moreover, she said the bank continues to make progress in growing their key segments in the various sectors of the economy.

For the period under review, Mumba Kalefungwa, Barclays Botswana finance director, said the half year results demonstrate their commitment to delivering on their strategy and also on contributing to the various sectors of the economy through credit extension and provision of various payment solutions.

“The performance that we are reporting today has mainly been driven by sustained revenue growth in our retail banking business and significant growth in excess of 50% in our Corporate and Investment Banking business and indeed our Business Banking business which has contributed to register excellent growth. Some of the factors that drove business in the year were efficient balance sheet utilization, improved margins, increased foreign exchange transaction volumes, generally transactional volumes and growth in our customer base,” he said.

The bank’s profit before tax was up by 144% to P270.6 million on the back of strong growth in revenue despite operating in a challenging and competitive environment. The bank realised revenues in the excess of P740.6 million, representing an increase of 27% following solid balance sheet increase and non-interest revenue growth in all the bank’s segments. Retail business registered growth of 10% mainly driven by transactional volumes while the bank also realised significant growth in Corporate and Investment banking as well as business banking segment which grew by 58% and 22% respectively.

The Net Interest Income increased by 8% to P499.6 million after corporate and investment banking and business and banking registered strong growth in terms of balance sheet momentum propelled by various chosen markets that the bank have elected to ply their trade in. The retail business remains the bank’s biggest cash cow in terms of revenue generation, contributing the largest share to revenues. The growth in Net Interest Income was helped in part by a fall in interest expense which went down by 27% to P92.2 million. The reduction was the result of a combination of optimised alternative funding sources and improved liquidity in the market following a reduction in the statutory reserve ratio which improved overall funding in the banking sector.

The Non-Interest Income increased by 18% while the Net Fee and Commission Income was up by 20% to P150 million. This was driven by improved customer transaction volumes in all chosen business segments. The bank says as part of their channel strategy, they have been migrating customers from the costly traditional bank branch to convenient and affordable digital channels. The operating expenses increased slightly by 4% to end at P374.3 million, which Barclays Bank Botswana says it’s in line with inflation growth rate. The bank has also impressed by cutting down on what was perhaps their biggest headache after they suppressed impairments down by 16% to P96 million. This comes after the bank reported lower profits in previous full year results after experiencing a spike in impairments. Barclays Bank Botswana was able to reduce impairments through improvements on retail losses which they attribute to revised collection models.

The second largest listed bank in Botswana in terms of market capitalization managed to grow its balance sheet to P14.5 billion, up by 12%  riding on the growth of loans and advances to customers which spiked by 18% to almost P10 billion. The growth has largely driven by Corporate and Investment banking and Business Banking segments that grew 79% and 116% from a balance sheet perspective as the bank continues to offer debts and transactional solution products. On the liabilities side, deposits due to customers went up by 10% to settle at P10.5 billion largely driven by corporate deposits rising by 16% to P5.7 billion.

“This growth was driven by positive flows from our various corporate relationships where we continue to focus on all identified opportunities. We continue to strive to improve our customer service and product offering to existing and potential customers with a view to providing access to finance and providing various payment solutions. This has continued to contribute to the momentum that we have built over the last few years.”

Barclays bank Botswana half year results show that the bank is strongly capitalised at P1.9 billion in terms of regulatory capital, representing a ratio of 19.2% against the regulatory limit of 15%. Furthermore the bank remains highly liquid at 19.7% and operating well above the regulatory limit. As a way of returning positive returns to shareholders, the bank has declared an interim dividend of 14.67 thebe, representing P125 million in dividend payout, up from P100 million paid out in the corresponding period.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

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.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

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.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

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”

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