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.
Business
LLR transforms from Company to Group reporting
Botswana Stock Exchange listed diversified real estate company, Letlole La Rona Limited (“LLR” or “the Company” or “the Group”), posted its first set of group financial statements which comprise the Company and Group consolidated accounts, which show strong financial performance for the six months ended 31 December 2023, with improvements across all key metrics.
The Company commenced the financial year with the appointment of a Deputy Chairperson, Mr Mooketsi Maphane, in order to bolster its governance and enhance leadership continuity through the development of a Board and Executive Management Succession Plan.
At operational level, LLR increased its shareholding in Railpark Mall from 32.79% to 57.79% and proudly took over the management of this prime asset.
The CEO of LLR, Ms Kamogelo Mowaneng commented “During the period under review, our portfolio continued to perform strongly, with improvements across all key metrics as a result of our ongoing focus on portfolio growth and optimisation.
“We are pleased to report a successful first half of the 2024 financial year, where we managed to not only grow the portfolio through strategic acquisitions and value accretive refurbishments but also recycled capital through the disposal of Moedi House as well as the ongoing sale of section titles at Red Square Apartments. The acquisition of an additional 25% stake in JTTM Properties significantly uplifted the value of our investment portfolio to P2.0 billion at a Group level. Our investment portfolio was further differentiated by the quality of our tenant base, as demonstrated by above market occupancy levels of 99.15% and strong collections of above 100% for the period”.
The growth in contractual revenue of 9% from the prior year’s P48.0 million to the current year P52.2 million, increased income from Railpark Mall, coupled with high collection rates, has enabled the company to declare a distribution of 9.11 thebe per linked unit, which is in line with the prior year.
In line with its strategic pillars of ‘Streamlined and Expanded Botswana Portfolio’ as well as ‘Quality African Assets’, the Group continuously monitors the performance of its investments to ensure that they meet the targeted returns.
“The Group continues to explore yield accretive opportunities for balance sheet growth and funding options that can be deployed to finance that growth” further commented the CEO of LLR Ms Kamogelo Mowaneng.
Ms Mowaneng further thanked the Group’s stakeholders for their continued support and stated that they look forward to unlocking further value in the Group.
Business
Botswana’s Electricity Generation Dips 26.4%
The Botswana Power Corporation (BPC) has reported a significant decrease in electricity generation for the fourth quarter of 2023, with output plummeting by 26.4%. This decline is primarily attributed to operational difficulties at the Morupule B power plant, as per the latest Botswana Index of Electricity Generation (IEG) released recently.
Local electricity production saw a drastic reduction, falling from 889,535 MWH in the third quarter of 2023 to 654,312 MWH in the period under review. This substantial decrease is largely due to the operational challenges at the Morupule B power plant. Consequently, the need for imported electricity surged by 35.6% (136,243 MWH) from 382,426 MWH in the third quarter to 518,669 MWH in the fourth quarter. This increase was necessitated by the need to compensate for the shortfall in locally generated electricity.
Zambia Electricity Supply Corporation Limited (ZESCO) was the principal supplier of imported electricity, accounting for 43.1% of total electricity imports during the fourth quarter of 2023. Eskom followed with 21.8%, while the remaining 12.1, 10.3, 8.6, and 4.2% were sourced from Electricidade de Mozambique (EDM), Southern African Power Pool (SAPP), Nampower, and Cross-border electricity markets, respectively. Cross-border electricity markets involve the supply of electricity to towns and villages along the border from neighboring countries such as Namibia and Zambia.
Distributed electricity exhibited a decrease of 7.8% (98,980 MWH), dropping from 1,271,961 MWH in the third quarter of 2023 to 1,172,981 MWH in the review quarter.
Electricity generated locally contributed 55.8% to the electricity distributed during the fourth quarter of 2023, a decrease from the 74.5% contribution in the same quarter of the previous year. This signifies a decrease of 18.7 percentage points. The quarter-on-quarter comparison shows that the contribution of locally generated electricity to the distributed electricity fell by 14.2 percentage points, from 69.9% in the third quarter of 2023 to 55.8% in the fourth quarter. The Morupule A and B power stations accounted for 90.4% of the electricity generated during the fourth quarter of 2023, while Matshelagabedi and Orapa emergency power plants contributed the remaining 5.9 and 3.7% respectively.
The year-on-year analysis reveals some improvement in local electricity generation. The year-on-year perspective shows that the amount of distributed electricity increased by 8.2% (88,781 MWH), from 1,084,200 MWH in the fourth quarter of 2022 to 1,172,981 MWH in the current quarter. The trend of the Index of Electricity Generation from the first quarter of 2013 to the fourth quarter of 2023 indicates an improvement in local electricity generation, despite fluctuations.
The year-on-year analysis also reveals a downward trend in the physical volume of imported electricity. The trend in the physical volume of imported electricity from the first quarter of 2013 to the fourth quarter of 2023 shows a downward trend, indicating the country’s continued effort to generate adequate electricity to meet domestic demand, has led to the decreased reliance on electricity imports.
In response to the need to increase local generation and reduce power imports, the government has initiated a new National Energy Policy. This policy is aimed at guiding the management and development of Botswana’s energy sector and encouraging investment in new and renewable energy. In the policy document, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi stated that the policy aims to transform Botswana from being a net energy importer to a self-sufficient nation with surplus energy for export into the region. Moagi expressed confidence that Botswana has the potential to achieve self-sufficiency in electric power supply, given the country’s readily available energy resources such as coal and renewable sources.
Business
MMG acquires Khoemacau in a transaction valued at P23Bn
MMG Limited, the Hong Kong-based mining company specializing in base metals, has successfully concluded the acquisition of Khoemacau Copper Mine, a state-of-the-art, world-class copper asset nestled in the northwest of Botswana.
On Monday, MMG announced that the acquisition of Khoemacau Mine in Botswana was finalized on 22nd March 2024. “This acquisition enriches the company’s portfolio with a top-tier, transformative growth project and signifies a monumental milestone in the Company’s journey,” MMG communicated in an official statement published on the Hong Kong Stock Exchange.
Upon completion of the acquisition, MMG remitted to the Sellers an Aggregate Consideration of approximately US$1,734,657,000 (over P23 billion), a sum subject to potential adjustments post-Completion.
In addition to the Aggregate Consideration, MMG, in accordance with the Agreement, advanced an aggregate amount of approximately US$348,580,000 (over P4.5 billion) as the Aggregate Debt Settlement Amount, to settle certain debt balances of the Target Group (Cuprous Capital/Khoemacau).
On November 21, 2023, Khoemacau announced that the shareholders of its parent company [Cuprous Capital] had agreed to sell 100% of their interests to MMG Limited.
MMG is a global resources company that mines, explores, and develops copper and other base metals projects on four continents. The company is headquartered in Melbourne, Australia, and has a significant shareholder, China Minmetals Corporation, which is China’s largest metals and minerals group owned by the Government of the People’s Republic of China.
On December 22, 2023, Khoemacau Copper Mining (Pty) Ltd received the approval from the Minister of Minerals and Energy of Botswana regarding the transfer of a controlling interest in the Project Licenses and Prospecting Licenses associated with the Khoemacau Copper Mine, a result of the Acquisition.
The Botswana Competition & Consumer Authority (CCA) on January 29, 2024, notified the market that it had given its approval for the takeover of Khoemacau Copper Mining by MMG Limited.
On January 29, 2024, the CCA issued a merger decision to the market, stating that after conducting all necessary assessments, it was ready to proceed.
The Competition Authority affirmed that the structure of the relevant market would not significantly change upon implementation of the proposed merger as the proposed transaction is not likely to result in a substantial lessening of competition, nor endanger the continuity of service in the market of mining of copper and silver ores and the production, and sale or supply of copper concentrate in Botswana.
Furthermore, the CCA stated that the proposed merger would not have any negative impact on public interest matters in Botswana as per the provisions of section 52(2) of the Competition Act 2018.
Earlier this month, Minister of Minerals & Energy, Lefoko Maxwell Moagi, informed parliament that his Ministry was endorsing the Khoemacau acquisition by MMG Limited. He noted that not only was the company acquiring the existing operation but also committing to an expansion program that would cost over $700 million to double production, create more jobs for Batswana, and increase taxes and royalties paid to the Government.