Big four continue to dominate banking market
Business
The new entrants in the Botswana banking market are failing to crack the oligopoly, as the big four continue to dominate proving that there isn’t ‘enough strong competition’.
According to the Banking Supervision Report released by the Bank of Botswana (BoB) the four largest banks, Stanchart, Barclays, FNBB and Stanbic, accounted for 90 percent of total assets, total deposits and total loans in 2015.
“The commercial banking sector continued to be characterised by oligopolistic market conditions, with the four largest banks accounting for approximately 79.2 percent (December 2014: 81 percent), 78.1 percent (December 2014: 79.4 percent) and 77.9 percent (December 2014: 80.1 percent) of total banking assets, total deposits and total loans and advances, respectively; a marginal decrease compared with the previous year,” the Bank stated.
The bank says the level of competitiveness, as measured by the Herfindahl-Hirschman Index (HHI), was moderate.
“Competition is expected to improve further once the two new banks, Bank of India (Botswana) Limited (BOI) and Bank SBI Botswana Limited (Bank SBI) 1, fully employ their capital and expand their operations,” the Bank said.
The central bank expects the associated market dynamics emanating from pressure on banks to develop and improve their products and services, in order to increase their profitability, should also contribute to enhancing competitiveness.
According to the report, the country’s financial depth and development indicators improved marginally with the ratios of Private Sector Credit and Banking Credit to Gross Domestic Product (GDP) increasing from 29.1 percent and 31.7 percent in 2014 to 31.6 percent and 32.4 percent in 2015, respectively.
The banking sector balance sheet as well as key prudential and statutory indicators showed some improvement. Total banking assets grew by 12.7 percent to P76.6 billion in 2015 from P68 billion in 2014.
The ratio of Non-Performing Loans (NPL’s) to Total Loans and Advances increased from 3.6 percent at the end of 2014 to 3.9 percent in December 2015. Most of the NPLs (52 percent) were attributable to the household sector.
Total customer deposits grew by 16.4 percent to P60 billion in 2015. Customer deposits constituted the largest part of liabilities and were the primary source of funding growth in banking assets.
The BoB stated that in 2015 banks were adequately capitalised, with the Capital Adequacy and Core Capital Ratios surpassing the minimum prudential and statutory requirements of 15 percent and 50 percent, respectively.
The reports highlights that the industry’s profitability decreased during the year as a result of a combination of narrowing interest margins and an increase in operating expenses. Consequently, Return on Average Total Assets (ROAA) and Return on Equity (ROE) were below historical trends for the Botswana banking sector, but comparable to international norms.
The BoB further stated that the aggregate commercial bank statement of financial position grew by 12.7 percent from P68 billion in 2014 to P76.6 billion in 2015. The growth rate was lower than that for 2014 at 13.4 percent.
“The main contributor to the asset growth was holdings of Bank of Botswana Certificates (BoBCs), which almost doubled in size to P8.2 billion. All banks had an increase in their asset base. On the liabilities side, total deposits, share capital and debt securities experienced significant growth,” the bank stated.
The bank attributed the slow credit growth rate in 2015 resulted from a combination of factors, including commercial banks’ adoption of a more cautious approach to lending in the context of lower business confidence, higher cost of funds and reduced market liquidity in early 2015.
Business
Stargems Group establishes Training Center in BW
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.
Business
Food import bill slightly declines
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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Business
Moody’s Reaffirms African Trade Insurance’s A3 Rating & Revises Outlook to Positive
Moody’s Investors Service (“Moody’s”) has affirmed the A3 insurance financial strength rating (IFSR) of the African Trade Insurance Agency (ATI) for the fifth consecutive year and changed the outlook from stable to positive.
Moody’s noted that the change in outlook to positive reflects the strong growth in ATI’s membership base – that has resulted in improved portfolio diversification, strengthened capital adequacy, and the good profitability despite the challenging operating environment. In addition, ATI benefits from its preferred creditor status (PCS) amongst sovereign member states which protects it from the risk of default by member sovereigns through securing recoveries against claims paid on guarantees.
The strong membership and equity growth are some of the key considerations for the consistent reinstatement of ATI’s A/Stable rating by Standard & Poor’s and Moody’s rating, over the years. Also supporting the rating affirmation are; consistent improvement in financial performance, commitment of its shareholders who continue to uphold the preferred creditor status, its high quality and conservative investment portfolio as well as strong relationships with a number of global reinsurers that provide significant risk-bearing capacity.
With the change in outlook to “positive”, ATI is now better placed to provide enhanced support to its member countries, attract additional shareholding and grow its portfolio. The positive outlook is an indication that if ATI continues to demonstrate its strong underwriting performance and ability to recover claims under the preferred creditor arrangements, among other factors, an upward pressure towards an upgrade may be generated. The Moody’s press release can be accessed from here
Commenting on the rating, Africa Trade Insurance Chief Executive Officer Manuel Moses said: “This positive revision is in line with our 2023 – 2027 strategic objectives in which we set to improve our rating outlook to positive in the first year, and achieve an upgrade of at least “AA”/Stable rating by both Moody’s and S&P within this Strategic Plan period. We aim to achieve this by doubling our exposures and increasing our capital to more than USD1 billion.”
ATI’s mandate is to provide trade-credit and political risk insurance, as well as other risk mitigation products to its member countries and related public and private sector actors. These insurance products not only directly encourage and facilitate foreign direct investment as well as local private sector investment in our member countries, but also contribute to intra- and extra-African trade.
About The African Trade Insurance Agency
ATI was founded in 2001 by African States to cover trade and investment risks of companies doing business in Africa. ATI predominantly provides Political Risk, Credit Insurance and, Surety Insurance. Since inception, ATI has supported US$78 billion worth of investments and trade into Africa. For over a decade, ATI has maintained an ‘A/Stable’ rating for Financial Strength and Counterparty Credit by Standard & Poor’s, and in 2019, ATI obtained an A3/Stable rating from Moody’s, which has now been revised to A3/Positive.