Botswana Telecommunications Limited (BTCL), Mr Paul Taylor
Botswana Telecommunications Corporation Limited’s yearly profit fell by more than 100% despite revenues slightly picking up. This is the company’s first loss in 4 years following an impairment exercise performed during the year 2016?.
The only listed telecommunication company in the Botswana Stock Exchange (BSE) reported a 0.4% increase in revenues on the back of increased sales of customer premises equipment which was the highest contributor registering a growth of 62%. Revenue from mobile was also impressive with a growth of 12%.
Highlighting the challenges facing the company, BTCL board through Daphne Matlakala, chairman of the board, and Paul Taylor, the outgoing managing director, said the revenues continue to be pressured by efforts of regulators (and governments) to continuously push down prices, as a way of driving universal access to telecommunication services. Furthermore they revealed that mature markets like Botswana face limited growth prospects, and entry of previously unrelated businesses into the Telco ecosystem, resulting in intensified competition.
The company’s loss after 4 years of profits comes about after the company failed to contain costs. According to the latest financial statements, total operating costs excluding impairment charge increased by 11% from Pula 1.345 billion to Pula 1.487 billion. The increase in costs was due to accelerated depreciation of network assets and an increase in mobile handset subsidy. The damage inflicted by the impairment exercise brought down the company’s total assets to P1.949 billion, resulting in a 19% decrease from the previous value.
“The loss for the year is at Pula 371 million. The loss was as a result of an impairment exercise performed during the year 2016. An impairment amount of Pula 522 million represents a write-down of some of property, plant and equipment due to technology changes which is in line with global trends,” read part of the company’s note to investors.
The company, however, managed to improve on its cashflow. The cash generated from operating activities was P257million, an upward tick of 5%. For the period under review the company scaled back on new investments as it only used P224 million in investing activities, reflecting a 5.6% decline. Meanwhile BTCL held back on any financing activity compared to the previous year where it spent P2.3 million.
“This resulted in an increase in cash and cash equivalents of Pula 33 million during the year. Cash and cash equivalents at the end of the year was Pula 390 million and its sufficient to finance operating requirements, anticipated capital expenditure and dividend payments,” revealed the company.
The leading telecommunications provider is bullish about the future as it hopes to post positive results going forward. BTCL projects to post profits in the region of P115 million in the 2017 financial year. The company says it will turn to improving its revenue streams through increased sales while at the same time containing costs. Moreover, revenue is expected to stabilise following huge price cuts and it will be boosted by the company’s focus on mobile and broadband (fixed and mobile) data services as avenues for continued growth in the short-to-long term. Botswana with the highest number of mobile penetrations in the world has provided a lucrative market for data services.
BTCL listing on the Botswana Stock Exchange (BSE) in April was preceded by a nationwide awareness campaign and ended with a record breaking number of domestic investors. BTCL which listed 1.05 billion issued securities ushered in more than 50000 citizen investors, prior to that there were only 28122 registered Central Securities Depository Accounts (CSD).The Company is a provider of communications solutions and services. BTCL’s principal activities include among others: fixed and mobile voice telephony, national and international internet, data services, directory services, virtual and private networks.
BTCL declared a final dividend of 5 thebe per share, payable to all shareholders registered in the books of the company at close of business on 15th July 2016. The company, which has a market capitalisation of P1.82 billion has had a tumultuous run on stock market. The company on the first day of trading closed atP1.30, an incredible 30% surge from P1. However, it the shares quickly retreated and briefly traded for around P1.20 until settling for the current P1.10 price, which is still a win to the shareholders as it represent a 10% premium on the initial P1 they paid during the Initial Public Offering(IPO).
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”