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Standard Chartered Bank profits fall

Standard Chartered Bank Botswana (SCB) has continued the trend of dwindling profits that has since plagued commercial banks in Botswana since 2014 amid a challenging trading environment characterised by low interest rates, sluggish economic growth and decline in market liquidity. Of all the listed banks in the Botswana Sock Exchange,  SCB took a huge hit in its profit as they went down by as much as 85 percent, this as a result of the bank’s bold decision to focus more on the balance sheet at the expense of short term performance.

Moatlhodi Lekaukau, the bank’s chief executive officer, said that the decision was deliberate on their part as a strong balance sheet will put them in an enviable position as they tackle the year 2016 which promises to be equally riddled with tough trading conditions. “Anyone who understands the banking sector will tell you the balance sheet of the bank is its heart beat. If the balance sheet is under stress then you can forget about sustainability of the bank.” He also added that they have the most liquid balance sheet, with advances to deposits ratio of 73 percent. The bank is strongly capitalised with capital adequacy ratio at 19.8 percent from 16.1 percent in the previous year. Nonetheless Moatlhodi consented that 2015 was a difficult year and they really took a hit.

Mr Lekaukau said ‘Our  performance in 2015 was impacted by the challenging trading environment, characterised by subdued macro-economic conditions, low interest rates and a significant decline in market liquidity. These factors resulted in a substantial increase in our cost of funding, causing considerable margin compression, which ultimately reduced income and profit. Throughout these challenges, the group remained focused on implementing long term sustainable solutions to keep the statement of financial position resilient and ensure that the group remains here for good for our customers and stakeholders.’

The bank’s three segments did not impress much in terms of performance, with only the commercial banking segment showing growth. It was the retail banking segment that saved them bank in what could have been an embarrassing loss. The retail bank division contributed 62 percent to the bank’s total operating income and it was the only segment that reported a positive profit after tax. The retail segment‘s profit before tax for 2015 was significantly lower than that of 2014 as it decreased by 51 percent on the backdrop of increased impairments.

The corporate and institutional banking segment was the worst performer, registering a 21 percent decline in growth and bringing in losses before tax compared to the positive profit it posted in 2014. The segment was devastated by a whopping 1660 percent rise in impairments which also negatively affected the bank’s overall performance. The newly created commercial banking segment showed signs of growth at 9 percent but it failed to make any impact as it brought in losses before tax but the losses were 35 percent lower than losses it realised in 2014.

The operating income at P880 million is down by 18 percent as a result of decreases in net interest income which was weighed down by an increase in interest expense. Also weighing down on the operating income was a 6 percent decrease in fee and commission income. Total operating expenses for 2015 were 6 percent higher than the previous reporting period.

A 7200 percent surge in net impairment loss also ate at the bank’s profit margins as the impairments moved from P1.4 million to P105 million. The increase comes as a result of the company’s exposure to businesses that have been operating under challenging market conditions, particularly those in the mining sector which has seen commodity prices plunge. In the end it was a difficult year for the Moatlhodi Lekaukau led bank as it posted a profit after tax of P47.4 million, a drastic drop from P319 million it posted for the year 2014.

The bank’s focus on growing its balance sheet resulted in a 3 percent growth, with much of the growth coming from investment securities. The investment securities grew by 161 percent, up from 2014’s P885 million to P2.3 billion. This was despite declines in the loans and advances to banks and customers. The loans and advances to bank was down by 12 percent to end at P2.2 billion while loans and advances to customers decreased by 11.5 percent to close at P7.2 billion. The bank managed to improve on its deposits from other banks as it shot up by 30 percent. Meanwhile deposits from customers crept back by 2 percent to reflect P9.8 billion. The total assets now stand at P13 billion up from 2014’s P 12.8 billion.

The bank’s upbeat CEO says 2016 promises to be interesting for the bank as they will be focused on delivering strong returns. The retail banking segment is expected to benefit from improved banking channels as it seeks to leverage as well as expand on its digital banking platform that will enhance service delivery and meet customers’ end to end requirements. As for the commercial banking segment, the bank says the modest growth it received in 2015 has given them the impetus to focus more on this segment as it shows potential to deliver better returns. The corporate and institutional banking segment is expected to continue providing advisory and structured financing solutions.

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Business

Dark days as Aviation industry collapses

22nd November 2020
Air Botswana

As the Aviation industry takes a COVID-19 pummeling, for Africa the numbers are staggering, Chief Executive Officer of the International Air Transport Association (IATA), Alexandre de Juniac has observed.

Speaking recently at the African Airlines Association (AFRAA) has been hosting an Annual General Assembly, de Juniac said traffic is down 89% and revenue loses are expected to reach $6 billion. And this figure is likely to be revised downwards in the next forecast to be released later this month. “But the impact is much broader. The consequences of the breakdown in connectivity are severe,” he surmised.

According to de Juniac, five million African livelihoods are at risk while aviation-supported GDP could fall by as much as $37 billion. That’s a 58% fall.

“We have a health crisis. And it is evolving into a jobs and economic disaster. Fixing it is beyond the scope of what the industry can do by itself.”

He said they need governments to act, “And act fast to prevent a calamity.”

“We are in the middle of the biggest crisis our industry has ever faced. As leaders of Africa’s aviation industry, you know that firsthand. Airline revenues have collapsed. Fleets are grounded. And you are taking extreme actions just to survive. We all support efforts to contain the COVID-19 pandemic.  It is our duty and we will prevail. But policymakers must know that this has come at a great cost to jobs, individual freedoms and entire economies,” he said.

de Juniac used the AFRA general assembly platform to amplify IATA’s call for governments to address two top priorities: “The first is unblocking committed financial relief. Airlines will go bust without it. Already four African carriers have ceased operations and two are in administration. Without financial relief, many others will follow.”

Over US$31 billion in financial support has been pledged by African governments, international finance bodies and other institutions, including the African Development Bank, the African Union and the International Monetary Fund.

Unfortunately de Juniac pointed out, in his words, “Pledges do not pay the bills. And little of this funding has materialized. And let me emphasize that, while we are calling for relief for aviation, this is an investment in the future of the continent. It will need financially viable airlines to support the economic recovery from COVID-19.”

The second priority, according to IATA is to safely re-open borders using testing and without quarantines.

“People have not lost their desire to travel. Border closures and travel restrictions make it effectively impossible. Forty-four countries in Africa have opened their borders to regional and international air travel. In 20 of these countries, passengers are still subject to a mandatory 14-day quarantine. Who would travel under such conditions?” de Juniac quizzed rhetorically.

He suggested that countries should adopt systematic testing before departure provides a safe alternative to quarantine and a solution to stop the economic and social devastation being caused by COVID-19.

He admitted that it’s a frightening time for everyone, not least the millions of people whose livelihoods depend on a functioning airline industry. Right now, de Juniac said there essentially is no airline industry. He cited the example that China’s largest airlines sound optimistic, but in a vague way. “They gave no hard data about current yields, loads, or forward bookings, discussing only developments in 2019. Boy, does that seem like ages ago.”

Aviation’s darkest days

The IATA CEO said these are the darkest days in aviation’s history. “But as leaders of this great industry I know that you will share with me continued confidence in the future.

Our customers want to fly. They desire the exploration that aviation enables. They need to do international business that aviation facilitates. And they long to reunite with family and loved ones.”

He said the industry will, no doubt, be changed by this crisis, but flying will return. “Airlines will be back in the skies. The resilience of our industry has been proven many times. We will rise again,” he said.

de Juniac said Aviation is a business of freedom. “For Africa that is the freedom to develop and thrive. And that is not something people on this continent will forget or lose their desire for.”

 

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Business

Inflation increased to 2.2% in October 2020

22nd November 2020

Headline inflation increased from 1.8 percent in September to 2.2 percent in October 2020, but remained below the lower bound of the Bank’s medium-term objective range of 3 – 6 percent, and lower than the 2.4 percent in October 2019.

According to Statistics Botswana, the increase in inflation between September and October 2020 mainly reflects the upward adjustment in domestic fuel prices {Transport (from -3.9 to -2.5 percent)}, which is estimated to have increased inflation by approximately 0.29 percentage points.

“There was also a rise in the annual price increase for most categories of goods and services: Alcoholic Beverages and Tobacco (from 6.2 to 6.6 percent); Clothing and Footwear (from 2.5 to 2.7 percent); Communications (from 0.6 to 0.9 percent); Housing, Water, Electricity, Gas and Other Fuels (from 6.4 to 6.6 percent); Recreation and Culture (from 0 to 0.2 percent); Miscellaneous Goods and Services (from 0.7 to 0.9 percent); Food & Non-Alcoholic Beverages (from 4.2 to 4.3 percent); and Furnishing, Household Equipment and Routine Maintenance (from 2 to 2.1 percent). Inflation remained stable for: Education (4.7 percent); Restaurants and Hotels (3 percent); and Health (1.5 percent). Similarly, the 16 percent trimmed mean inflation and inflation excluding administered prices rose from 1.8 percent and 3.1 percent to 2.2 percent and 3.4 percent, respectively, in the same period.”

[Source: Bank of Botswana]

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BDC injects further P64 million into Kromberg & Schubert

22nd November 2020
BDC

Botswana Development Corporation (BDC) has to date pumped a total of P100 million into the expansion of Kromberg and Schubert, a car harnessing manufacturing company, operating from Gaborone Old Naledi.

At the official ground breaking ceremony of the company‘s new warehouse today, BDC Managing Director, Cross Kgosidiile revealed the wholly state owned investment corporation has pumped P64 million into the expansion which entailed building of the new warehouse.

Kgosidiile explained that this follows another expansion project which was successfully launched in 2017, in which BDC invested P36 million, bringing the total investment into Kromberg at P100 million. The MD also acknowledged Botswana Investment and Trade Centre (BITC) as a partner in the project and for having facilitated the acquisition of the land.

 

Giving a keynote address, Minister of Investment, Trade & Industry, Peggy Serame highlighted the importance of infrastructural development in growing the local manufacturing sector and transforming the economy of Botswana.

Serame underscored the value of strategic partnerships between Government and the private sector, noting that when the two work together and pull together in one direction results will be evident and jobs will be created.

“With the prevailing conditions of depressed economy occasioned by COVID-19 pandemic, government is reliant on entities like BDC to bring in revenue and acceleration of private sector development in line with its mandate and strategic plan. This plan is supported by the need to invest in growth sectors and accelerate the implementation of the Economic Diversification Drive,” Serame said.

Minister Serame noted that the partnership between BDC and Kromberg & Schubert begun in 2017 when the P36 million, 4100 square metres factory expansion for the company was launched.

 

She said the launch of the 7320 square meters factory expansion, to be built at the tune of P64 million signals the continuation of the good partnership between the two companies.

 

“I must commend BDC for their continuous efforts to build partnerships with the private sector geared towards contributing to economic development of this country.”

 

Minister Serame also added that BITC through its robust investor aftercare programme continues to provide value added and red carpet to Kromberg and Schubert under their One Stop Service Centre.

 

“In this regard BITC facilitated acquisition of land to enable this expansion. I therefore would like to commend BITC for their timely facilitation to make this expansion possible,” the minister said.

 

Kromberg & Schubert was incorporated in Botswana in 2009; The Company has grown to asset its position as a significant player in the regional automotive industry value chain.

 

The company is also a critical player in the economic development of Botswana, it currently employs 2100 Batswana across its operations. Kromberg exports on average P2.0 billion worth of goods annually, contributing significantly to foreign exchange.

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