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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

Investors inject capital into Tsodilo Resources Company

25th January 2023

Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.

According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.

The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.

Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.

Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.

Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana.  The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.

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Global CEOs Back Plan to Unlock $3.4 Trillion Potential of Africa Free Trade Area

23rd January 2023

African heads of state and global CEOs at the World Economic Forum Annual Meeting backed the launch of the first of its kind report on how public-private partnerships can support the implementation of the African Continental Free Trade Area (AfCFTA).

AfCFTA: A New Era for Global Business and Investment in Africa outlines high-potential sectors, initiatives to support business and investment, operational tools to facilitate the AfCFTA, and illustrative examples from successful businesses in Africa to guide businesses in entering and expanding in this area.

The report aims to provide a pathway for global businesses and investors to understand the biggest trends, opportunities and strategies to successfully invest and achieve high returns in Africa, developing local, sub-regional and continental value chains and accelerating industrialization, all of which go hand in hand with the success of the AfCFTA.

The AfCFTA is the largest free trade area in the world, by area and number of participating countries. Once fully implemented, it will be the fifth-largest economy in the world, with the potential to have a combined GDP of more than $3.4 trillion. Conceived in 2018, it now has 54 national economies in Africa, could attract billions in foreign investment, and boost overseas exports by a third, double intra-continental trade, raise incomes by 8% and lift 50 million people out of poverty.

To ease the pain of transition to its new single market, Africa has learned from trade liberalization in North America and Europe. “Our wide range of partners and experience can help anticipate and mitigate potential disruptions in business and production dynamics,” said Børge Brende, President, and World Economic Forum. “The Forum’s initiatives will help to ease physical, capital and digital flows in Africa through stakeholder collaboration, private-public collaboration and information-sharing.”

Given the continent’s historically low foreign direct investment relative to other regions, the report highlights the sense of excitement as the AfCFTA lowers or removes barriers to trade and competitiveness. “The promising gains from an integrated African market should be a signal to investors around the world that the continent is ripe for business creation, integration and expansion,” said Chido Munyati, Head of Regional Agenda, Africa, World Economic Forum.

The report focuses on four key sectors that have a combined worth of $130 billion and represent high-potential opportunities for companies looking to invest in Africa: automotive; agriculture and agroprocessing; pharmaceuticals; and transport and logistics.

“Macro trends in the four key sectors and across Africa’s growth potential reveal tremendous opportunities for business expansion as population, income and connectivity are on the rise,” said Wamkele Mene, Secretary-General, AfCFTA Secretariat.

“These projections reveal an unprecedented opportunity for local and global businesses to invest in African countries and play a vital role in the development of crucial local and regional value chains on the continent,” said Landry Signé, Executive Director and Professor, Thunderbird School of Global Management and Co-Chair, World Economic Forum Regional Action Group for Africa.

The Forum is actively working towards implementing trade and investment tools through initiatives, such as Friends of the Africa Continental Free Trade Area, to align with the negotiation process of the AfCFTA. It identifies areas where public-private collaboration can help reduce barriers and facilitate investment from international firms.

About the World Economic Forum Annual Meeting 2023

The World Economic Forum Annual Meeting 2023 convenes the world’s foremost leaders under the theme, Cooperation in a Fragmented World. It calls on world leaders to address immediate economic, energy and food crises while laying the groundwork for a more sustainable, resilient world. For further information,

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Business

Electricity generation down 15.8%

9th January 2023

Electricity generation in Botswana during the third quarter of 2022 declined by 15.8%, following operational challenges at Botswana Power Corporation’ Morupule B power plant, according to Statistics Botswana Index of Electricity Generation (IEG) released last week.

The index shows that local electricity generation decreased by 148,243 MWH from 937,597 MWH during the second quarter of 2022 to 789,354 MWH during the third of quarter of 2022.

This decrease, according to the index, was mainly attributed to a decline in power supply realized at Morupule B power station. The index shows that as a result of low power supply from the plant, imported electricity during the third quarter of 2022 increased by 76.3 percent (123,831 MWH), from 162,340 MWH during the second quarter of 2022 to 286,171 MWH during the current quarter and Statistics Botswana added that the increase was necessitated by the need to augment the shortfall in generated electricity.

In the index Statistics Botswana stated that Eskom was the main source of imported electricity at 42.0 percent of total electricity imports. “The Southern African Power Pool (SAPP) accounted for 38.4 percent, while the remaining 10.1, 9.1 and 0.5 percent were sourced from Electricidade de Mozambique (EDM), Cross-border electricity markets and the Zambia Electricity Supply Corporation Limited (ZESCO), respectively. Cross-border electricity markets are arrangements whereby towns and villages along the border are supplied with electricity from neighbouring countries such as Namibia and Zambia.”

The government owned statistics entity stated that distributed electricity decreased by 2.2 percent (24,412 MWH), from 1,099,937 MWH during the second quarter of 2022 to 1,075,525 MWH during the third quarter of 2022. The entity noted that electricity generated locally contributed 73.4 percent to electricity distributed during the third quarter of 2022, compared to a contribution of 85.2 percent during the third quarter in 2022 and added that this gives a decline of 11.8 percentage points. “The quarter-on-quarter comparison shows that the contribution of electricity generated to electricity distributed decreased by 11.8 percentage points compared to the 85.2 percent contribution during the second quarter of 2022.”

Statistics Botswana meanwhile stated that the year-on-year analysis shows some improvement in local electricity generation. Recent figures from entity show that the physical volume of electricity generated increased by 36.3 percent (210,319 MWH), from 579, 036 MWH during the third quarter of 2021 to 789,354 MWH during the current quarter. According to Statistics Botswana electricity generated locally contributed 73.4 percent to electricity distributed during the third quarter of 2022, compared to a contribution of 57.7 percent during the same quarter in 2021. This gives an increase of 15.7 percentage points.

 

The entity noted that trends also show an increase in physical volume of electricity distributed from 2013 to the third quarter of 2022, thereby indicating that there are ongoing efforts to meet the domestic demand for power. “There has been a gradual increase of distributed electricity from the first quarter of 2013 to the third quarter of 2022, even though there are fluctuations. The year-on-year perspective shows that the amount of distributed electricity increased by 7.2 percent (71,787 MHW), from 1,003,738 MWH during the third quarter of 2021 to 1,075,525 MWH during the current quarter.”

The statistics entity noted that year-on-year analysis show that during the third quarter of 2022, the physical volume of imported electricity decreased by 32.6 percent (138,532 MWH), from 424,703 MWH during the third quarter of 2021 to 286,171 MWH during the third quarter of 2022. “There is a downward trend in the physical volume of imported electricity from the first quarter of 2013 to the third quarter of 2022. The downward trend indicates the country’s continued effort to generate adequate electricity to meet domestic demand, hence the decreased reliance on electricity imports.”

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