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Barclays balance sheet up 20%

BARCLAYS BOTSWANA MANAGING DIRECTOR: Reinette van de Merwe

Barclays Bank of Botswana has reported profits lower than the previous period as economic and other trading conditions continue to pull down on the profit margins.

But before the bank announced its financial results for the year ended 2015, Reinette van de Merwe, Barclays Bank Botswana’s managing director, assured the customers and shareholders that Barclays Botswana as well as its parent company Barclays Africa have nothing to worry about following the recent announcement by Barclays PLC to reduce its large stake in Barclays Africa, as the latter is independent and boasts of a strong balance sheet and is well capitalised.

With that out of the way, De Merwe said Barclays Botswana remains a profitable entity despite operating in an environment punctuated by sluggish economic performance, low interest rates, water and electricity crisis.

On giving a brief about the strategy they embarked on in 2014, the bank managing director said the journey has been and continues to be exciting despite pressing economic headwinds. “We are now in the third year of our journey. Our vision of becoming the bank of choice in Botswana is becoming a reality. Barclays Bank of Botswana has a strong Balance Sheet of over P14 billion and employs around 1 200 people. De Merwe said they are a big bank with big ambitions.

Now the key strategy of where to play and how to win; In retail banking we serve our chosen segments through the premium, prestige and personal propositions, while our business banking chooses segments of agriculture, tourism and franchise,” before she added that Barclays Bank wants to deepen its role in the public sector and support local expansion for quantum growth, making the bank the most accessible in Botswana.

For the period under review, net interest income leapt by 2 percent to deliver P909.9 million even though the Bank of Botswana (BoB) slashed the bank rate by 150 basis in 2015, an act that saw Barclays Botswana losing out on more than P100 million. Another positive gain was the net trading and investment income which surged by 31 percent, netting about P104 million.

The gains were offset by a decrease in net fee and commission fees which closed at P270.2 million, an 11 percent drop as a result of the bank’s decision to reduce the cost of financing for their customers. Also eating away at profits was the bank’s conservative approach to impairment charges and other credit provisions which stood at P244.2 million, an increase of 0.6 percent from the corresponding period.

The increase in impairments was sparked by defaults on personal loans from employees in some mining companies that went into liquidation. Moreover inflation also played a hand in reducing profits as the bank reported an increase of 1 percent in operating costs to close at 709.8 million. In the end the bank’s profit was significantly lower than that of 2014 as the bank shed off as much as 22 percent to post profit of P260.5 million for the year ended 2015.

As De Merwe had earlier noted that Barclays Botswana boasts of a strong balance, her words were echoed through Barclays Botswana’s financial position which saw the balance sheet grow by 20 percent to bring the bank’s total assets to P14.6 billion. Leading the rally was the loans and advances book which stands at P9.8 billion, an impressive gain of 20 percent year-on-year growth.

When the liquidity crisis left banks in a tight squeeze, the Bank of Botswana reduced the Primary Reserve Requirement (PRR) from 10 to 5 percent, effectively releasing P2.3 billion in the market to ease the liquidity crunch. Furthermore, the governor of BoB implored banks to come up with exciting products to lure depositors. Barclays Bank will be pleased by the results as the bank’s deposits due to customers spiked by 23 percent driven by positive flows from institutional depositors as the liquidity squeeze eased.

The growth in the balance sheet was supported by the bank’s strategy on how to leverage the bank’s key business segments to extract the maximum efficiencies from them as way of driving growth. The Corporate and Investment Banking (CIB) came to play as its value grew significantly to P2.8 billion.

Moreover customer deposits have also grown to P6.1 billion. The long term strategy for CIB involves growing the asset market share and increasing transactional activity through various product solutions. The Retail and Business Banking (RBB) segment was also another winner as it continued with its upward trajectory as it rode high on its strategy of being a customer centric service provider that retains existing clients while growing market share in chosen sectors and segments.

Overall RBB sustained a strong year-on-year momentum on customer assets recording a growth of 7 percent. The business was also bolstered by the liabilities that remained largely flat. In the end Barclays Botswana declared a final dividend of 7.62 thebe, which is lower than the 11 thebe declared in 2014.

As the bank forges ahead, there are aware of the dangers lurking in the shadows. Van de Merwe admitted that although the two year moratorium placed on bank charges has been lifted, banks are still reeling from its after effects. In another move that might create a slippery slope for banks is the government’s intention to create a credit protection act that will shield customers from debilitating credit effects. For some time now, financial institutions like International Monetary Fund and BoB have been voicing their concerns about the rising household debt that overshadows Batswana’s savings.

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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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