Botswana insurance Company (BIC) is as old as the local insurance industry. The largest short term insurer in the country has reached 40 years of operating as a business. As they celebrate the present, the company has readied itself for the future and the next forty years look promising.
The BIC story in the words of Managing Director, Johann Claasen, is told in three parts:
THE PIONEERS – These are the people that started with a vision for BIC. They wanted to provide protection that would not only create peace of mind for the individual but would help businesses sustain themselves and have some form of business continuity, if losses were incurred.
THE COUNTRY – They also chose Botswana which at the time was a country which had not reached its peak but with good sound governance, a plan for socio economic development, visionary leadership and a solid reputation for being a peaceful nation, there was certainly a sense of hope and confidence that Botswana would one day surface and create an impression on the global map.
“We are proud to be a local brand that carries the name of this country and spreading it beyond our borders,” said Claasen. The road to 40 years has been a roller coaster and the company has achieved tremendous growth over the years, explained the MD.
THE PEOPLE – Our customers of which we have 17000, “we are proud to have loyal customers that have been with us since BIC’s first 10 years – your belief and commitment in BIC is important.
Claasen thanked the team at BIC as well as the Brokers who make the insurance industry to tick. The future is certainly bright for BIC as the company has accommodated and adopted latest technologies to ensure that services are at the click of a burton away for customers.
A thankful managing director, Claasen, told the gathering that: “Together we have turned one idea into a company that empowers people to feel at ease knowing that if they had to encounter a loss, they are covered. We have empowered our intermediary distribution partners to build sound, integral business that add to the enrichment of Batswana and to the growth of not only the private sector but to the other socio development landscape. We have given our staff the platform to reach their full potential and they know that they have what is the ability to make it happen in their own lives.”
The company is now focused on service delivery a focus on getting customer feedback and market research for client evolving requirements, faster claim turnaround times, shorter convenient processes and multiple convenient points of payment such as mobile money and on the newly launched website.
BIC aims to be more relationship driven in the future, with partnerships between brokers and agents, strategic affiliations with Reinsurers and industry leaders, media and bancassurance growth.
New products will also drive growth with product innovation such as cyber crime insurance and more participation in other markets gaps that the company has identified.
BIC is also focused on Corporate Social Responsibility, supporting partners such as Cancer Association; The Botswana Society; Dignity Foundation; Happy Boys an d various donations and sponsorships and being part of a monthly sanitary pad drive.
BIC is now a subsidiary of Masawara Plc, an AIM listed company with interests across the continent. BIC opened its doors for business on the 12th February 1975, aiming at providing insurance solutions for general insurance and life assurance business. The company originally had two shareholders being Botswana Development Corporation (BDC) who held a 51 percent stake and JH Minet and Company Limited of London who held the remaining 49 percent.
THE BIC CONTRIBUTION TO THE DEVELOPMENT AGENDA
According Claasen, BIC is not just a private company interested in making profits. He is of the view that they are a socially responsible company that is duty bound to contribute to the country’s development agenda. He linked the role of the BIC to some of the wider agendas of Botswana.
He pointed out that they are aware that government and other stakeholders are working hard to push the job creation drive. He said they continue to support government initiatives such as the internship programme.
He said they provide internship to various graduates including those from an insurance background, finance, marketing, information and technology, administration and other disciplines. He said they currently employ hundreds of citizens around the country especially at their centres in Gaborone, Francistown and Maun.
He also drew interest on the subject of diversification. Claasen said as an industry, the insurance sector has the potential to help government diversify the economy which is heavily dependent on mining, especially dimaonds mining. He said they keep on coming with new products that could motivate diversification from the insurance perspective.
Although the insurance market penetration in Botswana is only estimated at 3.5 percent, Claasen said the new industry laws will soon reveal more opportunities for the sector players.
The BIC Managing Director was happy to also report that his company continues to play a big role in the education sector. He said they are working with several institutions of higher learning to ensure that modules related to the insurance industry are tailor made for the industry. He said they are currently working with the Botswana Accountancy College (BAC) to produce an insurance module.
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”