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Banks profitability declines in 2014

Bank of Bostwana Governor, Linah Mohohlo

The banks regulator, the Bank of Botswana has reported that the banking sector financial performance and profitability declined in 2014 due to a decrease in interest margins.

In its latest Banking Supervision Annual Report for 2014, the bank reports that the banking sector after-tax profit decreased by 16.7percent to P1.5 billion for the period ended December 31, 2014 from P1.8 billion in December 2013. This contrasted with a positive growth rate of 0.1 percent in 2013.  

The regulator highlighted that decline in profitability was largely due to the prevailing low interest rate environment in the country coupled with a 31.2 percent increase in the total provisions charge for loan impairments to P760 million in December 2014 compared to P579.4 million in 2013,contributed to the decline in profits.

Despite the decline in profitability, BoB says, the profitability ratios for the banking sector remained strong and above international norms for comparable sized banks. “Generally, the banking sector remained safe, sound and stable during 2014.”

The bank reports that total assets of the banking sector grew by 13.4 percent to P68 billion in December 2014, compared to the marginal increase of 3.5 percent recorded the prior year.

“All banks, with the exception of one small bank, recorded an increase in assets,” BoB stated. The significant increase in assets was mainly from placements with other banks, which increased by 50.3 percent to P9.6 billion in December 2014 from P6.4 billion in December 2013.  Seventy six percent of these funds were placements with foreign affiliated banks.

 In addition the growth was funded by customer deposits, which increased by 6 percent to P51.5 billion in December 2014 from P48.6 billion in December 2013. Customer deposits continued to constitute a significant portion of the liabilities at 75.7 percent.

Due to tight liquidity in the banking sector, the banks managed balance due to other banks. BoB reports that Vostro and domestic balances increased significantly by 157 percent to P3.6 billion at year-end from  P1.4 billion in December 2013.

“This could imply that some banks increased their borrowing in the interbank and foreign markets to cover the shortfall in liquidity experienced in 2014. Shareholders’ funds made 11.4 percent of total liabilities P7.7 billion,” BoB stated.

During the 2014 period total credit to the household sector stood at P25.2 billion, which represented 55.8 percent of total loans and advances.  Unsecured personal loans constituted the largest proportion of loans to the household sector, at 60.4 percent in December 2014; down from 62 percent in December 2013. This was followed by mortgage and motor vehicle loans at 30.5 percent and 5.7 percent, respectively.

The bank noted that banking sector total statutory liquid assets were almost constant at P7.4 billion for the period under review. Liquid assets comprised cash, BoBCs and current account balances with domestic banks. However, the Liquid Assets to Total Deposits ratio continued to be on a downward trajectory, reaching a low of 14.5 percent as at December 31, 2014. The ratio was, however, above the statutory minimum limit of 10 percent. Similarly, the Liquid Assets to Total Assets and Liquid Assets to Short Term Liabilities ratios maintained the downward trend.

“The decrease in these ratios was due to the continued decline in BoBC holdings by banks, which historically constituted a large proportion of banks’ liquid assets. As a result, funds initially invested in BoBCs were channeled to loans and advances and other investment assets which do not qualify as liquid assets,” the bank said.

The banking sector continued to be dominated by commercial banks. Their share of total deposits declined slightly, from 80 percent in 2013 to 79 percent in 2014. Their share of total assets and total loans and advances remained unchanged at 81 percent.

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Matsheka seeks raise bond program ceiling to P30 billion

14th September 2020
Dr Matsheka

This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.

“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.

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Lucara sits clutching onto its gigantic stones with bear claws in a dark pit

14th September 2020
Lesedi La Rona

Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.

A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.

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Botswana Diamonds issues 50 000 000 shares to raise capital

14th September 2020

Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.

A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.

Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.

In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.

The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.

In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.

Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.

The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”

In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.

Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.

The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.

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