Letshego forges ahead as Govít considers bank licensing changes
Letshego group managing director, Christopher Low
After Letshego Holdings Limited’s abortive attempt to acquire a banking license for its Botswana operations, the Group is confident that the eventually, multi tiered banking licensing will see the light of day in Botswana.
Bank of Botswana declined to license Letshego in 2013 as the Group was seeking a deposit taking license as opposed to a commercial bank license, something that was not provided for in the regulatory framework.
“We want to be the pilot company that shows that indeed multi tiered licensing (of financial institutions) is workable,” said Letshego group managing director, Christopher Low, at a press briefing recently.
“We need a deposit taking license we will prove our success in other countries,” said Low, to emphasise that the group will not be pursuing a commercial banking licence in Botswana for the foreseeable future.
“It is indeed true that the (Botswana) Government had engaged a specialist from Ghana and the research was completed; it was realised that they need to separate banking licenses from deposit taking licences,” said Low.
“The next phase is for the Ministry (of Finance and Development Planning) to perform its processes and then take it to Parliament, and we are likely to see a four tier licensing regime, more like what you will find in Rwanda.”
“At the of 2013, I was asked to put together a new strategy and we set out to diversify from just lending to deposit taking, something that required lots of upfront work and capabilities,” said Christopher Low.
Low said that the Group’s focus is on greater financial inclusion, a topical issue in Botswana Government agenda.
He also said that servicing the informal sector in Botswana has always been a challenge due to lack of statistics but “the situation is improving.”
Low said that because Letshego is not a bank it is at an advantage and can explore the lower end of the financial market that is highly subserviced.
“Banks are constrained by many factors such as their risk appetites, regulations and their focus on corporate; because we are not a bank, we can give financial inclusion agenda, the attention it deserves,”
Mythri George, head of corporate affairs at Letshego, also told BusinessPost that, “Research has shown that people use credit to build homes, getting working capital for small businesses and taking children to school.”
“20 percent of Batswana who take out loans with us use them to fund small business.”
Letshego is planning to roll out more simplified solutions for financial services, which will include micro insurance for the informal sector.
The Finscope Consumer Survey Botswana 2014, a Government sanctioned study which was released in July this year, showed financial exclusion reduced by 7 percent since 2009, from 31 percent in to 24 percent in 2014.
The findings also showed that consumers generally use a combination of financial products and services to meet their financial needs – an individual could have a bank account and also belong to a burial society. “Only 7.3 percent of adults rely exclusively on banking services n 31.2 percent use a combination of formal and informal mechanisms to manage their financial needs, thus indicating that their needs may not be fully met by the formal sector alone 8.2 percent of the adult population only rely on informal mechanisms such as village savings and loans groups to save or borrow money,” stated the Survey findings.
Meanwhile, Letshego Holdings Limited’s provisional banking licence in Namibia, which ended mid-July, has been extended by another six months, The Pan-African micro-lender is currently trading with a provisional banking licence, which was first granted in July 15, 2014.
Currently Letshego boasts the third largest market capitalisation for a Botswana-based company on the Botswana Stock Exchange and is among the top 50 companies outside South Africa, across Sub-Saharan Africa. Having planted roots in Botswana in 1998, the Group is now in 10 countries across Eastern and Southern Africa, servicing over 250,000 customers with in excess of 250 customer service points employing over 1,300 management and staff members.
• Net advances to customers increased by 33 percent to P4.4 billion (2013: P3.3 billion)
• Cost to income ratio increased from 26 percent to 33 percent
• Impairment charges remained within the target range at 1.7 percent for 2014 (2013: 1.3 percent) on average advances
• Profits before tax increased by 1 percent to P850.2 million (2013: P841.3 million), with a 5 year compounded annual growth rate of above 30 percent
• Capital adequacy position remained strong at over 70 percent (2013: over 70 percent)
• Dividends declared during the year equate to 25 percent of profit after tax
• Basic earnings per share decreased by 9 percent due to the conversion of a loan to equity earlier in the financial year
• 158 105 858 shares were issued to Development Partners International by conversion of the loan facility advanced to Letshego Holdings Limited
• 58 percent of profits before tax were generated outside of Botswana (2013: 40 percent)
• Sale of Zambia subsidiary was concluded in December 2013
• Change of year-end to 31 December, will be effected from 2014.
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Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‚ÄėGrit‚Äô) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company‚Äôs total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company‚Äôs share price.
The statement explained that Grit‚Äôs sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
‚ÄúGrit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders‚ÄĚ LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit‚Äôs already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
‚ÄúWe are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,‚ÄĚ Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. ‚ÄúWe continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,‚ÄĚ Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
‚ÄúIn accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,‚ÄĚ said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices.¬† Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
‚ÄúCommunity empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,‚ÄĚ said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, ¬†Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
‚ÄúAs a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy‚Äôs productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,‚ÄĚ said the Minister of Minerals and Energy.