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BDC’s road to re-invention

In its bid to redeem itself from being a loss making, scandal ridden organisation, Government’s Investment arm, Botswana Development Corporation has pulled out the ante with new strategies, new premises and investment properties and a new complement the most talented available personnel in its management team.

Managing Director, Bashi Gaetsaloe, has become synonymous with the dream of redemption and reinvention of BDC into what he has since termed the ‘new BDC’, forever waxing lyrical about returning to profitability by 2016 and doubling in business size in five years “But not just for the sake of it but to play a more meaningful role in the industrialisation of this country,” as Gaetsaloe would say, with infectious positivity.

The chequered history of the finance house runs from 1970, when it was first mandated to assist in establishing viable businesses in the country. The successes are numerous and remarkable – such as the former Gaborone Sun Hotel and Casino and Conferences (now Aavani Gaborone) and Avis – as is the rotten apple that was the abortive P500 million Fengye Glass project.

When Gaetsaloe came in everything had to change. The five year strategy entailed trimming the management team for efficiency, and bringing in new capabilities. Governance had to become more robust and responsive to the needs of the institution.

“We now have the best in class risk management policy,” declared Gaetsaloe this week when giving the media a sneak preview of the completed first phase of BDC’s P400 million investment property, Fairscape Precinct, in the Fairgrounds area in Gaborone.
‘Pushing the envelope is what we have done and what we will continue to do

However, it is the Herculean pipeline of projects that is set to open the Pandora box of dreams that BDC so desperately looking to realise.

After disinvesting in non performing and non strategic ventures, BDC is now focussing on untapped sectors such as energy, innovation and technology, and agriculture. In the medium to long term, it will look into cross border financing of regional projects.
Already, BDC is playing the services, property, agriculture and manufacturing spaces.

In the 2014 financial year, revenue for the BDC Company grew from P101.7M to P150.4 million while Group revenue declined from P317.9 million in the previous year to P286.8 million in the current year. “The slow-down in revenue at the Group level continued to reflect the challenges that the organisation is facing within its Subsidiary and Associate company structures,” the 2014 Annual report states.

At a Company level, BDC experienced a loss before tax of P67.1 million against a loss before tax of P222.2 million in the previous year. This loss at a Company level is substantially less than the loss in the previous year and is reflective of key initiatives to manage operating costs, improve collection and execute turn-around strategies within the portfolio of companies.

However, the Group delivered a profit before tax of P35.7 million for the year under review against a profit before tax of P13.4 million in the previous year, a sure sign that the Re-Modelling Programme is starting to show early signs of success.

The Group’s assets continued to grow at a healthy rate increasing from P3.16 billion to P3.64 billion.

The Fairscape Precinct has already won the two Fulton awards conferred by the Concrete Society of South Africa, for its outstanding architectural prowess and innovation in the use of concrete. Construction of the first phase of the mixed use property, which consists of a 15 storey tower with penthouse, commenced in June 2011 and was completed in September 2014.

The Precinct is a world of firsts not only for Botswana but for the continent and the world in its entirety.  In Botswana, it is the first ever such mixed use building which will at the completion of phase 2, consist of 64,5 percent office space, 21.5 percent as a planned five star hotel, 6,6  percent as retail and 7,4 percent as residential property.

Newly appointed chief operations officer, Bafana Molomo, could not be drawn into revealing who the hotel partners would be, save to say that “we are talking to some world class hotel brands who are very eager to partner with us to undertake this hotel project and we will soon sign an agreement which will see this project delivered in 24 months.”

The Precinct already has 60 percent occupancy, with several blue chip entities choosing it over other high end business addresses in the capital city. Molomo said the they are not worried about the perceived oversupply of office space in Gaborone, saying it is about the tiered type of offering and the differentials that attract a certain kind of tenant to high end offices, with the Precinct being a self styled financial services hub, also housing the new headquarters of BDC.

Bafana Molomo – Chief Operations Officer
Thabile Moipolai – Head- Human Capital
Mbako Mbo – Chief Risk Officer
Emmanuel Maite – General manager- Subsidiaries management
Marina KhanChief Audit Executive

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

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.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

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.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

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”

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