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Deposit taking licenses key to Letshego’s growth

Letshego Group Managing Director, Christopher Low

Botswana’s biggest multinational company has made great forays into African markets, expanding organically or buying into operations, in ten countries besides the home country.

Letshego’s first 15 years have seen the financial services group transformed from a small standalone office in Gaborone, of about 30 people, in 1998, to Botswana’s largest indigenous company with a presence in 10 countries in southern and East Africa.

The company is Botswana’s most heavily traded stock, with the shareholders now at 38 percent international investors as well as a market capitalisation of P5.4 billion, ranking in the top 40 listing of sub-Saharan companies ex-South Africa.

“Put another way we are larger than most banks in the markets in which we operate – our Botswana operations made well in excess of P300 million in post-tax profits this last year,” said Low.

Though the Group was denied a banking license in Botswana, it has managed to acquire deposit taking licenses in Rwanda, Tanzania, Mozambique and Namibia.


“We have engaged in forums with the BoB (Bank of Botswana) in which they discussed their intention to review a tiered licensing structure. We welcome this development, as we believe it will aid financial inclusion and skills deepening across Botswana, and have indicated as much to the regulator.”


On the question of whether the Group will try again to obtain a deposit taking license in Botswana, Group Managing Director, Christopher Low, is previously quoted in another publication saying: “Given the projects currently being followed in Mozambique, Rwanda, Namibia, Tanzania, amongst others, we would rather wait until the BoB reverts with an update on the tiered licensing structure. Should this initiative progress, we would reconsider an application under the deposit-taking micro-finance tier.”


At Letshego’s Gala dinner which was held at Lansmore Masa hotel on Tuesday this week, Mr Low revealed that the company’s strategy will rely heavily on obtaining deposit taking licenses.


“However to really develop a fully-fledged diversified strategy we need to obtain deposit taking licences – we have gone live with these in Mozambique and Rwanda in 2014 and are aiming to do the same in Namibia this year” adding that, “once we obtain such licenses, we can offer our customers “any channel, anywhere” solutions to their financial needs, using the latest technology – these will be affordable, simple and appropriate to their needs.

Legodile Serema, board chair of Letshego group, affirming the stature of the Group, said that: “Letshego remains an indigenous Botswana force that is now a multinational company. It is effectively exporting Brand Botswana through the skills that are built amongst the more than 190 Batswana team members, approximately half of whom provide support at Group level to our 9 other country operations.”

The Group is expected to show strong growth in its financial results, with loans and advances to clients growing substantially.


Mr Low revealed that the Group’s revenue mix is improving, and following the acquisition of a micro-finance business with operations in Kenya, Tanzania, Uganda and Rwanda three years ago, some 6 percent of revenues come from this business. “We are looking to roll this model out to further countries, including in Botswana,” he said.

In the last two years, Letshego has raised medium term notes (debt finance) of over P 1 billion Pula on both the Johannesburg Stock Exchange (JSE) and the Botswana Stock Exchange (BSE) – which has assisted the Company to improve its balance sheet leverage.

FINANCIAL REVIEW
The financial results of Letshego Holdings Group for the year ended 31 December 2014, which were released this week, reflect double digit growth in profit after taxation and advances to clients.

Profit before tax increased by 24 percent to P970 million. Margins were consistent with the prior period despite the prevailing competitive Environment. 60 percent of profits before tax were generated outside of Botswana. Cost to income ratio was reduced to 29 percent. Impairment charges were 2.0 percent on average net advances. Capital adequacy ratio remains above 60 percent.

Advances to customers (net) increased by 28 percent to P5.7 billion while the payroll portfolio increased by 26 percent to P5.3 billion. The microfinance portfolio increased 117 percent to P370 million. The customer base grew by 11 percent to 265,265. Customer access points have extended to 252.

The largest contributors to advances growth in absolute terms were Namibia, Mozambique and Botswana, contributing P944 million (75 percent) of net increase, as well as driving the payroll portfolio growth. Lesotho operations’ portfolio doubled to P190 million. Growth in the Swaziland portfolio was revived after product reviews, closing at P151 million, up 41 percent from the prior period. The Company has doubled the dividend payout ratio, paying out a dividend of some P197 million.

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Business

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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Business

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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