Imara, the pan-African financial services group, has reported “pleasing” earnings growth for the six months to October 31, 2014, with profit after tax of P10.94 million, up 85% from P5.9 million in the comparative period of the previous year.
The Botswana-registered business grew revenue by 16% to P107.4 million versus a comparative of P92.4 million.
Total comprehensive income net of tax amounted to P13.45, up 151% from a comparative figure of P5.37 million. Profit after tax attributable to shareholders rose to P9.02 million – up 186% from P3.15 million.
No dividend was paid for the period, though a final dividend of P2.96 million was distributed in the last six months in relation to the April 2014 financial year.
Imara group CEO Mark Tunmer commented: “Earnings performance for the first half was pleasing, coming off much-improved results in the previous 12 months.
“All divisions made a contribution, creating solid momentum on a broad front.
“No dividend was distributed, in line with long-term group policy on interim earnings.”
Imara is well-capitalised with P72.20 million in cash and no borrowings. The consolidated position remains solid with total assets of P287.55 million.
However, Tunmer said cash flows for the period were negative by P11.99 million.
“This is disappointing,” he added. “However, the negative cash flow relates largely to changes to working capital at Imara S.P. Reid (ISPR), our Johannesburg stockbroking business.”
The group parent, Imara Holdings Limited has been trading under a cautionary announcement since 17 September 2014. This relates to the planned disposal of ISPR.
The sale is expected to realise approximately P100 million, though the envisaged transaction is subject to conditions precedent.
The Asset Management Division continued to be the main contributor to profitability and cash flow while the Corporate Finance division “reported particularly strong results on the conclusion of several regional mandates”, said Tunmer.
Results at the Stockbroking Division were in line with the comparative period, with a strong first-quarter contribution from Zimbabwe. Earnings from the Trust & Administration Division were little changed.
First-half results included a share of profits from associates of P2.68 million, relating mainly to the contribution of Stockbrokers Zambia Limited.
The outlook for the second half of the year may be challenging, said Tunmer. The timing of the planned sale of ISPR could have material influence on performance.
He noted: “Global markets continue to be characterised by volatility and high levels of uncertainty, and equity markets generally declined in the second quarter, impacting both the Asset Management and Stockbroking divisions.
“The effective date of the ISPR disposal is indeterminable at present, but should this occur before 30 April 2015, the Stockbroking Division’s earnings contribution could be adversely affected.
“In view of these factors it is unlikely that the strongly improved earnings performance over the past 18 months can be sustained in the second half.”
Imara is an independent, Botswana-listed investment banking group that prides itself on objective decision-making in the service of its clients. The company is mid-sized and has offices in Angola, Botswana, South Africa and the UK and associate offices in Malawi, Mauritius, Zambia and Zimbabwe. Imara has also partnered with Chapel Hill Denham in Nigeria, Sterling Bank in Kenya, Namibia Equity Brokers and Mac Capital in Dubai.
The Group is an active participant in Africa's financial markets and maintains extensive research coverage of regional equities. Imara provides a range of specialised financial products and services that can be broadly categorised as:
Asset management (institutional and private client)
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”