Botswana Insurance Holdings Limited (BIHL) shareholders next month will be smiling all the way to the bank as Board of Directors of the Group decide to pay an extra dividend of 11 thebe per share (net of tax), being a total reflection of P31.1 million(net of tax).
For half year BIHL offered shareholders 44 thebe per share and for the year ending December 2019 the final normal dividend to be paid is 59 thebe per share (net of tax) or P166.6 million(net of tax). Furthermore BIHL board has resolved that an additional 11 thebe per share (net of tax) or P31.1 million (net of tax) be added on shareholders pockets. By April 20 BIHL should have paid a total of P322 million as dividends to shareholders. Group chairperson Batsho Pamela Dambe-Groth told shareholders when announcing the dividends on Wednesday that, “I am sure you will all be very pleased about.”
When making graphical presentation of the Abridged Audited Group results for the year ended 31 December 2019 BIHL Group CEO Kudakwashe Mukushi showed that since 2017. He showed that an interim dividend of 55 thebe was offered in 2017 before a final dividend of 67 thebe was paid. The same year, an additional 35 thebe was paid to shareholders. In 2018 after six months the BIHL offered shareholders 60 thebe before 67 thebe was paid end of the year. An additional 16 thebe was paid to shareholders in 2018 according to Mukushi.
“Overall, the Group remains well positioned in terms of capital management and solvency. This is always taken into consideration when calculating dividends. In determining the dividend, the Board ensures that its capital position remains solid and aligned with future capital requirements whilst sustaining healthy levels of Return on Group Equity Value,” said Dambe-Groth when announcing dividends during the December 2019 financial results presentation.
BIHL Group CEO Catherine Lesetedi was positive when taking the podium on the Wendesday results presentation saying, “the numbers speak for themselves.” She said BIHL has managed to survive the ever growing competitive environment ever since putting up shop 45 years ago. According to the latest financial results, BIHL Profit after tax went up by 19 percent to close the year at over P434 million compared to P366 million registered in the prior year.
This was bolstered by impressive revenue figures registered during the year. The Group raked in about P2.59 billion in revenue during the year ended 31st December 2019, up 8 percent from the P2.34 billion revenue registered in the prior year. Also operating profits for the Group during the year remained flat at P376 million as at December 2019 compared to prior year. Operating profit for the life business increased by 3 percent over the year despite the difficult economic conditions and intensified competition.
“Growth in operating profit is mainly a result of good new business volumes from the group lines and low new business strain for our retail products,” explained Lesetedi on Wednesday. New business grew by 18 percent underpinned by strong performance on group lines. Recurring premium recorded a growth too.The value of new business, which represents the present value of future profits from new business premiums written during the year, increased by 8 percent from the previous year on the back of impressive new business volumes from the group lines.
The asset management business operating profit for the year was however 14 percent down compared to prior year due to pressure on the fees earned. The general insurance business was positively impacted by lower claims leading to a decent growth over last year; however BHIL has since sold this business as it streamlined its activities. Contribution of BIHL associate holdings and joint ventures which includes Pan African Micro lender Letshego and Funeral Services Group has increased by 169 percent due to lower impairment change compared to prior year.
In terms of segmental performance BIHL through Botswana Life , the country ‘s largest life insurance business realized net premium income growth of 11 percent from 2.35 billion in 2018 to 2.60 billion in 2019. Operating expenses increased above inflation as a result of the investment made on the 5-year strategy that was rolled out at the beginning of the year. Selling expenses also increased in line with the increase in income from group lines.
During the year, BIHL management launched the soft elements of the Life and More marketing campaign, a two-year campaign that is intended to support the five-year Se Sarona strategy with the purpose of brand positioning, client delight and elevating the advisory role as the narrative is scripted to demonstrate a problem and its solution which profiles Botswana Life products.
BIHL subsidiary Botswana Life also launched an extended family funeral cover called Masika Otlhe which the BIHL CEO said the product demonstrates their agility and commitment to innovation and predicting customer needs. On the Asset Management business which is mainly under Botswana Insurance Fund Limited (BFIM) operating profit for 2019 was flat when compared to the 2018 performance. Total Assets under Management for the year were P27.3billion, a 5 percent growth from the 2018 assets under management.
Company management says the main driver of the 2019 performance was the continued pressure on investment management fees hence lower margins. The Zambia business on the other hand remained resilient despite the challenging economic conditions particularly in the 2nd half of the year and posted an overall 5 percent year on year growth in operating profit.
Included in this number is Zambia’s P4.2 billion and the remaining P23.1 billion represents asset directly managed by BIFM. During the year Management rolled out a new five year strategy which saw some new funds being introduced to the market. BIHL says the strategy is already bearing fruits with fresh mandates received for some of the new funds. “We are cognisant of the highly competitive environment and will continue to focus on managing expenses and delivering value to clients,” Lesetedi noted.
Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.
In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.
The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.
With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.
Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.
BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.
During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.
BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.
As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.
In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.
BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.
The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.
BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.
Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.
According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).
With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.
In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.
Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.
The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.
The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.
The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.
In the latest June 2022 global economic prospects, released last week the World Bank has warned that low global economic growth and economic activity in global commodity markets such as China and Europe could negatively affect export revenues for Botswana and other Sub Saharan countries.
Recent data from Statistics Botswana show that Botswana’s exports destined to the global markets such as Asia and the European Union (EU) on monthly basis accounts for around 60.1 percent and 20.1 percent respectively.
The World Bank last week lowered its 2022 projections of global economic growth and indicated that the new forecasts could be bad news for countries like Botswana who are dependent on export mineral revenues. The Bank noted that just over two years after COVID-19 caused the deepest global recession since World War II, the world economy is again in danger and stated that this time it is facing high inflation and slow growth at the same time.
In the recent June projections, the bank lowered its forecast of global economic growth from the January 4.1 percent to 2.1 percent. “Our June forecasts reflect a sizable downgrade to the outlook: global growth is expected to slow sharply from 5.7 percent in 2021 to 2.9 percent this year. This also reflects a nearly one-third cut to our January 2022 forecast for this year of 4.1 percent,” a team of World Bank economists noted in the June 2022 Global Economic Prospects.
The World Bank indicated that exports from Botswana and other Sub Saharan countries could suffer from a substantial deceleration of activity in China and Europe. The Bank noted that exporters of industrial metals, crude oil, and ores such as Angola, Democratic Republic of Congo, Republic of Congo, South Africa, and Zambia could suffer from a substantial deceleration of activity in China.
On the other hand a sharp contraction of growth in the euro area could hurt exporters of agricultural products such as beef, coffee, tea, tobacco, cotton, and textiles from Botswana, Ethiopia, Madagascar and Malawi. “The faster-than-expected deceleration of the global economy and increased volatility of commodity prices could hurt many SSA commodity exporters,” said World Bank President David Malpass.
Malpass indicated that subdued growth in the global markets for Botswana and other Sub Saharan exports will likely persist throughout the decade because of weak investment in most of the world.
He noted that with inflation now running at multi-decade highs in many countries and supply expected to grow slowly, inflation could remain higher for longer than currently anticipated. “Even if a global recession is averted, the pain of stagflation could persist for several years— unless major supply increases are set in motion. Amid the war in Ukraine, surging inflation, and rising interest rates, global economic growth is expected to slump in 2022. Several years of above-average inflation and below-average growth are now likely,” said Malpass.