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BancABC IPO money walked aid through Covid-19 winds

BancABC

African Banking Corporation (BancABC) Managing Director, Kgotso Bannalotlhe said the bank invested its Initial Public Offering (IPO) money to make it a force to recon with in Sub-Sahara Africa and keep up with the ever changing new technology.

Bannabotlhe said the bank wholly-owned by sub-Sahara African financial services group Atlas Mara Limited which launched an IPO on the Botswana Stock Exchange in 2018 started by putting its capital on transformation and launch of customer-facing digital platforms intended to make it a transactional bank — having started as a merchant bank — and begin to acquire market share.

Among BancABC’s technological upgrade is the implementation of the revamped ATMs and Cards infrastructure and the SARUMoney retail banking application to assist customers with a platform that ensures, safe, accessible, reliable and universal movement of funds.

The BancABC MD said they are focusing on their plan of achieving growth in ten years and launching IPO has helped in accessing the needed capital. The bank secured further Tier II capital instrument amounting to P100 million to support the Bank’s strategic growth aspirations. At the recent Editorial Roundtable Presentation the BancABC said almost 9 percent year on year profit after tax increase felt immense pressure from the current economic challenges.

“The COVID-19 pandemic continues to create significant uncertainty around the duration of constrained economic activity and timelines for the economy to be fully operational. The global and local economy is expected to go into a recession of unknown magnitude and duration, with intermittent lockdown measures likely.

Based on estimated financial performance during the first of these lockdowns in the second quarter, whilst the Bank continues to be profitable, we expect the curtailed economic activity and disrupted markets to have an impact in 2020 full year financial performance and will slow down the Bank’s path to deliver on its previous timelines for attaining return on investment made,” said BancABC in its Half Year Financial Results recently.

However, BancABC is one of the few banks that remained resilient amid Covid-19, Bannabotlhe said this is because the bank was prepared for flexibility through its digital transformation. He said the bank was able to operate smoothly, do digital transactions and offer payment holidays when the entire economy was under the pangs of Covid-19.

On Thursday, Bank of Botswana deputy governor Kealeboga Shalaulo Masalila explained that the reason why banks were able to remain standing tall during tough times is because they are able to evaluate their processes, their loan books are sound and they strive to expand their income, especially from the interest income to digitalization. He further lauded banks marketing strategies that makes them attractive to customers.

But for BancABC, a struggle with bleeding impairments especially from the SMME which were funded is still a worry for Bannabotlhe. In its half year financial results BancABC board said credit impairments for the first half of the year was an increase in provisioning by P2 million compared with a net release in the prior year.

The increase is driven primarily by a deterioration on the largely SME lending book due to the current stresses experienced due to COVID-19,” said the bank in its half year results. According to BancABC the retail portfolio increase in impairments is due to the modified cashflows adjustments for change in client’s repayment schedules brought about by relief measures put in place to assist the bank’s clients that required cash flow assistance during this difficult time rather than underlying credit portfolio deterioration.

The other heavy burden on BancABC’s back is the need to have its balance sheet grow. In the half year result the bank said its balance sheet grown by about 3 percent driven by the growth in the loans and advances at about 4 percent. This is not enough according to head of commercial banking Pauline Motswagole who told journalists that the bank’s balance sheet is “squeezed” and depends mostly on retail lending as the main asset.

According to the bank’s half year financial results, being dependent on retail lending stagnates the bank because now its asset book volumes have been muted for the last six months due to the delay in the expected Government employee’s salary increases. Government has since backpaid employees recently, Motswagole also expect the economy to bounce back and SMMEs to come for loans, especially some in the water and construction tender.

Her ambitious wish, Motswagole wants the bank to build a huge transactional banking capability in order to bring interest expense in line with market peers. While expectation for covid-19 associated disruption to continue, BancABC has promised to keep on offering its customers debt relief. When quizzed by journalists if he expects the Bank of Botswana to cut the bank rate, Bannabotlhe avoided engaging in policy discussions. He however said the central bank has been supportive since Covid-19 hit the economy. Bannabotlhe also said if demand shrinks, he will strongly be biased on cuts.

On Thursday Bank of Botswana decided to maintain the Bank Rate at 3.75 percent. “…the MPC decided to continue with the accommodative monetary policy stance and maintain the Bank Rate at 3.75 percent. The Bank stands ready to respond appropriately should the need arise,” said Bank of Botswana.

The morning before the central bank maintained the rates, BancABC researchers in its Botswana Market Watch said they do not expect the bank to make an adjustment to the rate at this time. The researchers prefers to adopt a wait and see approach into the end of 2020, something which was done by Bank of Botswana.

“The Bank has been aggressive in cutting rates this year, slashing the benchmark rate by some 100 bpts this year. Granted this has not been as aggressive as some other countries in the region but it is significant nevertheless. The last cut took place at the October meeting and was 50 bpts in magnitude,” said BancABC researchers.

Business

Debswana-Botswana Oil P8 billion fuel partnership to create 100 jobs

18th May 2022
Head-of-Stakeholder-Relations

The partnership between Debswana and Botswana Oil Limited (BOL) which was announced a fortnight ago will create under 100 direct jobs, and scores of job opportunities for citizens in the value chain activities.

In a major milestone, Debswana and BOL jointly announced that the fuel supply to Debswana, which was in the past serviced by foreign companies, will now be reserved for citizen companies. The total value of the project is P8 billion, spanning a period of five years.

“About 88 direct jobs will be created through the partnership. These include some jobs which will be transferred from the current supplier to the new partnership,” Matida Mmipi, Head of Stakeholder Relations at Botswana Oil, told BusinessPost.

“We believe this partnership will become a blueprint for other citizen initiatives, even in other sectors of the economy. Furthermore, this partnership has succeeded in unlocking opportunities that never existed for ordinary citizens who aspire to grow and do business with big companies like Debswana.”

Mmipi said through this partnership, BOL and Debswana intend to impact citizen owned companies in the fuel supply value chain that include transportation, supply, facilities maintenance, engineering, customs clearance, trucks stops and its support activities such as workshop / maintenance, tyre services, truck wash bays among others.

“The number of companies to be on-boarded will be determined by the economics at the time of engagement,” she said. BOL will play a facilitatory role of handholding and assisting emerging citizen-owned fuel supply and fuel transportation companies to supply Debswana’s Jwaneng and Orapa Letlhakane Damtshaa (OLDM) mines with diesel and petrol for their operations.

“BOL expects to increase citizen companies’ market share in the fuel supply and transportation industries, which have over the years been dominated by foreign-owned suppliers. Consequently, the agreement will also ensure security of supply for Debswana operations, which are a mainstay of the Botswana economy,” Mmipi said.

“Furthermore, BOL will, under this agreement, transfer skills to citizen suppliers and transporters during the contract period and ensure delivery of competent and skilled citizen suppliers and transport companies upon completion of the agreement.”

Mmipi said the capacitating by BOL is limited to providing citizen companies oil industry technical capability and capacity to deliver on the requirements of the contract, when asked on helping citizen companies to access funding.

“BOL’s mandate does not include financing citizen empowerment initiatives. Securing funding will remain the responsibility of the beneficiaries. This could be through government financing entities including CEDA or through commercial banks. Further to this, there are financial institutions that have already signed up to support the Debswana Citizen Economic Empowerment Programme (CEEP),” Mmipi indicated.

While BOL is established by government as company limited by guarantee, it will not benefit financially from the partnership with Debswana, as citizen empowerment in the petroleum value chain is core to BOL’s mandate.

“BOL does not pursue citizen facilitation for financial benefit, but rather we engage in citizen facilitation as a social aspect of our mandate. Citizen facilitation comes at a cost, but it is the right thing to do for the country to develop the oil and gas industry,” she said.

Mmipi said supplying fuel to Debswana comes with commercial benefits such as supply margins. These have traditionally been made outside the country when supply was done by multi-nationals for a period spanning over 50 years. With BOL anchoring supply for Debswana, this benefit will accrue locally, and BOL will be able to pay taxes and dividends to the shareholders in Botswana.

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Business

VAT in Africa Guide 2022 – Africa re-emerging

18th May 2022

PwC Africa has presented the eighth edition of the VAT in Africa Guide – Africa re-emerging. This backdrop of renewal informs on the re-emergence of African economies and societies which have been affected by the COVID-19 pandemic.

In this edition, which has been compiled by PwC Africa’s indirect tax experts, covers a total of 41 African countries. It is geared towards sharing insight with our clients based on the constantly changing tax environments that can have a significant impact on business operations.

Within Africa, governments continue to focus on expanding the tax net by improving revenue collection through efficient compliance systems and procedures. PwC Africa has observed that revenue authorities also continue to take a keen interest in indirect taxes as part of revenue mobilisation initiatives.

Maturing VAT system and upskilling SARS 

“In South Africa, VAT is becoming more relevant as a revenue source for the government,” says Matthew Besanko, PwC South Africa’s Indirect Tax Leader. “Strides have been made to upskill South African Revenue Service (SARS) staff and identify VAT revenue leakages, particularly in respect of foreign suppliers of electronic services to people and businesses in South Africa.”

Broadening the tax base and digital economy

In the past year, South Africa, Mozambique and Zimbabwe saw updates to their VAT legislation, or introduced specific legislation targeting electronically supplied services (ESS), which is in line with the global trend of attempting to tax the digital economy. “The expectation is that Botswana will also introduce VAT legislation in due course, while the National Treasury in South Africa has also made mention of revising the rules to account for further developments in the digital economy,” Besanko says.

South Africa’s National Treasury has also drafted legislation with the intention to introduce a reverse charge on gold, which is expected to come into effect later in 2022. While in Zimbabwe, revenue authorities have introduced a tax on the export of raw medicinal cannabis ranging between 10% and 20%, which came into effect on 1 January 2021.

ESG and carbon tax 

Key strides have also been made within the Environmental, Social and Governance (ESG) space. “ESG leadership, strategising and reporting is essential now for organisations that wish to flourish and remain relevant,” Kabochi says. He adds that companies need to consider how ESG and tax intersect, since tax is a significant value driver when businesses need to deliver on their ESG goals.

In South Africa, a carbon tax regime, which is being implemented in three phases, has been adopted. The second phase was scheduled to start in January 2023, however phase one was extended by three years until 31 December 2025.

Until then, taxpayers will enjoy substantial tax-free allowances which reduce their carbon tax liability. At the beginning of 2022, the South African government increased the carbon tax rate to R144 (about US$9), which is expected to increase annually to enable South Africa to uphold its COP26 commitments.

With effect from 1 January 2023, carbon tax payers in South Africa will also be required to submit carbon budgets and adhere to the provisions of the carbon budgeting system which will be governed by the Climate Change Bill. Where set carbon budgets are exceeded, the government plans to impose penalties. “At PwC, we are continuously focused on our renewed global strategy, ” The New Equation,” Kabochi says. “Through this strategy, a key focus area for PwC Africa is to support clients in adding value to their ESG ambitions and building trust through sustained outcomes.”

The New Equation is also an acknowledgement of the fundamental changes in the business environment in which PwC’s clients and other stakeholders operate. PwC continues to reinvent and adapt to these changes as a community of problem solvers, combining knowledge and human-led technology to deliver quality services and value.

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Business

Economists project lower economic growth for Botswana

18th May 2022
CBD

Local and international economists have lowered their projections on Botswana’s economic growth for 2022 and 2023, saying the country is highly likely to fail to maintain high growth rate recorded in 2021 hence will not reach initial forecasts.

Economists this week lowered 2022 forecasts for Botswana’s economic growth rate, from the initial 5.3% to 4.8% and added that in 2023 growth could further decline to 4.0%. The lower projections come on the backdrop of an annual economic growth that recovered sharply in 2021 with figures showing that year-on-year real Gross Domestic Product (GDP) growth increased to 11.4%, up from a contraction of 8.7% in 2020.

Economists from the local research entity, E-consult, this week stated that the 2021 double digit growth that exceeded projections made at the time of the 2022 budget may be short lived due to other developments taking place in the global economy. E-consult Economist Sethunya Kegakgametse stated that the war in Ukraine has worsened supply problems in the global economy and added that before the war, macroeconomic indicators were seen as improving and returning to pre-COVID levels.

According to the economist the global economy was projected to improve in 2022 and 2023. Recent figures show that global growth projections have been revised downwards from the initial forecast of 4.9% in 2022 with the World Bank’s new estimate for global growth in 2022 at 3.2%.

The statistics also shows that International Monetary Fund revised their growth projections for 2022 and 2023 down by 0.8% and 0.2% respectively, falling to 3.6% for both years. “The outbreak of war has severely dampened the global recovery that was under way following the COVID-19 pandemic,” said the economist.

She stated that despite Botswana being geographically removed from the conflict, the country has not and will not be exempt from the disruptions in the global economy. “The disruptions to global supply chains resulting from the war will have a negative effect on both Botswana’s growth and trade activities.

The economic sanctions against diamonds from Russia will add uncertainty to the market which will have knock on effects to Botswana’s growth, exports, and government revenues,” said the economists who added that the disruptions are driving prices up and result with very high inflation in the local economy.

Kegakgametse projected that in an attempt to limit inflation Bank of Botswana will be forced to raise interest rate “Should the sharp increase in both global and local inflation persist, Bank of Botswana much like other central banks around the world will be forced to raise interest rates in a bid to control rising prices. This would mean an end to the expansionary monetary policy stance that had been adopted post COVID-19 to aid economic growth,” she said.

In the latest projections, the UK based economic research entity Fitch Solutions lowered 2022 real GDP growth forecast for Botswana from 5.3% to 4.8% “In 2023, we see economic growth rate decelerating to 4.0%,” said Fitch Solutions economists who also noted that the 2022 and 2023 economic growth projections may come out lower than the current forecasts, as it is possible that new vaccine-resistant virus variants may be identified, which could result in the re-implementation of restrictions. “In such circumstances, we cannot rule out that Botswana’s economy may post weaker growth than our baseline scenario currently assumes,” said the economists.

According to the projections, Fitch Solution stated that there is limited scope for Botswana government to increase diamond production and exports, following the economic sanctions imposed on Russian diamond mining companies operating in Botswana. The research entity added that De Beers is unlikely to scale up diamond output from Botswana in order to prop up diamond prices.

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