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BancABC IPO money walked aid through Covid-19 winds

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 BancABCs 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 Banks 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 Banks 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 clients repayment schedules brought about by relief measures put in place to assist the banks clients that required cash flow assistance during this difficult time rather than underlying credit portfolio deterioration.

The other heavy burden on BancABCs 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 banks balance sheet is squeezed and depends mostly on retail lending as the main asset.

According to the banks 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 employees 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

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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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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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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