Moodys Africa banks outlook in dark hole towards 2021
News
Moodys latest outlook on African banks drew a picture of major local financial institutions as collateral for the Covid-19 sting that collapsed their associates in South Africa.
Among Moodys publicly rated banks is Absa Group Limited South Africa, a parent to Absa Botswana and FirstRand Bank Limited South Africa, a mother to First National Bank Botswana. Absa Group South Africa with assets sanding at USD 90 143 million, carries a Ba3 rating with a negative outlook while FirstRand South Africa, with assets of USD 89 079 million has a Ba2 rating with a negative outlook too.
When analyzing the already dogged by recession and deteriorating and indebted South Africa, Moodys had this to say: Our outlook for the sector (South Africa) is negative. The coronavirus-related disruptions are exacerbating the already challenging operating conditions characterized by low growth and wide fiscal deficits.
For banks, we expect a rise in problem loans to over 7%-8% of gross loans, and a significant drop in profits due to higher provisions and a squeeze in margins. The migration of Stage 1 & 2 loans to riskier Stages 2 & 3 will lead to higher risk weighted assets and lower capital.
Despite depositors move to shorter duration products and banks reliance on institutional deposits, funding conditions remain stable and liquidity buffers resilient. A planned new banking resolution regime with bail-in features will be credit positive for senior creditors. Good risk management practices will support financial stability.
In its 2021 Africa banks outlook, Moodys says there is difficulty in operating conditions and banks close links with their respective sovereigns drive the negative outlook. Most African sovereigns like Botswanas outlook has been negative since the outbreak of Covid-19 in the first quarter of 2020. Moodys further says, loan quality, profitability and foreign-currency (FC) liquidity will be pressure points, but stable funding and capital will mitigate risks.
This is after Fitch said that weaker-rated Sub Sahara Africa nations may face higher funding costs than before the pandemic, which could discourage their return to markets. On Wednesday Moodys outlined that there will be stress in African economies as operating conditions will remain difficult, as economic activity, consumer spending and investor confidence remain battered by the pandemic. The rating agency further stated that African sovereigns are heavily indebted and have limited capacity to absorb shocks.
Moodys said banks creditworthiness is linked with deteriorating sovereign credit profiles through their large holdings of government securities. Governments capacity to provide support to troubled banks will also be impaired.
However, according to Moodys, 2021 growth will recover modestly (to 3.3% for Moodys-rated countries). But financial stability will be broadly maintained as stable local currency deposit funding, high liquidity in local currency, good capital buffers with the equity-to-assets ratio typically exceeding 9%-10%, and gradual improvements in risk management will help to contain the risks.
Moodys says banks will be hurt via their links with governments as sovereign pressures will continue to weigh on banks credit profiles: economic slowdown hampers banks financial performance; government capacity to provide support is impaired; while banks are heavily invested in government securities and are hit by a drop in their value.
The African Banking sector will maintain its regional diversity. For example; Egyptian banks will be least impacted by the pandemic. While South African and Nigerian banks will face acute macro challenges, while loan quality and liquidity remain issues for Angolan and Tunisian banks, respectively. East African and Francophone West African banks are better placed than Central African banks given more resilient economies.
The pressure points will be NPLs, profits, FC liquidity and Moodys researcher expect non-performing loans (NPLs) to potentially double from 2019 levels as payment holidays expire, while increased provisioning needs, reduced business generation and margin pressure erode profitability.
Partly dollarized systems like the oil rich Nigeria, Angola and Botswanas diamond money reserves where foreign-currency revenues slumped, are more at risk of foreign exchange shortages.
Furthermore, Moodys said ESG and technology of increasing credit importance is on the forefront. The rating agency outlined the rising environmental risks which will increasingly affect overall economic performance and specific economic sectors, also impacting banks.
On the flip side of the gloom and doom, digital transformation provides exciting opportunities for the banking sector, primarily from rising financial inclusion, says Moodys. Locally commercial banks have been lauded for their resilience amid covid-19 winds, despite banking stocks taking the biggest hit since March this year at the local bourse.
When looking at the Bank of Botswana Research Bulletin which was released on Monday, a study on Market Structure and Performance in Botswanas Banking Industry gave a positive outcome of a healthy local banking sector. The paper said the banking sector profitability does not raise any competition concerns as they are driven by adoption and use of organizational strategies and technologies that improve the efficiency rather than market power or its abuse.
Last week during the MPC press conference 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.
News
BTC launches the 3rd Francistown Marathon 2024 and handover proceeds to the 2nd Francistown Marathon beneficiaries
Botswana Telecommunications Corporation Limited (BTC) has announced that its 3rd Francistown Marathon will be held on Saturday 20th April 2024 at Obed Itani Chilume Stadium in Francistown. The BTC Francistown Marathon is officially recognised by World Athletics and a Comrades Marathon Qualifier will offer race categories ranging from 42.2km, 21.1 km, 10km, 5km fun run, 5km peace run for children and has introduced a 5km and 10km categories for wheelchairs athletics.
BTC also used this opportunity to announce beneficiaries who received donations from proceeds made from the 2nd BTC Francistown Marathon that was held on April 23rd 203. BTC donated a play area, plastic chairs and wooden tables for pupils worth a total of thirty eight thousand, one hundred and three pula, fifty thebe each (P38, 103.50) to Monarch Primary School, Tatitown Primary School, Mahube Primary School and Gulubane Primary School. Ditladi and Boikhutso clinics each received a donation of benches, television sets and 10, 000 litre water tanks worth thirty seven thousan, eight hundred and ninety eight pula (P 37, 898.00). Additionally, BTC also donated seventy thousand pula (P70,000.00) to their marathon technical partner, Francistown Athletics Club (FAC) which will be used for daily operations as well as to purchase equipment for the club.
The BTC Francistown Marathon aligns seamlessly with BTC’s corporate social investment programme, administered through the BTC Foundation. This programme is a testament to BTC’s dedication to community development, focusing on key areas such as health promotion. The marathon, now in its third year, not only promotes a healthy lifestyle but also channels all proceeds to carefully chosen charities as part of BTC’s commitment to impactful and sustainable projects.
Speaking at the launch, the BTC Managing Director Mr Anthony Masunga stated that the marathon underscores BTCâs commitment to community upliftment and corporate social investment. He stated that âthe annual event which has been in existence since 2016, having taken a break due to the covid and other logistical issues, is instrumental to the economic upliftment of the city of Francistownâ. He congratulated all the beneficiaries for having been nominated to receive the donations, adding that âthe donation of proceeds from the 2023 marathon aims to highlight BTCâs commitment and heart for Batswana and our continued impact in the different industriesâ.
He further stated that through this marathon, âwe demonstrate our steadfast commitment to having a good influence on our communities, this event is a manifestation of our dedication to promoting education and a healthier, more active societyâ. Â He concluded by stating that âBTC looks forward to another successful marathon that will leave a lasting positive influence on the greater Francistown community and the country at largeâ he said.
Giving welcome remarks, the Councillor for Donga, Honourable Morulaganyi Mothowabarwa stated that âhe is ecstatic that BTC is collaborating with the City of Francistown on yet another installment of the Marathonâ. He continued to offer his support to BTC to enable this marathon to continue over the coming years, stating that the âCSI element is a welcome development that helps empower our communitiesâ, he said.
The 3rd BTC Francistown Marathon is officially open for registrations and athletes may use the following platforms to register and pay; through Smega by dialling *173# and choosing opton 5, then choose Option 3 for the Francistown marathon, at any BTC store or by visiting the BTC website and clicking on the BTC Francistown Marathon and choosing the relevant options.
News
Letsholo lauds President Masisiâs digitization in fight against corruption
Thapelo Letsholo, Member of Parliament for Kanye North, delivered a moving speech at the United Nations International Anti-Corruption Day commemoration, praising President Dr. Mokgweetsi Eric Keabetswe Masisi’s digitalization initiative in the fight against corruption. Letsholo highlighted the importance of embracing digitalization in governance as a crucial step in curbing corrupt practices.
According to Letsholo, the implementation of digital systems in government services can significantly reduce direct interactions between citizens and officials, which often serve as fertile grounds for corruption. By minimizing these opportunities for illicit activities, the efficiency and transparency of public services can be enhanced. Letsholo pointed to Estonia’s success in digital governance as an example, where public services have become more transparent, accessible, and efficient.
The MP commended President Masisi’s commitment to digitalization and E-Governance, emphasizing that it aligns with global anti-corruption standards. He called for full support and active participation from all sectors to ensure the success of this initiative.
Letsholo also stressed the importance of improving detection methods and refining whistleblower laws to effectively combat corruption. He highlighted the unseen and unspoken facets of corruption as its lifelines, emphasizing the need for robust detection mechanisms and a system that encourages and protects whistleblowers.
Addressing the societal role in fighting corruption, Letsholo focused on the crucial role of everyday citizens and civil servants who often witness corrupt practices firsthand. He acknowledged the existing reluctance to report corruption due to the perceived risks of repercussions. To change this narrative, Letsholo advocated for creating an environment where staying silent is deemed more detrimental than speaking out. He called for a cultural shift where the potential benefits of exposing corruption outweigh the risks, ensuring that whistleblowers are protected and feel secure in coming forward.
Letsholo called for collective responsibility and action in creating a system that not only detects and reports corruption but also supports those who stand against it. He expressed hope that under President Masisi’s digitalization initiatives, the future of governance in Botswana will be characterized by integrity, transparency, and accountability. Letsholo’s speech resonated with the sentiments of hope and determination that permeated the commemoration, emphasizing the need for unity in the fight against corruption.
In summary, Letsholo lauded President Masisi’s digitalization initiative in the fight against corruption, highlighting its potential to curb corrupt practices, enhance efficiency and transparency in public services, and align with global anti-corruption standards. He emphasized the importance of improving detection methods, refining whistleblower laws, and creating an environment where speaking out against corruption is encouraged and protected. Letsholo called for collective responsibility and action in creating a future characterized by integrity, transparency, and accountability in governance.
News
FaR property assets value clock P1.47 billion
FaR Property Company (FPC) Limited, a property investment company listed on the Botswana Stock Exchange, has recently announced its exceptional financial results for the year 2023. The company’s property asset value has risen to P1.47 billion, up from P1.42 billion in the previous year.
FPC has a diverse portfolio of properties, including retail, commercial, industrial, and residential properties in Botswana, South Africa, and Zambia. The company owns a total of 186 properties, generating rental revenues from various sectors. In 2023, the company recorded rental revenues of P11 million from residential properties, P62 million from industrial properties, and P89 million from commercial properties. Overall, the company’s total revenues increased by 9% to P153 million, while profit before tax increased by 22% to P136 million, and operating profit increased by 11% to P139 million.
One notable achievement for FPC is the low vacancy rate across its properties, which stands at only 6%. This is particularly impressive considering the challenging trading environment. The company attributes this success to effective lease management and the leasing of previously vacant properties in South Africa. FPC’s management expressed satisfaction with the results, highlighting the resilience of the company in the face of ongoing macroeconomic challenges.
The increase in profit before tax can be attributed to both an increase in income and effective control of operating expenses. FPC managed to achieve these results with fewer employees, demonstrating the company’s efficiency. The headline earnings per linked unit also saw an improvement, reaching 26.92 thebe, higher than the previous year.
Looking ahead, FPC remains confident in its competitiveness and growth prospects. The company possesses a substantial land bank, which it plans to develop strategically as opportunities arise. FPC aims for managed growth, focusing on consumer-driven developments and ensuring the presence of supportive tenants. By maintaining this approach, the company believes it can sustainably grow its property portfolio and remain competitive in the market.
In terms of the macroeconomic environment, FPC noted that inflation rates are decreasing towards the 3% to 6% range approved by the Bank of Botswana. This is positive news for the company, as it hopes for further decreases in interest rates. However, the fluctuating fuel prices, influenced by global events such as the war in Ukraine and oil output reductions by Russia and other Middle Eastern countries, continue to impact businesses, including some of FPC’s tenants.
FPC’s property portfolio includes notable assets such as a shopping mall in Francistown with Choppies Hyper as the anchor tenant, Borogo Mall located on the A33 main road near the Kazungula ferry crossing, and various industrial and commercial properties in Gaborone leased to Choppies, Senn Foods, and Clover Botswana. The company also owns a shopping mall in Mafikeng and Rustenburg in South Africa.
The majority of FPC’s properties, 85%, are located in Botswana, followed by 12% in South Africa and 3% in Zambia. With its strong financial performance, competitive position, and strategic land bank, FPC is well-positioned for continued growth and success in the property market.