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Moody’s Africa banks outlook in dark hole towards 2021

Moody’s

Moody’s 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 Moody’s 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, Moody’s 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, Moody’s says there is difficulty in operating conditions and banks’ close links with their respective sovereigns drive the negative outlook. Most African sovereigns like Botswana’s outlook has been negative since the outbreak of Covid-19 in the first quarter of 2020. Moody’s 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 Moody’s 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.

Moody’s 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 Moody’s, 2021 growth will recover modestly (to 3.3% for Moody’s-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.

Moody’s 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 Moody’s 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 Botswana’s diamond money reserves where foreign-currency revenues slumped, are more at risk of foreign exchange shortages.
Furthermore, Moody’s 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 Moody’s. 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 Botswana’s 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.

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Khan: Boko, Masisi are fake politicians

18th January 2021
Masisi & Boko

While there is no hard-and-fast rule in politics, former Molepolole North Member of Parliament, Mohamed Khan says populism acts in the body politic have forced him to quit active partisan politics. He brands this ancient ascription of politics as fake and says it lowers the moral compass of the society.

Khan who finally tasted political victory in the 2014 elections after numerous failed attempts, has decided to leave the ‘dirty game’, and on his way out he characteristically lashed at the current political leaders; including his own party president, Advocate Duma Boko. “I arrived at this decision because I have noticed that there are no genuine politics and politicians. The current leaders, Boko and President Dr Mokgweetsi Masisi are fake politicians who are just practicing populist politics to feed their egos,” he said.

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Ookeditse rejects lobby for BPF top post

18th January 2021
LAWRENCE-OOKEDITSE

Former Botswana Democratic Party (BDP) parliamentary hopeful, Lawrence Ookeditse has rejected the idea of taking up a crucial role in the Botswana Patriotic Front (BPF) Central Committee following his arrival in the party this week. According to sources close to development, BPF power brokers are coaxing Ookeditse to take up the secretary general position, left vacant by death of Roseline Panzirah-Matshome in November 2020.

Ookeditse’s arrival at BPF is projected to cause conflicts, as some believe they are being overlooked, in favour of a new arrival. The former ruling party strategist has however ruled out the possibility of serving in the party central committee as secretary general, and committed that he will turn down the overture if availed to him by party leadership.

Ookeditse, nevertheless, has indicated that if offered another opportunity to serve in a different capacity, he will gladly accept. “I still need to learn the party, how it functions and all its structures; I must be guided, but given any responsibility I will serve the party as long as it is not the SG position.”

“I joined the BPF with a clear conscious, to further advance my voice and the interests of the constituents of Nata/Gweta which I believe the BDP is no longer capable to execute.” Ookeditse speaks of abject poverty in his constituency and prevalent unemployment among the youth, issues he hopes his new home will prioritise.

He dismissed further allegations that he resigned from the BDP because he was not rewarded for his efforts towards the 2019 general elections. After losing in the BDP primaries in 2018, Ookeditse said, he was offered a job in government but declined to take the post due to his political ambitions. Ookeditse stated that he rejected the offer because, working for government clashed with his political journey.

He insists there are many activists who are more deserving than him; he could have chosen to take up the opportunity that was before him but his conscious for the entire populace’s wellbeing held him back. Ookeditse said there many people in the party who also contributed towards party success, asserting that he only left the BDP because he was concerned about the greater good of the majority not individualism purposes.

According to observers, Ookeditse has been enticed by the prospects of contesting Nata/Gweta constituency in the 2024 general election, following the party’s impressive performance in the last general elections. Nata/Gweta which is a traditional BDP stronghold saw its numbers shrinking to a margin of 1568. BDP represented by Polson Majaga garnered 4754, while BPF which had fielded Joe Linga received 3186 with UDC coming a distant with 1442 votes.

There are reports that Linga will pave way for Ookeditse to contest the constituency in 2024 and the latter is upbeat about the prospects of being elected to parliament. Despite Ookeditse dismissing reports that he is eying the secretary general position, insiders argue that the position will be availed to him nevertheless.

Alternative favourite for the position is Vuyo Notha who is the party Deputy Secretary General. Notha has since assumed duties of the secretariat office on the interim basis. BPF politburo is expected to meet on 25th of January 2020, where the vacancy will be filled.

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BDP cancels MPs retreat

18th January 2021
President Masisi

Botswana Democratic Party (BDP) big wigs have decided to cancel a retreat with the party legislators this weekend owing to increasing numbers of Covid-19 cases. The meeting was billed for this weekend at a place that was to be confirmed, however a communique from the party this past Tuesday reversed the highly anticipated meeting.

“We received a communication this week that the meeting will not go as planned because of rapid spread of Covid-19,” one member of the party Central Committee confirmed to this publication.
The gathering was to follow the first of its kind held late last year at party Treasurer Satar Dada’s place.

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