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Banks sceptical of households paying debts during Covid-19 year

An outlook by local banks suggests that their loan books quality could deteriorate in 2020 and the Covid-19 pandemic was expected to be the main excuse. According to Household Indebtedness Survey Report 2020 which was recently released by Bank of Botswana, 50 percent of banks expected a high default rate.

More than half the banks expected a gloomy 2020, 33.3 percent and 16.7 percent anticipate the non-payment rate to be moderate and low, respectively. Banks which indicated that the default rate is likely to be high in 2020 attributed that to the expected impact of Covid-19 on jobs, thus impairing the ability of households to service their debt, said the Household Indebtedness Survey Report 2020.

In the past years lenders indicated that they managed to put non-payment rate at bay during 2018 and 2019. In 2019, on average, 58.3 percent of banks experienced a moderate default rate and 41.7 percent a low default rate. BoB said this survey measures the level of household indebtedness in Botswana, using data collected from commercial banks, statutory banks, micro-lenders, hire purchase stores, and Savings and Credit Cooperative Societies (SACCOS).

Data was collected by the use of an online questionnaire and from statutory returns of commercial and statutory banks, according to the central bank. Either, all lenders expect demand for credit not to be forthcoming and hire purchase stores anticipate it to be generally low in 2020.

The central bank in its survey said on average 25 percent of both banks and micro-lenders expected demand for credit to be high in 2020 on the backdrop of the increase in Government employee salaries and the reduction in the Bank Rate.

Government employees borrow more money compared to their counterparts from the private sector, in 2019 they took a larger share of 54.8 percent while those from the private sector were at 43.2 percent. According to Household Indebtedness Survey Report, 50 percent of micro-lenders, 42 percent of banks, 27 percent of SACCOS and 25 percent of hire purchase stores expected demand for credit to be moderate in 2020.

The survey further says the banks explained that their moderate outlook for demand for credit is informed mainly by their intention to grow the loan book, particularly secured lending.
But micro-lenders indicated that they expect most of their customers to continue with their normal borrowing habits as most of them are employed by Government (government workers have not lost their jobs even during COVID-19 pandemic), states the report.

Other factors mentioned by micro-lenders that influenced their moderate outlook for demand for credit include delays in the salary increment for Government employees; reduction of incomes due to COVID-19, the possibility of job losses due to COVID-19; and lockdowns (as well as restrictions of movements) which resulted in closure of some businesses, says the Household Indebtedness Survey Report 2020.

As at the end of December 2019, total household debt amounted to P50.7 billion, comprising of bank loans (88.6 percent), micro-lenders loans (9.4 percent), hire purchase credit (1.3 percent) and SACCOS loans (0.6 percent). As a percent of GDP, total household debt was 25.8 percent in the same period.

According to the household survey of 2020, most of the lending to households by banks is in the form of unsecured personal loans which stood at 63 percent of the total bank credit in December 2019, up from 58 percent in 2018. The second largest debt category is for residential property at 31 percent, which declined from 34 percent in 2018, followed by motor vehicle loans at 5 percent and credit cards at 2 percent, said the report.

Women credit fearing

Since 2018, two years to the end of the household debt survey of 2020, men tend to borrow more than females and the middle-aged population (30 to 49 years old) tends to take on more debt than other segments of the population.

According to the central bank survey, when looking at the demographics section, household earning income is between P3 000 and P20 000 per month actively participate in credit markets compared to those who earn income outside this range.

According to the Director of the Macroeconomic Policy, Forecasting and Research Department at the African Development Bank, Hanan Morsy, when contributing to an article for International Monetary Fund (IMF) last year, women are self-selecting out of the African credit market.

Morsy said womens access to finance is disproportionately low. She further said despite substantial overall progress in 2017, the World Bank reported, 1.2 billion more people had bank accounts than in 2011 there is still a 9 percent gap between womens and mens access.

In sub-Saharan Africa, only 37 percent of women have a bank account, compared to 48 percent of men, a gap that has only widened over the past several years, Morsy said. In Botswana context, females have been low in borrowing when compared to men since 2017, but the rate has been improving since the three years before 2020. In 2017 females were 43 percent, in 2018 it went down by 42 percent and in 45.4 percent in the last year under review being 2019.

Fresh evidence drawn from the credit markets of 47 African countries suggests that women entrepreneurs in Africa, in general, and in North Africa, in particular, are more likely to self-select out of the credit market because of low perceived creditworthiness.

These women did not apply for loans or lines of credit because they were discouraged by their own perception that their applications would be denied. Our study finds that women managers of micro and small firms are more likely than men to self-select out of the credit market, said Morsy.


Grit divests from Letlole La Rona

22nd March 2023

Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.

The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.

Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.

This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.

In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.

Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.

The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.

“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said

In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.

The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.

Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.

Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.

Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.

Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.

“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.

LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.

The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.

An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.

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Stargems Group establishes Training Center in BW

20th March 2023

Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.

The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.

“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.

In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices.  Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.

“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.

Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy,  Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.

“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.

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Food import bill slightly declines

20th March 2023

The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.

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