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FIRSTCRED: 2021 Outlook and market trends

FIRSTCRED

DUDU GAREKWE

LESSONS FROM COVID-19 – WHAT’S NEXT FOR THE CREDIT LENDING SECTOR?

As Botswana is grappling with the second wave of Covid-19 infections, it is becoming increasingly evident that there is no quick solution to the current dynamics playing out. In light of possible further waves of the pandemic, Batswana and the markets will have to continuously adapt to a rapidly changing environment.

The credit lending sector is no exception, and all lenders, be it banks or microfinance institutions, have been impacted to some extent or another by the pandemic.

A tightening credit environment

All lenders have been forced to tighten their credit policies in response to the uncertainty brought about by the pandemic. At this stage it is unclear what impact the second wave will have on the economy, and whether a projected growth of 8.8% will be achieved in 2021. Talks of possible third and fourth waves before herd immunity is reached adds to market uncertainty.

As signalled during the recent Budget Speech by Minister of Finance and Economic Development, Dr Thapelo Matsheka, we do anticipate a change in monetary policy as a result of upwards pressure on inflation, although this is expected to remain in the Bank of Botswana’s target range of between 3% and 6%.

The increase in the VAT rate from 12% to 14%, alongside an increase in fuel tax of 1 Pula per litre will impact on the disposable income of everyone, although there is some relief for those earning P4,000 per month, in the form of a higher tax exemption threshold.

As a result, the credit lending sector will be much more fixated on containing non-performing loans, which means there will likely be a tightening on lending. Loans to higher-risk small, medium, and micro enterprises (SMMEs) will likely be harder to come by, notwithstanding Government’s efforts to assist businesses through an Industry Support Fund (ISF).

With Government focused on reducing the public sector wage bill from its current levels of 15% of GDP to 10% in the short to medium term, competition for market share among payroll-dependent lenders is expected to increase considerably.  Competition inevitably will lead to innovation to the benefit of consumers, and we expect a number of rapid digital transformation to follow.

Lessons from a black swan event

Covid-19 took everyone by surprise, with sales reducing significantly under hard lockdown restrictions. This is a scenario no-one had planned for in their risk assessments. The biggest impact to the sector has been the inability of customers to visit branches and transact on their business. Especially moving between zones made people uneasy to travel. Yet customers insisted on talking to us – which demonstrates the need for two-way communication.

With hindsight, we realise how misleading the power of perception can be. Especially as most businesses originally regarded news of the pandemic as something similar to SARS, that will be contained in a few countries.

The main lesson learnt, and something we’ve implemented into our risk assessment is to plan for the worst. The sector could have positioned itself differently some time ago, finding ways of serving and educating customers on financial matters virtually.

Rapid digital transformation

Within this crisis lays the opportunity – we anticipate that Covid-19 will stimulate rapid evolution of online credit processes, especially as Government continues to roll-out online connectivity as part of its Vision 2036 aspirations of turning Botswana into a high-income country.

Through technology, credit scoring will become much more sophisticated, which will allow for credit decisions to be reached within two hours, with same-day pay-outs.

The use of mobile services is further likely to escalate rapidly. A lot of our clients, for instance, live in villages far from formal financial service centres, but almost everyone has a cell phone. A driving factor in the success of mobile money will be education, and in this regard we have already pushed the boat out by educating our agents to teach customers on how to use the technology.

Protecting your credit record and good name

We have noticed a trend where people are living on credit, which is not sustainable. Borrowers often also don’t investigate the terms and interest rates of their contracts. A good credit record is worth its weight in gold, and Batswana will do well to shop around for the best service, advice and repayment terms.

Borrowers should take care to no overexpose themselves – the 40% minimum take-home pay threshold by Government is a guideline and loans should only be taken if it is absolutely needed. Loans should also be paid off in the shortest amount of time possible, to avoid unnecessary interest charges.
Dudu Garekwe is Chief Executive Officer (CEO) of FirstCred Limited

Business

Food prices continue to rise, but at a slower rate

28th November 2022

Prices for cereals or staple foods in Botswana and other Southern African countries continue to rise at a slower pace, following trends in the global markets, according to the latest November 2022 Food Price Monitoring and Analysis by Food Agricultural Organization (FAO) of the United Nations.

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Business

Still doing business the old way?

18th November 2022

It’s time to get business done better with MTN Business Botswana’s ICT Solutions.

Running a digital businessMTN Business Solutions Botswana, popularly known as MTN Business is an Internet Service Provider. We are a subsidiary of MTN Group Limited, a multinational telecommunications Group headquartered in South Africa, which operates in 19 markets across Africa and the Middle East.

More and more, clients are looking for ways to keep their staff productive in a dynamically changing business environment. Whether your people are working from home, the office or abroad, there is a growing recognition that digitising your operations can offer unprecedented commercial value in flexibility, productivity and growth. This new, digital reality means that it is more important than ever to stay agile – if there is anything that can slow a business down, it is being burdened by othatld technology.

Having made substantial investments in fibre technology, high-speed terrestrial and undersea networks and new frequency spectrum across the markets wherein it operates, MTN is perfectly positioned to respond to this shift in the market.

A few years ago, MTN also made the decision to build an IP capable radio network for its mobile services, giving its core network the ability to seamlessly integrate with enterprise IP networks. The mobile towers deliver services to enterprise clients absolutely anywhere it has a network, shortening the last mile and removing complexity and cost.

Now there is increasing demand from clients to connect their remote sites in all areas, including rural and semi- rural. MTN has assisted clients with overcoming this connectivity hurdle, enabling their staff to get the job done wherever they are.
MTN’s evolution

For MTN, the focus has shifted from just being a core telecommunications services provider, towards also becoming a technology solutions provider. The service offering now also includes Unified Communications, Data Hosting and Cloud Solutions, Security-As-A-Service and Managed Network Services. The scope has changed to being client and industry specific, so the requirements and service portfolio vary from one client to the next. The expectation is that a company like MTN must respond to these challenges, helping clients to get business done better as they shift from old to new technologies.

As many businesses continue to grapple with a digitally dynamic world, they face new challenges that have to be solved. This environment will benefit those that are more digitally enabled and agile. It is a brave new world that will favour online over on-site, wireless over wired and fluid over formulaic. Businesses will seek out partners and suppliers that are every bit as flexible and forward-looking as they are.
Ultimately, clients need partners like MTN Business that will invest in infrastructure, deliver the services they require, have market credibility, are financially sound and have a long-term commitment to their market presence.

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Business

BIE to vitalize the Dignity of Engineers

9th November 2022

Botswana Institution Of Engineers (BIE), has last week hosted a gala dinner in  which they appreciated engineers who worked tirelessly and with dedication for 10 years from 1983 to steer the BIE to its current status.

The event that was held at the Phakalane Golf Estate had brought together young, experienced and veteran engineers and was held under the theme “Vitalize the dignity and eminence of all professional engineers”.

Explaining the theme, the institution’s treasurer, Thanabalasingam Raveendran said that engineers were looked upon reverentially with respect as the educated but with time it seems to have deteriorated. He indicated that there is a need to change the narrative by all means.

“The BIE exists for the welfare and the betterment of us Botswana engineers, we need to recognize specialised units within our Institution. We Engineers strongly believe in Engineers make it happen” Raveendran said.

He indicated that under the theme they appeal to all engineers to energize, to attain quality of being worthy of honour and respect and to achieve recognized superiority amongst the Society.

Raveendran stated that engineers need to ensure their end product is of good quality satisfying the end users expectations and engineers must be honest in their work.

“Approximately 8000 engineers registered with Engineering Regulatory Board (ERB) are not members of the BIE, engineers need to make every effort to recruit them to BIE” he said.

He alluded that BIE being a society, it currently needs to upgrade itself at par with professional institutions elsewhere like the UK and USA.

He further stated that BIE has to have engineering units of specialised disciplines like Civil/Mechanical/electrical etc

“As President Masisi indicated in his inaugural speech, the young people, who make 60 percent of the population of this country, are the future leaders and therefore investing in them is building the bridge to the future” said Raveendran

Kandima indicated that BIE has a memorandum of Understanding with Engineers Registration Board (ERB), where BIE is a recognised provider of CPD training, mentorship programmes and more importantly IPD undertaking to upgrade the skills and know-how of our engineers.

“For us to achieve our mandate and make worthwhile changes to engineering in Botswana, we have to be totally focused and act with intent” said Kandima.

Furthermore, Stephen Williams, past president of the BIE from 1986-1988 told the engineers that  the BIE provides a fertile environment where they can meet, share ideas and grow professionally.

“The BIE is also a nesting place for graduate engineers to learn from their peers and seniors, it also cater for engineering technicians and technologists and so nobody in the technology field is left out” he said.

He further indicated that Botswana Government provides a conductive environment for growth of engineering professionals.

“It must be stated that the Botswana Government recognises the existence of BIE and it can further be stated that the government enables ERB to carry out its mandate as a regulator of engineering professionals” said Williams

He plead with engineering companies to recognize and support BIE as it is the only source of engineering personnel’s for various Industries .

Furthermore, when giving his farewell speech, Michael Pinard , a past president of the institution  said how they are viewed as engineers by the general public might be due to some lack of appreciation as to exactly what role they play in the development of the country.

“The BIE slogan is aptly coined-Engineers make it happen, in other words, what man dreams engineers create” Said Pinard.

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