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Non-Bank Financial institutions defy odds with P2 billion profit

Non-Bank Financial institutions

Botswana’s Non-Bank Financial services sector displayed resilient performance in the year 2020, beating unprecedented difficult trading conditions presented by the COVID-19 pandemic. This week, Non-Banking Financial Institutions Regulatory Authority (NBFIRA) released its annual report for the 12 months period ended 31st March 2021.

The outbreak of the COVID-19 pandemic set a difficult global stage for countries, industries, and individuals alike. A severe contraction of global economic activity in the first half of 2020 was reflected by the decline in global GDP of 3.3 percent, a state of affairs worse than that recorded in the global economic and financial crisis of 2008/2009.

In response, The Non-Bank Financial Institutions Regulatory Authority (NBFIRA), the statutory body set up to regulate this sector, adopted a facilitative regulatory approach in line with the international efforts to mitigate the effects of the pandemic on the performance of regulated businesses. Notwithstanding the unprecedented developments, the Non Banking Finance Institutions (NBFI) sector shone hence closing the reporting period with a 2.9 percent increase in active entities from 764 in 2019 to 786 in 2020, as well as a 2.5 percent growth in assets compared to the prior year.

With total assets of P129 billion in 2020, the NBFI sector retained the dominant share of 54 percent in the domestic financial services sector. The sector’s capital and profitability positions were stable in spite of the COVID-19 pandemic. The capital position increased from P7.5 billion in 2019 to P9.2 billion in 2020 demonstrating the financial soundness and resilience of the sector. The profit before tax increased from P1.7 billion in 2019 to P2 billion in 2020, while the return on assets grew from 5.8 percent in 2019 to 6.8 percent in 2020.

The liquidity position also improved, as evidenced by a 10 percent reduction in liabilities from P21 billion in 2019 to P19 billion in 2020. Overall, the NBFI sector was assessed to be stable and financially sound, with no obvious vulnerabilities in the short to medium term. Due to good performance of the foreign financial markets, Retirement Funds recorded an asset increase of 3 percent from P89 billion in March 2019 to P 92 billion in March 2020.

Retirement Funds continued to dominate the NBFI sector with a market share of 71 percent in 2020, going up from 70 percent registered in 2019. After the year-end closure, management accounts of Retirement Funds for the 12 months’ period ended December 31, 2020 showed that pensions had grown to P105 billion compared with P93 billion in the prior year. The growth was attributed to a strong performance in foreign equities and alternative investments.

However, total investment income was lower by 47 percent ending the year 2020 at P6.2 billion from P 11.8 billion in 2019. Total contributions to the retirement funds by both the employees and the employers increased sharply by 15 percent from P4.6 billion in 2019 to P5.2 billion in 2020, partly, due to additional voluntary contributions and 3 percent civil service salary adjustments. The offshore/onshore asset allocation was 65/35 percent in 2020 compared to 61/39 percent in 2019.

Total assets for Investment Institutions (asset managers and management companies of CIUs) declined by 60.9 percent from P1,451.4 million in 2019 to P567.6 million in 2020 due to the reclassification of some of the financial assets as well as restructuring of the businesses of some of the major players in the market. Total liabilities also declined significantly by 75.8 percent, from P1,119.8 million in 2019 to P271.0 million in 2020. The Investment Institutions sector was able to preserve equity, which declined by 12.1 percent from P337.6 million in 2019 to P296.6 million in 2020.

Total Assets Under Management (AUM) for Investment Institutions amounted to P51.1 billion in 2020, representing a slight increase of 2.5 percent from the P49.9 billion recorded in  prior period. Gross Written Premiums (GWP) for the Insurers (Life and General) increased by 4.6 percent from P5.4 billion in 2019 to P5.6 billion in 2020. When expressed as a percentage of Nominal GDP, the penetration ratio increased to 3.1 percent in 2020, compared to 2.7 percent in 2019.

The Insurers’ total assets grew by 5.1 percent from P19.4 billion in 2019 to P20.4 billion in 2020. In the reporting period, the total assets of Microlenders increased by 17 percent with the main driver of the growth being the loan book which grew by 12.8 percent in 2020 and accounts for 61.9 percent of the total assets increase. The industry also experienced growth in liabilities by 20.7 percent, with 75.4 percent being short-term liabilities due within a year. NBFIRA Chief Executive Officer Oduetse Motshidisi said despite the COVID-19 pandemic, the NBFI sector remained resilient during the period under review.

The insurance industry maintained a strong balance sheet with robust capital positions and profts exceeding the previous year. As support to the industry, the implementation of the transitional provisions of the insurance Act, 2015, due in 2020 were deferred to 2021. The strategic asset allocation of the retirement funds in favour of offshore markets was benefcial to the retirement funds as windfall gains were made on investments, underpinned by stock market recovery and fight of funds to safe currencies of developed countries.

The asset distribution for offshore/onshore was 65/35 percent in 2020 compared to 61/39 percent in 2019. The top 20 microlenders by asset size also reported strong balance sheet position despite business closures during the periods of lockdown.

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Payless to partake in BSE’s Flagship Tshipidi program

28th June 2022

Newly established wholly indigenous citizen owned retail chain Payless Retail (PTY) Ltd is set to partake in the first session of Botswana Stock Exchange (BSE)’s Tshipidi Mentorship Program (TMP) on Monday June 29th.

The TMP aims to train and capacitate SMEs so they can operate as corporates and eventually list on the local bourse. According to local bourse, BSE, the program aims to provide practical training to potential issuers through a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.

Payless Retail is a newly established supermarket chain whose mission is to become a convenient one-stop shopping destination as it is one of the Botswana oldest retailing brands.  It started off as Corner Supermarket in January 1976, and to date boasts of nine stores in, among others, Gaborone, Mochudi, Molepolole and Tlokweng. Payless was recently acquired by Ellis Retail Group, which is led by businessman Elliot Moshoke.

The takeover catapulted Ellis Retail to the envious position of being the first wholly indigenous owned major retail chain. “We jumped at this opportunity because it gave us a chance to prove to Batswana that the retail business is open and lucrative.”

The objective is to create a proudly Botswana retail chain that fully supports our national Vision, economic development and citizen economic empowerment ambitions,” Moshoke told BusinessPost.

He further emphasized that Batswana are capable and able to run large scale businesses hence they need to accept invite foreign investors who will come in to support us not take the business.
“Our win as Payless in the Fast Moving Consumer goods (FMCG) industry is a win for Batswana. We need their support in this difficult and challenging journey.

As you are aware, Payless is the only retail chain in the hands of Batswana ba Sekei. We need to take advantage of this to generate employment and create small businesses in retail and Agri businesses,” he explained.

The retailer has also partnered with Botswana Investment & Trade Center (BITC) on their #PushaBW campaign with a view to initiating earnest engagement with local producers to iron out bottlenecks and ensure seamless trading.

“Local producers have to be part of the phenomenal growth of the Payless brand. This will in turn facilitate employment creation and economic growth. We did this because we have the utmost respect for local manufacturers and producers,” he mentioned.

Payless is currently restocking all of its stores; a development that Moshoke says is testament to the retailer’s commitment to growing the brand and ensuring continuity of business. He further revealed that renowned retail suppliers like PST and CA Sales have reignited their trust in Payless, opening their doors for Payless as they have faith in the retailer’s new owners.

The takeover has reportedly saved more than 200 jobs and gave a new lease of life to the previously fledging Payless brand. According to a press release from the management team, the Payless work forces are also extremely excited about what the future holds. The TMP is a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.

The program is administered by experts within the listing ecosystem and seeks to bring the potential issuers closer to the listings advisers, investors and leaders of already listed companies.  “As a strategic initiative, the BSE decided to set up this mentorship program in a bid to assist SMEs to strategize, corporatize and acclimatize in order to list to access equity finance and expand operations,” said the BSE.

The TMP will avail to SMEs practical insights, knowledge and feedback from institutional investors, increased awareness of the BSE listing requirements as well as an intimate network of advisors and CEOs of listed companies. After training, Payless will graduate with improve governance structures and better knowledge of articulating its business strategy. The retailer will also gain increased visibility through BSE marketing platforms.

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BITC assisted companies rake in P2.96 billion in export earnings

21st June 2022

Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.

In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.

The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.

With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.

Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.

BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.

During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.

BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.

As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.

In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.

BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.

Another tool used for export development by BITC is the Botswana Trade Portal, which has experienced some growth in terms of user acceptance and utilisation globally. The portal provides among others a catalogue of information on international, regional and bilateral trade agreements to which Botswana is a party, including the applicable Rules, Regulations and Requirements and the Opportunities for Botswana Businesses on a product by product basis.

The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.

BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.

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Inflation up 2.3 percent in May

21st June 2022

Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.

According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).

With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.

In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.

Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.

The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.

The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.

The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.

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