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Banks could sink Botswana financial sector

Banks play a crucial role in the financial sector of any country, providing essential services such as loans, deposits, and financial advice. However, in Botswana, the banking industry is posing risks to the stability of the country’s financial sector. The International Monetary Fund (IMF) has recently released a report titled “Botswana Financial System Stability Assessment,” which highlights the potential dangers that banks in Botswana could pose to the economy.

The report says; “Main risks relate to banks’ high concentration of lumpy short-term deposits from retirement funds and insurance companies, volatility in diamond prices, geo-political developments, and the tightening of global financial conditions.”

“Under a severe risk scenario, two banks fell below the prescribed capital ratio. The elevated level of banking sector liquidity allows most banks to withstand liquidity shocks,” the report says.

One of the major concerns raised in the report is the high number of personal household credit loans that fail to perform. The report states that credit risk forms the largest risk in Botswana’s banking system, with risk-weighted assets of credit risk accounting for 89 percent of total risk-weighted assets. The largest part of these assets comprises loans, which make up 83 percent of total assets. These loans are primarily concentrated in the household sector, accounting for 41 percent of commercial bank assets. The majority of these loans are personal loans, mainly in the form of unsecured consumer credit. While a large share of lenders collect repayments through direct salary deduction, contributing to a generally low level of non-performing household loans, there is still a significant risk associated with these loans.

“Bank loans to households are largely personal loans (70 percent), mainly in the form of unsecured consumer credit, for which a large share of lenders collect repayments through direct salary deduction, contributing to generally low level of non-performing household loans. Mortgages comprise 23 percent of household loans.

Furthermore, the report highlights that some banks in Botswana may not be able to withstand financial pressure. Under a severe risk scenario, two banks fell below the prescribed capital ratio. This indicates that these banks may not have enough capital to cover potential losses, which could lead to their collapse. Additionally, the report notes that banks are vulnerable to liquidity and funding risks due to their concentrated funding profiles. Short-term deposits from corporations and non-bank financial institutions make up a significant portion of their funding, leaving them exposed to potential liquidity shocks.

The IMF report also warns that the Bank of Botswana needs to tighten its screws on regulation. The report suggests that the banking supervision approach should be more risk-based and forward-looking, with more skilled staff who can identify emerging risks in the complex banking sector. It also recommends issuing specific regulations for material risks and developing supervisory assessments for more risk-sensitive capital requirements. Data gaps should be addressed to enable the implementation of stress tests and perform more granular analyses of household and corporate sector vulnerabilities.

To enhance the resilience of the banking system, the report suggests strengthening decision-making and refining the strategy for the calibration of capital buffers and borrower-based macro-prudential tools. It also emphasizes the need to strengthen the operational independence of the Bank of Botswana in supervisory matters and incorporate tools for reviewing and assessing banks’ internal capital adequacy assessment and risks into the supervisory review and evaluation process.

The IMF report highlights the potential risks that banks in Botswana could pose to the country’s financial sector. The high concentration of personal household credit loans that fail to perform, the vulnerability of some banks to financial pressure, and the need for tighter regulation and supervision all contribute to the concerns raised in the report. It is crucial for the Bank of Botswana to address these issues and take necessary measures to ensure the stability and resilience of the financial sector in Botswana.

On banking regulation and supervision of banks, the report says supervisory framework should become more risk based and forward looking, and implemented on a consolidated basis.

“The operational independence of BoB supervision should be strengthened, the framework for the oversight of banks’ corporate governance should include concentration risk and transactions with related parties, and tools for reviewing and assessing banks’ internal capital adequacy assessment and Pillar II risks should be incorporated into the supervisory review and evaluation process (SREP),” says the report.

The report says three banks would face challenges in meeting their minimum capital requirements by 2025 (aggregate recapitalization needs reach to 0.4 percent of GDP).

 

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Botswana’s Legislative Milestone: Championing Disability Rights

27th February 2024

In a significant stride towards inclusivity, Botswana’s National Assembly has ratified the groundbreaking Persons with Disability Act. This legislation is a cornerstone in protecting the rights and promoting the economic well-being of individuals with disabilities

At the heart of this act is the creation of two pivotal bodies: the National Disability Coordinating Office and the National Disability Council. These institutions are set to revolutionize the integration of disability affairs into the national fabric, as outlined by the Minister for State President, Kabo Morwaeng. Morwaeng highlighted the alignment of this act with the global Convention on the Rights of Persons with Disabilities (CRPD), underlining Botswana’s commitment to international standards in disability rights.

During his address to Parliament, Morwaeng disclosed Botswana’s inaugural CRPD report submission to the UN, underscoring the nation’s dedication to global dialogue on disability rights. Furthermore, he unveiled plans for a comprehensive assessment to understand the socio-economic realities of disabled individuals and their families. This initiative, complemented by the strengthening of existing programs, aims to empower this community, ensuring their integration and prosperity in society

Morwaeng’s call to action was clear. He urged a collective shift in developmental agendas to accommodate and prioritize disability issues, advocating for an inclusive societal framework.

An ambitious budget of P35,631,600 has been allocated to bridge gaps in Disability Economic Empowerment, alongside critical studies and the establishment of the National Emergency Operations Centre. Concluding his presentation, Morwaeng appealed to fellow governmental departments to allocate funds diligently to fulfill CRPD and Persons with Disabilities obligations, marking a new chapter in Botswana’s legislative history towards inclusive development.

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Kabo Matlho’s Majestic Reentry Descends Upon a Solo Venture

27th February 2024

Kabo Matlho, a luminary whose fame once graced the grand finale of My Star, is poised to enchant the music realm once more with an upcoming solo venture—an RnB and Hip-Hop Extended Play (EP)—heralding his grand resurgence after a hiatus that spoke volumes.

During a telephonic confab with our editors, the virtuoso, navigating the world from the confines of his wheelchair, confided that while the exact launch date of the EP remains shrouded in mystery, he is fervently working towards a mid-2024 reveal. Matlho shared the trials of his odyssey, especially the cold shoulder he received from the industry ambushes, crediting the harsh exclusion to his physical predicament.

“The scene calls me once more, for the absence has been both a sabbatical and a shadow. The road for an artist, enveloped in the embrace of wheels, is strewn with fewer welcomes and scarce stages. Yet, herein I forge my return, with the precise hour of my EP’s birth still nestled in the coming chapters, assuredly within this year’s embrace,” Matlho unveiled with a determination that shone bright.

 

Probed on his choice for a solo EP, the melody weaver expressed a desire to not only rekindle his essence but to stand solitary under the spotlight, nurturing his brand to vigor before possibly blending it with the talents of others—once his career phoenix rises anew from its ashes.

Elaborating on his Extended Play, Matlho shared visions of its essence, where the soul of RnB intertwines with the spirited rhythm of Hip-Hop, crafting an audial tapestry that not only returns to his roots but also ventures into previously uncharted territories of his musical domain. With resilience, Matlho faces the crossroads of his artistry, embracing the whisperings of Hip-Hop that tease the boundaries of his comfort, embarking on this path with a heart both apprehensive and ablaze.

 

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BODANSA strikes gold with a handsome P45K windfall from Turnstar Holdings

27th February 2024

The Botswana DanceSport Association (BODANSA) has been graced with a financial boon of P45,000 courtesy of Turnstar Holdings. This generous endowment is earmarked for the illustrious Botswana International Dance Sport Grand Prix Championships, which are scheduled to animate Gaborone from Friday to Saturday.

At a media engagement held early today, BODANSA’s Marketing Maestro, Tiro Ntwayagae, shared that Turnstar Holdings Limited has bestowed a gift of P45,000 towards the grand spectacle.

“We are thrilled to announce that this backing will enable us to orchestrate a cultural soirée at the Game City Marque locale, a night brimming with cultural fervor set for March 1, 2024, from 6pm to the stroke of midnight.

This enchanting space will also serve as the battleground for the preliminaries of traditional dance ensembles—spanning the rhythmically rich Setapa to the euphoric beats of Sebirwa, the spirited Seperu, the heavenly Hosana, and more—in a competition folded into the Traditional Dance Groups Category. The ensemble that dances into the judges’ hearts will clinch a grand prize of P10,000,” elaborated Ntwayagae.

He further illuminated that the cultural eve would not only celebrate traditional melodies but also the fresh beats of contemporary dance variants including Hip Hop, Sbujwa, Amapiano, among others, in a dazzling display of modern dance mastery.

Moreover, these championships carry the prestigious recognition by the World DanceSport Federation as a qualifying round for the Breakdance category for the Paris 2024 Olympics. “This is a monumental opportunity for athletes to leap towards their Olympic dreams during one of the penultimate qualifiers,” underscored Ntwayagae.

Looking ahead to March 2, 2024, the festivities will propel into the University of Botswana Indoor Sports Arena for the championship’s climactic showdowns encompassing Breakdance, Latin, and Ballroom Dancing.

 

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