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Banking sector shows signs of stress

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Economists have expressed a worrying trend in the banking sector coupled with liquidity within the sector, arrears in bank loans which impact on the supply of loanable funds and credit risk. Dr Keith Jefferis and Sethunya Sejoe of Econsult firm expressed with concern in their 2017 second quarter review that there are increasing signs of stress in the banking system, on a number of fronts.

First to note is that banking liquidity has been falling steadily for some time, but the decline has been particularly sharp since the beginning of 2017. Excess liquidity fell to 2.6 percent of banking assets in April, the lowest since the “liquidity crisis” of late 2014. “The liquidity squeeze has been driven by stagnant deposits –there has been no growth in the deposit base of banks for at least two years.

With little surplus liquidity, it is not surprising that bank lending has slowed – the banks (or some of them at least) are simply running out of loanable funds. “At the same time the level of bank loans in arrears has jumped sharply, to 8.3 percent – up from 6.4 percent a year earlier. Contrary to some perceptions that it is household borrowers that are debt stressed, the most striking increase in arrears has been on lending to businesses and – for the first time – on lending to parastatals.”

According to the duo, the combination of these developments – lack of supply of loanable funds and concerns about credit risk – combined with much reduced borrowing by parastatals, have led to a sharp slowdown in annual bank credit growth, which is now at its lowest rate for 20 years. Perhaps in a further reflection of the lack of credit-worthiness of many parastatals, Government’s own direct lending has increased sharply.

On the other hand, another firm, Motswedi Securities analysts Garry Juma and Moemedi Mosele have observed that the sector is transforming and the primary objective of banks as intermediaries between savers and borrowers is no longer the key driver of profitability, with complementary services and fees taking a leading role. Under the current interest rate regime, the two said margins remain under pressure with banks forced to improve efficiencies and cost management to remain afloat.

“We expect impairments to remain above 2 percent for the second quarter, as BCL and its employees continue to impact on the sector. Furthermore, the South African Reserve Bank recently cut rates by 25 basis points, in the wake of a technical recession, placing the local economy under pressure and giving the Bank of Botswana room for a further cut before the end of the year, thereby squeezing bank margins,” shared the analysts. Meanwhile, Barclays momentum has slowed following a sterling performance in Q1, up by 13.1 percent, to close Q2 2017, up by a modest 3.5 percent, at P5.90 per share.

FNBB’s performance was flat for the quarter, dipping by 0.7 percent, while Stanchart saw a massive 14.1 percent price slip, the biggest move of the quarter. As for Stanchart, the analysts do not believe that the bank is out of the waters just yet, although activity on the counter is slowly improving, with volumes showing participation by institutional investors and not only desperate to sell retail investors.

They said, “It might be too soon to say the company has turned a corner, but the last financials (Dec 2016), showed an improvement on profits before tax of over 50 percent, enough to raise interest on the counter.” Last Friday the board of Standchart Botswana announced that the company’s results for the period ended 30th June 2017 will be significantly lower than those achieved in the corresponding period in the prior year.

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SMEs benefit from Consumer Fair growth

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The Botswana Investment and Trade Centre (BITC) has applauded Botswana Consumer Fair’s continued efforts to improve small to medium enterprises’ linkages.

BITC Chief Executive Officer, Keletsositse Olebile, when opening the fair, said the event has provided interactive forum for both local and foreign exhibitors. He said the shopping show has enabled manufacturers, wholesalers and traders to market their products directly to consumers, an alignment to government’s endeavors.

“As part of government intention, we continually encourage local sourcing by retailers and distributors,” said Olebile who is just few months into his new post. He further celebrated the growth of Botswana Consumer Fair over the years, attributing the expansion to quality of goods displayed at the previous shows.“Improved quality and increased variety of wares increases the interest of the visitors and makes them look forward to returning the following year,” said Olebile.

This year’s exhibitors at the 13th event still running under the banner: ‘It is more than just shopping’ have been drawn from Lesotho, Zambia, Swaziland, South Africa, Nigeria, Ghana, Kenya, Egypt, Japan, India, Tanzania and Zimbabwe.

Consumer Fair is a flagship event for Fairgrounds Holdings and provides a platform for small medium enterprises (SMEs) from the different sectors of the economy to showcase and promote their products and services. In addition, the SMEs are expected to establish long term business linkages and promote local manufactured goods.Fairgrounds Holdings is already optimistic that the Fair immensely contribute to the socio-economic development of the country through supporting SMEs.

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‘Involve SMMEs in standards development’-Minister

Keikantse Lesemela

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Minister of Investment, Trade and Industry, Bogolo Kenewendo appealed to Botswana Bureau of Standards (BOBS) to include the Small, Medium and Micro Enterprises (SMMEs) when developing the standards to improve the sector.

She said the Ministry of Investment, Trade and Industry has identified three areas of focus going forward which are modeled on SMME development, investment promotion and export development apexes. “I would like to implore you to include this sector in standards development processes and assist in improving SMMEs conformity to standards and compliance to technical regulations,” said Kenewendo.

Speaking during the BOBS Technical Committee Members appreciation ceremony on Thursday, Kenewendo explained that the important roles of standards are underpinned by the aspirations and intentions espoused in both diversified export led economic growth and job creation as priority areas. “It goes without saying that the diversification of the economy requires a National Quality Infrastructure and Technical Regulatory Framework that promote competitiveness of Botswana goods and services.”

She also emphasized that an effective National Quality Infrastructure and Technical Regulatory Framework are essential as they provide crucial links to global trade, market access and export competitiveness through their contribution to consumer confidence in product safety, quality and the environment.Since inception in 1997 BOBS has published more than 1700 standards through 48 technical committees across several sectors of the economy; 109 certification licences have been issued against some of these standards. Currently 46 Botswana Standards are being implemented through the standards regulations with a view to protecting the health and safety of consumers as well as protection of the environment.

On her note, BOBS Vice Chairperson of the Standards Council, Professor Edward Dintwa said standards are powerful tools for helping organisations that implement them to realize their potential, have access and compete in the global marketplace. “In this highly competitive and complex world, issues of sustainability and productivity, viewed from economic, environmental and societal perspectives require that businesses must be more efficient in their operations, which can be achieved through the implementation of standards”.

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