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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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Matambo calls on financial sector to pick GDP

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Finance Minister, kenneth Matambo

Finance Minister Kenneth Matambo has announced that government is committed to support financial service sector to prop up the country’s Gross Domestic Product (GDP).

Currently contributing over 13 percent to GDP, Matambo said the sector has potential to increase its share. “Hence government’s interest in the sector,” said Matambo addressing delegates at the inaugural Botswana Insurance Holdings Limited (BIHL), Global Financial Summit.

The country has built a strong, resilient and fast growing financial sector underpinned by a robust regulatory framework. The finance minister who is expected to step down next year, noted that government’s commitment to the financial service sector has this year been buttressed by a number of laws passed in July relating to money laundering activities.

In addition, Matambo said the continued investment in the development of information, communication and technologies (ICTs) backbone infrastructure is also to support local banks’ rising appetite for online services.

The Minister said the country remains committed to maintaining micro-economic stability to spur private sector participation in the economy. “Our vision is to become a high income country by 2036,” said Matambo, challenging the private sector to step forward and help government to develop the country, bemoaning the low levels of financial inclusion and shallow domestic capital markets.

He said the private sector should come up with more initiatives to develop further the local capital markets. The Minister’s sentiments were also shared by Martin Davies, Managing Director for Emerging Markets and Africa at Deloitte who has challenged the country to start dealing with its low manufacturing value add.

“How do we start to diversify beyond the single commodity economy,” quizzed Davies, adding that manufacturing increase is vital for low inequality across the country.

“Inequality results in bad public policy, as the state starts to believe and think they have to intervene more,” said Davies, highlighting that the country needs to move away from the absolute concept of state drive growth. Meanwhile, minister Matambo has applauded the private sector for leading economic dialogue in the country through events such as the BIHL Global Finance Summit.

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First Lady advises women entrepreneurs

Keikantse Lesemela

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First lady, Neo Masisi

First Lady, Neo Masisi has urged women entrepreneurs to bring change in the economic development of the country and the rest of Africa.

Speaking during the Lioness Lean in Africa breakfast on Friday, Masisi said women entrepreneurs are remarkable engines of economic growth and job creation. “I believe women entrepreneurs hold incredible potential and credentials on the continent because Africa has the highest percentage of women entrepreneurs in the world.

It is projected that millions of much needed jobs will be created over the next decade and these will be created predominantly through small businesses which are mostly run by women,” said Masisi.She highlighted that women entrepreneurs are also the most powerful engine for equitably distributing growth and they are also solutions for addressing inequality on the continent.

“It is a proven fact that for many generations, women understand the simple concept of barter and commerce. These are the role models of our past and our present and they will continue to inspire new generations to do more for business to grow,” she said.

The Lioness Lean In Breakfast Series brings together inspirational and successful women entrepreneurs to share, inspire and connect with the next generation of great women-led start-ups.

The platform is based on a breakfast networking and speaker presentation format, which has been organized in locations across the African continent for the past year by Lionesses of Africa, empowering over one million women entrepreneurs across the continent.

Stanbic Bank Botswana Head of Personal Markets, Omphemetse Dube said they are pleased to bring the Lionesses of Africa Lean In platform to Botswana once again to bring together women entrepreneurs in the country and help to nurture their growth further.

“Botswana is blessed with a number of thriving female entrepreneurs, and the potential for the next generation of talent is strong. Platforms such as this are therefore paramount in growing the cause and we as a bank are proud to help champion that movement further,” said Dube.

Founder and CEO of Lionesses of Africa,Melanie Hawken noted that Gaborone is a growing and exciting centre for women’s entrepreneurship in Africa. “This is a must-attend event for women entrepreneurs in the country as it gives them the opportunity to hear the inspiring entrepreneurial stories of women who are building great businesses here,” she said.

The annual Lionesses of Africa event allows entrepreneurs to benefit from the insights and advice of women entrepreneurs who have seen and experienced it all and to also provide an excellent opportunity for networking.

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