The National Development Bank finds itself crippled by non-performing loans which are hovering at over half a million. In an engagement with the media last Friday, the Chief Executive Officer of the soon to commercialise development bank, Lorato Morapedi revealed that the business is going through a tough trading environment. Non- performing loans (NPLs) are on the shoot up.
“As at March 2017 our level of NPLs is at P672million which is 45 percent of our loan book. For 2015/16 we took a conscious decision to slow down disbursements to P122million from the normal average of P400million in the previous years. The lower the disbursements the lower the revenue,” revealed Morapedi. Just recently, Bank of Botswana Governor, Moses Pelaelo expressed concerns on the recent upward trend in non-performing loans.
Pelaelo said while this trend could be, in part, due to sluggish global economic activity and idiosyncratic business performance and environment, there is some evidence of lack of financial discipline on the part of some individuals and poor management practices by some businesses. The bank finances mostly agriculture projects which constitute 48 percent of its loan book, 16 percent amounts to the share of mortgage financing, 12 percent to commerce and retail and one (1) percent on human capital.
According to the bank’s management projects that have borrowed are unable to pay on time. For the 2015/16 reporting period, they managed to recover P116million from non- performing loans and are continuing to collect. The high NPLs resulted in high impairments leaving the bank to record a loss of P168million with the bulk coming from the impairments. “It is not a good state of affairs but what is important is that we know where this problem comes from. We are hoping to recover P100million this year.
We have revised our loan book policy and this will come up with an improved quality loan book and will see the bank’s profitability increasing,” said a hopeful Morapedi. The challenges the bank highlighted range from drought, Foot and Mouth Disease, government spending cuts, lay-offs from mining and lower interests rates amongst others.
‘Manufacturing holds key to economic growth’
Barclays bank’s economist Naledi Madala has urged the country to consider manufacturing, as a key tailwind to drive the economy and reduce inequality.
She was speaking at a gathering organised by the bank which focused on economic outlook for 2019. “We should not make a mistake of leapfrogging without manufacturing,” said Madala, lamenting that the country’s diversification remains a pipeline dream, as the diamond is still the economy’s mainstay. She bemoaned that mining activities in the country could not spring forward diversification, though non-mining GDP has been steady over the years.
“Extractive industries are not good stepping stones for diversification, the sector does not prepare us for the next step,” said Madala at the Barclays’ Economic Outlook Forum Review 2019. The economist further noted that government should confront head-on challenges of productivity and competitiveness to attract the much needed Foreign Direct Investment (FDI). Though diversification efforts continue to hit a brick wall, Madala said the country should expect increased activities in the mining sector hinged to ramp up in coal production in the year ahead.
She also implored government to consider a welcoming attitude towards foreign investors and generous tax incentives to businesses that set up in the country. Madala is also upbeat that the use of public private partnership model could also help diversify the economy coupled with privitisation. “Privitisation will offer opportunities for growth, through the renewed optimism from government, as business confidence has improved,” said Madala.
She implored the government and the business community to access what is going to drive and hinder growth highlighting that key headwinds to growth are income inequality, diversification challenge and productivity, among others. “The pace of poverty reduction has slowed down, while income inequality goes up,” said Madala
MINISTER BEWAILS BAD REPAYMENT BY YOUTH
Minister of Youth Empowerment, Sports and Culture Development, Tshekedi Khama has told parliament his ministry continues to face challenges on the repayment of Youth Development Fund (YDF) loans.
Recently presenting the budget to Parliament, Khama said this financial year the ministry has received a total of 2582 YDF applications and approved 983of them to the value of P98 million. He said the programme attracts a high level of interest from youth but the ministry is only limited to funding a maximum of 1200 youth projects annually due to budget limitations.
“However the greatest challenge for the Fund is the repayment of the loan component by the majority of the youth businesses. The youth have advanced number of challenges for this including high rentals for operating spaces, low market access owing to tight competition and limited production capacities,” said Tshekedi, adding that they continue to pursue beneficiaries to repay the loans.
Out of the 919 businesses funded 1058 jobs have been created. The minister highlighted that disbursements of funds will continue to be undertaken until the end of the financial year. “The YDF is currently under review in line with the pronouncement made by the President, Dr Mokgweetsi Masisi in the State of the Nation Address, to improve beneficiaries through training, and encourage consortia and cooperatives,” said Tshekedi.
The ministry assists YDF beneficiaries in marketing their products and services through fairs and exhibitions. The ministry also runs entrepreneurship-training seminars for youth and in the past year 3692 young people were trained. Over 600 youth businesses attended fairs and exhibitions to market their products and services. Currently the ministry is collaborating with Local Enterprise Authority (LEA), First National Bank Botswana and Citizen Entrepreneurial Development Agency (CEDA) on training in entrepreneurship development and mentorship of YDF beneficiaries.
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