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State of the economy – according to Stan Chart

Publishing Date : 12 September, 2017

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Botswana Economic Environment

Botswana economy registered a year-on-year growth of 0.8% in the first quarter of 2017, a reduction from the 4.2% reported in the last quarter of 2016. The decline in GDP was largely driven down by the Mining and Water & Electricity sectors, due to the closure of copper/nickel mines during the fourth quarter of 2016. The same sectors also impacted credit growth extended by commercial banks to business sector. While the slowdown in economic activity remains worrisome, it is expected that growth in the non-mining sector will continue to pick up.

Bank of Botswana has also through its monetary policy maintained the bank rate unchanged at 5.5% on the basis of the subdued economic environment. While inflation is expected to edge up in the short-term, the Central Bank expects it to remain within the 3 - 6% target band in the medium term.

Business and Financial Position Review

The current economic environment has shown signs of improvement although the consensus is that the outlook remains uncertain. The Group results for 2017 show a strong capital position and an improving loan book. The Bank has been encouraged by increasing client activity as it continues to offer a broader client value proposition to strengthen existing relationships whilst also building new ones. All in an effort to increase diversity in the Group portfolio and income streams.

The Group’s profitability was adversely impacted by a one off impairment for a specific client in our corporate business which resulted in a significant impairment loss. This resulted in the Group posting a loss for the half year. Focused efforts to reduce the deficit for the full year are under way. The subdued performance for the Group in the last three years was mainly caused by one off impairments; a diamond and jewellery client in 2015, a mining client in 2016 and another diamond and jewellery client in 2017.

The Group has taken the necessary actions to address the underlying problems which adversely affected earnings in the short term. The Bank has over the past few years been reducing its exposure in certain categories of its portfolio, whilst also tightening our risk tolerance, and optimising low-returning assets.

In spite of the results, there has been positive indicators of business growth. Retail Banking segment posted a growth in revenue compared to previous period as the business continued to focus on driving initiatives to improve the client experience, including the robust suite of features on our enhanced mobile and online banking platforms.

Other segments have also shown clear signs of progress; the Commercial Banking business has improved profitability and Corporate & Institutional Banking business is diversifying and expanding its client base and already seeing good momentum across a range of products.

The Group recently reviewed its strategy and has made steady progress against its strategic objectives; building strength and efficiency into all areas of the business, increased focus is on clients, people, leveraging on strong international network. This is crucial to delivering better value and returns for our stakeholders.
The fundamentals of the Group remain intact. The Group is clear on the issues we face. It is in our power to fix them and we will. The Group has the right strategy, a clear plan and making good progress. We have a fabulous franchise, outstanding client relationships, shareholder support, and the right team of people to turn this position around and return value to where it needs to be, all on the back of a strong balance sheet and well capitalised business.

Here for good

The Group saw an increase in its community engagements primarily driven by staff employee volunteering (EV) initiatives. Engagements ranged from an environmental focus to youth and retired professionals associations. Building on the success of the Seeing is Believing programme, the Bank supported a pilot screening programme – PEEK Vision – that presented 848 spectacles to school going children in the Good Hope district, the project has received a significant show of support as the Ministry of Health has given authorisation for this innovative programme to be rolled out across other districts in the country.

The first half of the year offered an additional opportunity for client and community engagement through the hosting of the local and regional finals of the SC Trophy 2017. The tournament was hosted on a global scale offering amateur football enthusiasts the opportunity to enter a 5-a-side team with the grand prize of playing the global finals at the iconic Anfield Stadium – the home of Liverpool Football Club.

Botswana embraced the opportunity by winning the regional finals against winners from Zambia and Zimbabwe and reaching the Quarter Finals at Anfield. Local media, both traditional and online, closely followed the progress of the tournament and Team Botswana while in the UK. A key focus for 2017 is commemoration of our 120-year anniversary. To support this, the second edition of the Business Journal was published focused on the Bank’s anniversary profiling key milestones and long-serving staff.

Dividend Declaration

A dividend of BWP49.7million (16.66 thebe) per ordinary share was declared and paid during the period out of the 2016 profits.



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