Saturday, May 21, 2022

Absence of indigenous commercial banks worries Central Bank

The Bank of Botswana deputy governor, Oduetse Motshidisi, is worried that almost half a century into self rule, Botswana still does not have an indigenous commercial bank.

The deputy governor expressed his disappointment at a briefing for the Francistown business community on Monday.

“It is very worrying that there is no indigenous commercial bank in the country,” said Motshidisi.

On other issues and in contrast to fears allayed by the bank’s Sheila Sealetsa of the Treasury Department that the country’s foreign reserves were not facing imminent danger on the back of potential default on debt repayment by the United States of America, Motshidisi expressed worries that the western super power has not yet taken a conclusive position on repaying the huge debt.

“We should not fall into a false sense of security. The US has not agreed on what to do. There is a risk,” said Motshidisi.

America has up to August 2 to restructure its debt ceiling, which has pitted the Republicans against the Democrats in forging a solution.

Responding to possible implications on the American debt problem on Botswana’s foreign exchange reserves, Sealetsa said the reserves have been invested in liquid assets and the bank pursued a robust investment policy.

“The portfolio is diversified. Greece is not in the list of countries we invest in. We have robust investment policies. We do not go to emerging markets for investments but rather to developed markets,” said Sealetsa.

Responding to former BOCCIM president Iqbal Ebrahim’s concerns on the issue of limited investment opportunities in the country as expressed by the central bank’s deputy director of research,┬áDr Kealeboga Masalila, the bank’s research director said Bank of Botswana does not have scope for investing in infrastructure, adding that such scope existed within the commercial banks who can syndicate loans for such projects.

Masalila said although BoB does not invest in infrastructure, government, however, participated through its investment arm in Botswana Development Corporation. He added that pension funds also invested in property development.

Another Deputy Governor, Moses Pelalelo said the commercial banks are also hindered in investing in huge infrastructure developments as a result of short term deposits they received, coupled with the problem of asset bubbles. Mothsidisi noted that the problem of liquidity is endemic in other countries and is not unique to Botswana.

On whether cash loans and micro lenders were not contributing to the problem of inflation, Oarabile Mabusa said cash loans are supervised by the Ministry of Trade although the restrictions that the ministry had come up with in the past had fallen through.

“It appears the Non Bank Financial Regulatory Authority will take over. The cash loans and micro lenders currently fall in a vacuum,” said Mabusa, adding that some transactions were personal although it was clear that the market was somehow institutionalized.

“There is no law supervising cash loans. If they proliferate they interfere with our intermediation. We have tried to monitor their operations. They constitute less than one percent of the overall lending market. They do not constitute a hazard to the financial system. We are operating on the fringe compared to east and West Africa,” said Mabusa.

Andrew Motsomi said the banking industry liquidity had declined in the past three years although it still remained above the statutory requirement.

Despite the decline in the liquidity, the banking sector remained well capitalized although the earnings declined on the back of tight economic conditions.

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