Monday, October 26, 2020

BCL collapse have rippling effect on banking industry

Botswana’s top three banks are expected to be crippled following the provisional liquidation of one of the country’s oldest mine BCL and its subsidiary Tati Nickel Mine Company (TNMC) last week.

Details are beginning to emerge of how the collapse of BCL, under a multi-million Pula debt, may hit First National Bank Botswana (FNBB), Barclays Bank Botswana and Standard Chartered Bank Botswana.

It is not clear if Bank of Botswana (BoB) may have to intervene to rescue the country’s financial sector which stands to be badly hurt.

Government guaranteed P1.2 billion loan from Barclays Bank of Botswana and South Africa’s ABSA Bank which was extended to the BCL group. Initially BCL requested P35 million bank overdrafts at FNBB and at StanChart Botswana. Currently the amount of overdrafts are slightly below P35 million, with a rough estimate of plus P20 million from the two banks. Sunday Standard has established that the overdraft facilities are fully secured from the Botswana Stock Exchange-listed commercial banks.

When contacted, FNBB Director of Marketing and Communications Obonye Malope said while the provisional liquidation of BCL Limited was a matter of public interest, the bank could not comment on the financial affairs of its client adding that they were bound by confidentiality.

She is of the view that banks and other financial providers might have to deal with increasing impairments as loss of jobs would result in defaults or fire sales for some of the assets like property and vehicles that the employees have purchased on credit. 

She believes that the downturn in the property market could mean some shrinking in the balance sheet for home loan books of some banks with significant exposure as valuations will go down in line with decreased occupancy and demand levels.

“Financial services such as rentals and sales prices will go down as the demand shrinks and occupancy rates drop for both commercial and residential properties,” said Malope.

She further stated that minerals contribute 35 to 40 percent of fiscal revenue: 85 to 90 percent of exports and 95 percent to Foreign Exchange (FX) reserves. As a result the structural macro effects of closure of the base metal mines, coupled with lower commodity prices means a widening fiscal budget deficit. He said shrinking current account will hurt the balance of payments and Pula value. Malope stated that net result of this is fiscal consolidation which could result in delayed implementation of other infrastructure projects and limited creation of employment.

“BCL liquidation will result in the escalation of loss of jobs in the mining industry following the closure of Boseto and African Copper mines, both of which were also dealing with base metals,” she stated.

Following the recent announcement of the impending provisional liquidation of the BCL Group, Barclays Bank said that all the corporate exposures to the BCL Group are fully secured, adding that it remains sufficiently liquid and well capitalised.

“We continue to execute our strategy in the market through the delivery of innovative financial products and services,” said Head of Marketing and Corporate Relations, Duduetsang Molloy.

StanChart Director Corporate Affairs Itumeleng Ramsden said: “We are required by law to maintain strict confidentiality about customer and client information, for the protection of the clients’ rights and privileges, and therefore we are unable to comment.”

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