While it is proud to maintain profitability, the government’s investment arm, Botswana Development Corporation (BDC) has admitted that it is currently cash constrained to fund further projects. The challenge could be explained better by the investment agency’s recent decision to sell some of its assets and subsidiaries.
Established more than 40 years ago, with a firm mandate to develop the country’s commercial and industrial landscape, BDC and its subsidiaries have over the recent years reported a mixed performance patterns.
On Wednesday, its Managing Director, Bashi Gaetsaloe told a group of financial journalist in the capital Gaborone that the corporation’s financial for the year ending June 2017 reflect a 3 percent decline in revenues from P281 million in 2016 to P273 million by June 2017.
BDC Chief Financial Officer, Dr. Mbako Mbo attributed the decline to the correcting structure of the agency’s income, adding that it is not indicative of operational performance.
The corporation’s financial statements show that 12 of the companies that BDC funded registered a revenue decline whereas 7 others recorded revenue growth which resulted in mixed performance. In terms of loss making entities, Mbo said that the agency reduced the number from nine to three and expects that going into 2018 it will only have one loss making entity. Other numbers include P611 million that was put into new businesses which Mbo said are giving BDC a return. P486 million of new debt was raised and 732 million was raised through borrowing and divestments.
As a development agency BDC is primarily expected to fund projects that deliver such a return as creating jobs, diversifying the economy and growing exportation of goods.
On Wednesday, Gaetsaloe admitted that development projects tend to be high risk and also generate low financial return. He however recognized that achieving a balance between development and commercial projects remains important to the agency, he emphasised that looking for projects that will generate an immediate financial return will thrust BDC forward in terms of meeting the emerging need for new projects.
In 2015 BDC set forth an ambitious holy grail of doubling its business over a five year span but the year 2017, said Gaetsaloe, proved to be the most challenging since the agency embarked on its transformative five year game plan.
By doubling its business BDC would create room for new projects funding. “No one has been spared from market conditions, we particularly have not been spared,” said Gaetsaloe. When responding to the question of whether BDC is meeting its rather bold ambition, Gaetsaloe said “we’re 61 percent along the journey of where we want to get to.” He expounded that the agency has in response to the challenging conditions initiated actions that act as enablers to doubling the business. Such actions include as mentioned the pursuit of purely commercial high return projects, raising additional funds on a non-guarantee basis and aligning the business to market realities. Gaetsaloe revealed that at the start of the year BDC applied for a government guarantee which however was not successful. The move, explained Gaetsaloe, was taken in attempt to lower the cost of funding.
Despite the tough times calling the hand of this main development agency of the country it paid its shareholder being government a dividend of P20 million, less by P5 million from what it paid in the previous year. According to the 2016 annual report between 2012 and 2015 BDC failed to pay a dividend to government. Prior to that between 2005 and 2011 it paid dividends consistently.