Saturday, October 24, 2020

Funding challenges BDC – Gaetsaloe

The government’s investment arm, Botswana Development Corporation (BDC), says it is currently challenged with funding what is in the pipeline, as optimal funding is required to ensure that their projects have the best possible chance of success.

BDC Managing Director (MD) Bashi Gaetsaloe confirmed before the Parliamentary Committee on Statutory Bodies and Enterprises that the corporation needed cheaper funding and longer tenures. 

He said it BDC had obtained funding through a Line of Credit (LOC) and had approved a bond programme to raise funds for the immediate term.

 “Given our past poor performance, these funds can be sourced only at sub-optimal levels. Consequently we have applied for a government guarantee to enable us to more optimally fund our pipeline,” said Gaetsaloe.

He further said he aware that they were expected to deliver a development return by stimulating the private sector through growing exports, diversifying the economy and creating jobs. He is of the view that at a time when government is projecting deficits for NDB 11, the need for its investment arm to deliver a profit is paramount.

“Lack of an explicit government guarantee at this early stage will remain a high risk factor with a noticeable impact of diminishing the forecast impact of projects to be funded,” stated Gaetsaloe.

Gaetsaloe also believes that in order to sustain the development agenda, funding lines have been secured and should see BDC successfully creating exports, substituting imports, creating sustainable jobs and above all, driving industrialisation into the distant future.

“Our financing model seeks to balance purely commercial projects with high impact development projects to ensure. When assessing projects we do not focus exclusively on profitability, we also consider the development impact,” said Gaetsaloe.

BDC MD further stated that the financial health of BDC has significantly improved, compared to the status as at 2013. He said the negative working capital gap had significantly narrowed down from P400 million in 2013 to close 2015 at P145 million, and 2016 draft results reflect that the negative working capital has been eroded, leaving a residual P200 million in working capital reflecting a healthy liquidity ratio of 2.5 times. Gaetsaloe said bank overdrafts have been reduced from an all-time high of P230 million to just under P60 million balances outstanding as at mid-August 2016.

“While we are excited about our future, we remain cautiously optimistic.  The economy is slowing down and that will pose challenges for our portfolio,” he stated.

MP Ndaba Gaolathe questioned the corporation’s plans of investment drive through Letshego Holdings Limited through expansion in other Africa countries as well as Botswana Public Officers Pension Fund (BPOPF) while MP Pius Mokgware questioned the corporation linkages with Phakalane Property Company.  Gaolathe added that BDC needs more capital than the request capital injection to finance the projects in the pipeline. 

“We have been focusing on bedding down the results of the transformation programme which was aimed at returning BDC to profitability after a four-year loss making trend. We have reversed this loss making trend and we have restructured the business,” said the BDC MD.

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