The sluggish economy and tough trading conditions are beginning to weigh heavily on the banking sector as seen by the revelation by one of the oldest commercials banks in Botswana. Standard Chartered Bank Botswana, one of the country’s top five banks told shareholders that its half year results will be hard hit by the prevailing environment.
“In terms of the listing requirements of the Botswana Stock Exchange, the Board of Directors hereby announce that the Group’s results for the period ended 30th June 2015 will be significantly lower than those achieved in the corresponding period in the prior year due to the challenging trade environment which has slowed down lending and tightened margins,” the BSE listed bank said.
The bank had in the same period last year reported a 13 percent rise in income from 2013 that was underpinned mainly by retail clients and increasing momentum from its Corporate and Institutional Clients segments. The loan book also rose 27 percent on the corresponding period. The bank’s full year results also showed total income was seven percent above 2013 driven by good growth in the Retail Clients and Corporate and Institutional Client segments.
“The Bank delivered a solid set of results for 2014, despite the challenging trading conditions, which saw the interest rate environment and intense market competition cause a rapid decline in margins,” the bank later said on its 2014 full year results.
The banking industry has been hit by a host of problems including tight liquidity with the crunch forcing the Bank of Botswana to inject P2.5 billion into the banking system to stabilize the liquidity position.
“There was or is for some time now a problem of liquidity contributed by various variables, and what BoB did to reduce the reserve rate requirement was in part to inject liquidity into the banking sector and to advice banks on gaps that the Ministry saw with the way that they manage,” Solomon Sekwakwa, the Permanent Secretary in the Ministry of Finance and Development said at the height of the crisis.
The banking woes are also worsened by the fact that there have been many job losses in the economy as several companies closed up, together with sluggish mining led growth. Some of the problems are even man made as seen by the impending loss of 50 percent of workers at one top asset management company that would shrink Botswana’s middle class. The economy is also faced with the closure of many companies coupled by high unemployment rate that hovers at over 22 percent. “Official” unemployment has been at 20 percent in the past few years, but independent researchers argue that the actual figures may be as high as 40 percent. It is estimated that approximately1,350 jobs have been lost since the beginning of the year with 1000 jobs having been lost in mining and related industries alone. Last week, the International Monetary Fund (IMF) revised the growth forecasts of Sub Saharan African ecomomiesÔÇöthe region that also includes Botswana.
The IMF said on its World Economic Outlook (WEO) Update, July 2015 that the countries in the region will see growth of 4.4 percent in 2015, which is down from the 5.0 percent forecast in 2014. Botswana’s GDP growth was estimated at 4.4 percent in 2014, thus reflecting the 4.5 percent and 4.4 percent expansion in mining and non-mining output, respectively. Inflation increased from 2.8 percent in March to 3.1 percent in April 2015. Inflation now stands at 2.8 percent.