Botswana Building Society (BBS), the leading mortgage lender, will announce whether it will proceed with its highly anticipated P2 billion bond issuance in the fourth quarter of 2012, an official assured on Wednesday.
The society, which is partly owned by government and individual shareholders was supposed to have listed part of its P2 billion bond note last September, but that did not happen largely due to a bitter tussle with one of their shareholders-BIFM Capital One. Speaking to BG Business on Wednesday, Sipho Showa explained their ‘risk people’ would assess the parameters for the bond issuance, which is earmarked for listing at Botswana Stock Exchange (BSE). “A decision will be made before year end,” pointed out Showa. BBS, just like many other government agencies such as Botswana Development Corporation (BDC), has previously listed bonds at BSE. However, BG Business understands that it is highly likely that the bond issuance will be delayed further, pending a decision from Finance and Development Planning Ministry regarding BBS’ planned commercialisation. The 36-year-old society has already written to its parent ministry stating their intention to transform into a commercial bank, which will compete directly with established banks. Part of the money that was to be raised from the bond programme was going to be used to fund the BBS’ commercialisation process. It will not make any economic sense for the society to proceed with the bond without getting a nod from government about their demutualisation process, said a BBS insider. Showa, this week, explained that they are still waiting for a decision from government on the matter. Meanwhile, Chairperson of the BBS board Cross Kgosidiile explained that the process of demutualisation would enable them to leverage on the goodwill they have built over 30 years of existence. It remains unclear if the BBS Act will be repealed or amended to allow for commercialisation once government approves the proposal. On the other side, it remains unclear if the society will now be forced to apply for a banking license from Bank of Botswana (BoB), just like any commercial bank that wants to set shop here.
Earlier this year, the society held onto the bond programme after former BBS board members Tim Marsland and Rhys Carr launched a campaign to sway fund managers from participating in the bond program. Marsland and Carr own part of BIFM Capital. A few months ago, the High Court ruled in favour of the society in a case in which BIFM Capital Fund One was appealing its decision to redeem P150 million worth of shares. Showa said this does not mean the society will immediately look for new shareholders to replace BIFM Capital. Meanwhile, the society’s overall results over the years have not disappointed. For the year ended March 2012, BBS profits jumped by seven percent to sit at P68 million.