Shareholders of Botswana Buildings Society (BBS) go into a crucial meeting later this month, which by the end of day could have decided if the Society can transform into a commercial bank or not.
This week, BBS board secretary Sipho Showa dispatched a briefing note to shareholders, which among others states that those in attendance will have to consider and approve the recommendation to undertake preparatory work on demutualisation project. If the recommendation is passed, this will pave way for BBS to go into retail banking space. For almost five years now, the board of the Society has been in constant discussions with finance and development ministry, regarding demutualisation. Investors will also have an opportunity to consider as well as appointing advisors for the preparatory work for demutualisation, which could start as soon as it is given thumps up.
Should the agenda pass, BBS will have been given a chance to experience the cutthroat banking industry which has so far been ‘selfishly’ dominated by South African and British based-lenders. It will also become the country’s homegrown bank, after Letshego’s banking licence application was rejected by the central bank last year. Previously, BBS managing director Pius Molefe said the transformation of the Society could lead to more unlocking of value for shareholders, which among others counts government and Motor Vehicles Accident (MVA) Fund. In a statement accompanying BBS financial results for the year ending March 2014, Molefe explained that the benefits of demutualisation will also bring sustainability to the Society. According to a briefing note, the Society is currently offering limited range of products, mainly mortgages and deposits.
BBS is governed by the Buildings Societies Act (BSA) and it is not allowed to offer services which mainstream banks offers such as treasury and forex services. Over the years, government has not been keen to allow BBS to transform, explaining that banks and Buildings Society should continue to be defined by their different products offerings and clientele. BBS board chairman Cross Kgosidiile who is also MVA chief executive said they have made a lot of work to prepare for the demutualisation project. The Society has also appointed Pricewaterhousecoopers to act as demutualisation consultancy service provider.
The chairman said BBS has a strong assets base which can enable them to take established lenders which in this case include First National Bank Botswana, Standard Chartered Bank and Barclays bank head on. However, ahead of the special meeting scheduled for Gaborone Sun on the 29 August, parliament has already given the nod to BBS’ request to transform into a company. The conversion will enable the Society to apply for a banking licence. The Society has kept its banking model under wraps ahead of its highly anticipated application. However, such application can only be done after extensive consultation with shareholders. Meanwhile, BBS has reported a profit of P68 million, which is 4 percent less than what the company posted before. The decline, according to the BBS boss, was ‘due to the cost of running the business.’ In the period under review, expenses shot up by 13 percent.
However, the company’s asset base jumped by P3, 045 billion, compared to P2, 897 billion. The company has introduced two more offsite teller machines in the past year. More will follow in other parts of the country. BBS was established on 13 December 1976 with assets of only P4, 108,000 after three months of business as at 31 March 1977.