The country’s investment firm, Botswana Development Corporation (BDC) has disclosed that a multi-pronged strategy, hatched four years ago, is bearing fruits and results, both operationally and financially.
The government-owned entity, which is under the leadership of astute corporate leader, Bashi Gaetsaloe recently revealed its financial results for the year to June 2018, where profit before taxation jumped 39 percent year on year, closing at P187 million. “It was a year of transformation for us,” said a thrilled Gaetsaloe, who together with the board led by Blackie Marole are the architects of BDC’s five year strategy (2014-2019). The profits are up despite the country’s sluggish economic recovery which has dented investment sentiments. Low interest rate regime has also not helped the situation.
According to Gaetsaloe, during the year under review, the business continued to focus on reducing wastage, improving working capital, sustainable growth as well as increasing value for the shareholder (Botswana Government). In the year passed, the Corporation realised a growth in interest income of 20% to P42million against P35million reported in the prior year. “This was a reflection of the expected growth in debt assets, a milestone achieved in correlation with BDC’s business strategy to rebalance the equity/debt asset profile,” commented the company.
BDC, which in the past was forced to suspend its bond program on the backdrop of past corporate flows which negatively affected perception from potential funders, even managed to raise P600 million from the local market, “All this money came from the local banks,” Acting Chief Financial Officer, Maranyane Makhondo told Botswana Guardian.BDC has also established an investment fund and a reserved fund which has P230 million.
The group, which has shareholdings on listed and unlisted firms locally, has approved as much as P500 million investment on new businesses, with just over P180 million having been disbursed. “Some funded companies are starting up,” stated Gaetsaloe last Thursday. Sectors which are expected to benefit from the half a billion Pula will be healthcare, logistics, manufacturing, among others. The BDC Chief speaks highly of their successful investments on Pasdec, an automotive parts manufacturer in Lobatse as well as Transport Holdings Limited, a revered transport and logistics group with contracts in Botswana and the region. Pasdec is expected to employ over 1000 people having recently won a P1 billion international tender with Nissan. The group also completed the liquidation of its failed glass manufacturing plant in Palapye, named Fenguye. The land where the plant was to be will be leased to interested manufacturing companies.
Meanwhile, Chief Investment Officer, Moatlhodi Lekaukau told stakeholders that, they have already made notable progress as far as investing in the continent is concerned. The first target has been the West African region where the group has just completed a deal which will see them investing on a company in the telecommunications and mobile payments. In Ghana, BDC is eyeing the country’s energy sector while in Uganda, possible participation on an oil refinery are currently being explored.
Lekaukau, former Standard Chartered CEO, said they will be looking at companies which can also in return invest in the local markets. The outward investments are being done cautiously, stressed Gaetsaloe and Lekaukau. The group is well aware of tight competition, political, economic challenges and regulatory bottlenecks in the African continent that are often not easy to maneuver. Nonetheless, Gaetsaloe said BDC remains stronger than never before.
“Our underlying business remains strong and our results come off the back of our success in driving new business growth as we continue to scope for local and continental partnership opportunities in our targeted sectors,” he said. ‘Such interests are mainly in industries that can deliver significant contribution towards Gross Domestic Product (GDP) and the wider socio-economy. The Corporation has continued to stabilise post our Transformation Programme which entailed a robust turnaround review of our processes, structures and policies’
The state-owned investment arm, Botswana Development Corporation (BDC) this week made it known they are more than ready to expand beyond the borders of the country, taking advantage of the current bullish investment opportunities in the continent. The company’s Managing Director, Bashi Gaetsaloe made the revelation this Tuesday after BDC facilitated a deal which will ensure Transport Holdings (TH) is 100 percent citizen owned.
TH, one of the biggest logistics companies in the country was previously partly owned by a South African logistic firm, Imperial Group. Some five years ago, government, which is the sole shareholder of BDC gave the company (BDC) the go ahead to start investing outside the country. The Johnny-come-late, BDC will find other state owned enterprises such as the South African Industrial Development Corporation (IDC), already taking advantage of Africa’s economic growth.
IDC, which was formed in 1940 has invested in projects all over Africa. A hyped-up Gaetsaloe, who has been at the helm of the company for more than three years is confident the time is now to spread wings and rip the benefits as long as they last. “Africa is an exciting place to be right now and analysts, investors, and economists have all remarked, ‘Ignore Africa at your peril.’ We believe that Africa is our ‘back-yard’ and have taken a deliberate strategy to invest across Africa,” said the BDC top executive.
Gaetsaloe is perhaps inspired to expand in the region and Africa by the fact that, some countries in Africa are currently recording Gross Domestic Product(GDP) rates ranging between 5 percent and 8 percent. “Serious business people looking for growth and new markets must look at the region and the continent,” said Gaetsaloe, whose area of specialisation include investment strategy, development finance, business strategy, organisational transformation, among others.
BDC has not stated which countries they will expand to in the short to medium term, or which sectors in the African continent they will fund. Transport Holdings, which they have just helped through P160 million deal has ambitious plansof expanding further into Southern African Development Community (SADC).
Gaetsaloe, who has now roped in a corporate deal maker-Moatlhodi Lekaukau as Chief Investment Officer market, said the country’s narrow also makes them eager to taste unchartered waters outside. With its credit ratings status done by reputed Moody’s,BDC will release as much as P700 million from their war chest into new projects at home and abroad.
Last year, the Corporation injected P600 million into new businesses and managed to make a Profit beforeTax (PBT) of P150 million. BDC has announced itwill be using different funding models if the needs to raise more for projects arise.“As an A-Rated government and with BDC’s own investment grade rating of Baa2 – we can export highly competitive financial services and products and do so profitably and sustainably.
This is one of our competitive advantages as a country and as BDC,” said Gaetsaloe in a prepared speech. Writing in the company’s 2017 annual report, the Chairman of BDC, Blackie Marole noted that the Corporation is seeking opportunities to mobilise resources together with African partners that can be deployed strategically to advance the development of Botswana, the region and the continent. “Financial sustainability is imperative for the Corporation to continue delivering on its mandate in the long run,” said Marole.
Meanwhile, Minister for Investment, Trade and Industry, Bogolo Kenewendo, under whom BDC falls, told attendants during the BDC/Transport Holdings transaction on Tuesday that BDC remains an important cog of government. “BDC remains mandated to developing the commercial and industrial sector through funding of commercially viable ventures and partnerships with local and foreign investors”.
Bashi Gaetsaloe, the day-to-day manager of Botswana Development Corporation is the right man to lead the government investment arm. The same also applies to Blackie Marole, who chairs a well-composed board of directors that gives BDC management strategic advice periodically.
Gaetsaloe is a shrewd business manager. On the other side, Marole is a well-rounded leader and economist, who at some point was Managing Director of gem producer, Debswana. Similarly, his management head has led high profiled blue chip companies with astute acumen such as KPMG and Accenture Botswana. Although Marole was appointed in 2011, while his Managing Director was only appointed in April, 2014, we all punched the air in the hope that these two men are perfectly placed to lead BDC, which at the time was not performing well.
However, there are some developments that are coming from BDC; especially its cash raising exercise and which projects they will be investing in after they get the nod from government. News coming from Fairscape, BDC headquarters, is that the government’s investment arm wants the sole shareholder, government, to act as a guarantor for its loans amounting to just over P1 billion. In basic economic terms, this means government will pay the loan should by any means BDC default in its payment for whatever reason. This happens all the time in Botswana and elsewhere. The burning matter, however, is thatBDC wants to invest in projects which are already mature and cannot change the economic landscape of the country and create the much-needed jobs.
For example, the P1billion loan will among others be used to fund BSE listed micro-lending titan, Letshego Holdings. The last time we checked, this Gaborone-based company‘s balance sheet was on the green. The company’s market value is even bigger than that of BDC. Letshego is fully capitalised to fund its African push. It has just received a banking licence in Namibia. Its Managing Director, Chris Low, has told Botswana Guardian in a previous interview that, should they need any funding, they will tap into their medium term notes (bonds) to raise cash. So the question is, what is attracting BDC to Letshego?
The company is well on its feet, as is a market leader in the micro-lending industry. It is poised to become a market leader in the continent in the medium to long term. At his maiden press conference, Gaetsaloe said he wants BDC to invest in projects that can have a meaningful impact on the economy and create jobs. However, Marole and Gaetsaloe must tell us, how by funding Letshego, they will ensure jobs are created by taxpayers’ funds.We want the two gentlemen to shows us that, if parliament approves their request, how will they ensure that, Ba Isago University will create more jobs. Ba Isago, like any tertiary institution in Botswana, depends on government-sponsored students for survival. Government, which is likely to post an expanded budget deficit in the current financial year, has announced plans to cut tertiary institutions funding for students. This basically means Ba Isago, like its peers, will be adversely affected by the move, which is forced by government’s tight budget.
Then where will BDC’s return on investment come from? Does this mean BDC wants to gamble with our taxes? This does not in any way mean investment is not a risky undertaking, but there are instances where risks can be avoided at all costs. We also read that government’s investment body wants to invest in a dairy project in Lobatse. The project is owned by a company called MilkAfric. As things stand, it has partnered with Lobatse town council for the development of dairy plant. There are questions that we need BDC to answer before they invest in the project.
Some years ago, BDC mulled the establishment of a dairy project. However, it would later abandon the project reasoning that it was not a viable project. So what is making dairy production a viable project at this point in time? What else has changed in the market since they abandoned the project? We need these questions answered first before BDC sinks its capital there. This does not in away take away the fact that Botswana gets more than 80 percent of its dairy needs from South Africa. By this, it cannot be taken that BDC should invest in dairy projects, whose sustainability and profitability cannot be guaranteed now. What we need to hear more from BDC is that, now that they have been given the leeway to invest beyond borders, where are such plans?
Some African countries such as Ethiopia are registering double-digit growths. Is the company not seeing this? We all know the past challenges of BDC. Our belief and indeed our hearts tell us that, Marole and Gaetsaloe know the painful past that BDC had to go through in the past five years or so. They cannot allow BDC to fall in the same pit. So while they have made an impassioned plea to government to back their financial needs, we are of the view that there are other viable projects that need to be funded. There is a bold statement on the BDC 2015 annual report that, ‘Leading the way towards the industrilisation of Botswana’.
We need BDC to live by this. We want a BDC which invests in projects that can industrialise Botswana. Surely, not in the above mentioned entities.
*Koobonye Ramokopelwa is a Business Editor at Botswana Guardian