Which way BDC?

Koobonye Ramokopelwa - Business Editor
Tuesday, 13 September 2016
Which way BDC?

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

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