Financial institutions and commercial banks remain optimistic and believe opportunities exist despite economic hurdles.
The International Monetary Fund (IMF) predicts Botswana’s economic growth to slow to 1 percent in 2024 due to depressed demand for diamonds. The economy is expected to contract further, before picking up next year.
Even so, the Head of Wealth & Retail Banking at Standard Chartered Bank Botswana, Moses Rutahigwa, said opportunities exist for the bank assets amid a challenging operating environment.
“There are areas which are growing and those that are flat,” Rutahigwa recently said when responding to questions on where the bank sees opportunities to grow its assets.
“There is growth in the SMEs and housing segments. Personal loans remain fairly muted.”
However, Rutahigwa said the bank made a few changes during the H1 2024, which included expanding loan tenures as well as increasing amounts.
He said they made some deliberate changes targeting new homeowners, emphasising the huge potential of the segment.
This is because growth from this segment has not been performing to its potential.
Having previously forecast economic growth of 3.8 percent, the bank has since revised it to 1.1 percent, in line with the IMF projections.
Head of Treasury Markets at StanChart, Galeboi Sennanyana, said this is because the engine of growth, mining, specifically diamonds, is not performing as expected.
He expects the non-mining sector to be less buoyed because of the drag on the mining sector.
“Diamond traders are down year-on-year mainly because of that,” she said.
“Also, the diamond flows are affecting the trade balances and we expect the budget deficit to widen.”
Sennanyana said during the first half of the year, the banking industry experienced an improved level of liquidity.
This was driven by the repatriation of pension funds and government spending, she said.
“At the start of the financial year, we saw quite an aggressive increase in BoBCs.”
Sennanyana said this also positively affected the banking industry.
However, she said trends indicate that the level of spending has reduced, with the level of market liquidity dropping.
“We started noting the trend around June, mainly because the government increased the local bond ceiling,” she said.
“That seems to be reducing the liquidity that is available in the market.”
Nevertheless, Sennanyana said generally, H1 was characterised by an improvement in liquidity.
According to Sennanyana, total credit extension for the first half of the year stood at 3.9 percent, mainly driven by a reduction in credit extended to businesses, which fell to 2.9 percent compared to 10.8 percent in the previous year.
“Also, the growth to the household has been very limited, mainly because of the low performance of the personal loans,” she said.
“We did note some sort of improvement in vehicles and mortgages, but those are very small compared to personal loans.”
Sennyanana said the rising cost of living which impacts affordability could be responsible for the muted growth in personal loans.
Because of the current performance of the economy, Absa Bank Botswana Managing Director, Keabetswe Pheko-Moshagane, said the bank has observed a reduced spending power from its retail sector.
“What that often does is, there would be an increased willingness to take more debt,” she said.
“This is where at Absa we pause and say, though we want to grow, it has to be in a sustainable manner, hence the outcome of our balance sheet where our asset growth has been muted.”
Pheko-Moshagane said the focus at the moment is ways to keep customers sustained during this period of strained consumer spending.
But as the diamond industry remains under strain Absa is focused on diversifying its income, particularly in Corporate Investment Banking.
The bank is looking at other sub-sectors within mining such as copper and nickel.
Also, Absa is focusing on State-owned Enterprises and agencies.
First National Bank Botswana (FNBB), Steven Bogatsu, has also pointed out the opportunities that banks can explore given the issues around diamonds and the impact this will have on the fiscus.
“We need to play the part that we have around SMMEs development,” he said.
“There are opportunities in various sectors where if the light is shown, we should be able to have some of these SMMEs play a meaningful role that is expected of them in the economy.”
Bogatsu said the bank visited a number of its customers in the last few weeks and identified that many of them are involved in industries that the bank previously did not realise had opportunities for growth in Botswana.
