G4S Botswana is grappling with rising costs, declining profit margins and a challenging environment that has led to consecutive years of losses.
An audited abridged consolidated financial statement for the year ending December 31, 2023, reveals that the security company posted an operating loss of P12.6 million and a total comprehensive loss of P11.1 million, prompting independent auditor, Deloitte to raise a flag about weaknesses in G4S’ internal control measures.
“The group and company’s control environment exhibited various control weaknesses, specifically control deficiencies over reconciliation of financial reporting information, deficiencies in reviews of information produced by the entity and the financial statements, and deficiencies in data management and record keeping. In addition, weaknesses were identified in the IT environment within which the controls function,” the auditor said in the report.
G4S Botswana’s Managing Director, Mothusi Molokomme reiterated that despite these setbacks, the company is not backing down. He told the Business Weekly & Review that, instead G4S is rallying behind a comprehensive overhaul of its internal controls and a strategic push to restore profitability and rebuild its standing in Botswana’s security services sector.
“The business continues to strive towards operational excellence and building a strengthened internal control culture,” Molokomme stated. This involves a “holistic review of our internal processes as well as our operating teams to ensure that we are adequately resourced with the right skills and tools to deliver excellence.”
The Managing Director emphasised that there is an ongoing exercise, aimed at creating a robust environment capable of detecting, preventing, and addressing deficiencies vigorously and promptly.
One of the most pressing issues flagged by Deloitte was the integrity of G4S’ financial reporting and data management systems. The company has acknowledged the need for improvement and is taking decisive steps to address these concerns. “To address these challenges, the business is implementing a comprehensive strategy aimed at enhancing its financial reporting and data management system,” he revealed. This strategy as per the Managing Director, includes re-engineering processes and solidifying controls to ensure that quality is built into every transaction that underpins the overall financial reporting.
Leveraging technology is at the cornerstone of the company’s strategy, as G4S Botswana aims to reduce human error and improve efficiency. The MD underscored that the company has committed to ongoing investments in its workforce, with a focus on continuous training to keep staff updated on best practices in financial reporting and compliance requirements.
For G4S, the battle against rising costs is just as fierce as the struggle to tighten internal controls. The company has been hit hard by escalating operational expenses, particularly in areas like vehicle maintenance and insurance costs, which have significantly impacted gross profit.
In response, G4S Botswana has launched an aggressive cost-reduction initiative aimed at optimising every aspect of its operations. “Management has identified areas of cost improvement which include, among other things, driving efficiencies in serving our customers optimally, fuel cost management, reducing our maintenance expenses on our vehicles, and suspension of all discretionary spending where practically possible,” the Molokomme explained.
According to Molokomme, these efforts are already yielding some results. By optimising vehicle usage and refining customer service routes, G4S Botswana has managed to realise some cost savings in the current year compared to 2023. Additionally, the company has renegotiated its insurance premiums, benefiting from a lower-risk environment as the threat of cash heists has diminished. “We have at the beginning of 2024 re-negotiated lower rates in line with the current risk environment, which will see us pay far less premiums than we did in the previous year,” Molokomme noted.
As noted by the MD, reversing the company’s loss-making position is at the heart of G4S Botswana’s turnaround strategy. Although the company remains guarded about the granular details of its cost-saving initiatives, the overarching goal is clear: to return to profitability by the end of 2024. Molokomme acknowledged that one significant challenge has been the inability of some customers to pay for services rendered, leading to a troubling bad debt position. However, G4S Botswana has taken a proactive stance, engaging extensively with customers to improve their debt positions and align with payment terms going forward. In cases where customers have failed to meet their obligations, the company has proceeded to terminate their services.
Looking further ahead, Molokomme highlighted that the company is also lobbying for regulatory changes that could have a significant impact on its long-term financial health. The company is advocating for listed entities on the Botswana Stock Exchange to be exempt from the provisions of Section 76 of the Procurement Act, which currently restricts Government and quasi-government contract opportunities to 100 percent citizen-owned companies. “In essence, our business is owned by Batswana through pension funds and asset managers who hold these shares on their behalf,” he argued, making the case that excluding the company from these opportunities ultimately excludes thousands of Batswana.
While cost management and internal controls are critical, G4S Botswana knows that long-term success hinges on retaining and growing its customer base. The company has placed a strong emphasis on providing comprehensive security solutions tailored to customer needs. This approach has been particularly effective in securing long-term contracts, with many customers opting for evergreen agreements due to the high level of service provided.
“We offer an integrated security offering – our approach is to ensure that we have a detailed risk assessment for our customer needs (revised periodically) that ensures that we provide a comprehensive security solution,” Molokomme explained. The company’s ability to combine manned guarding with advanced technology has been a key differentiator, allowing customers to track patrols, supervision, and other agreed metrics through an online platform. Molokomme noted that on the Cash service line, they have been able to protect their position as market leader by providing excellent service to their customers primarily in the banking sector.
The focus on customer retention has not only stabilised G4S Botswana’s revenue base but also driven top-line growth over the past three years. As noted by the MD, the company has expanded its reach into new industries, such as healthcare and retail, although these sectors offer thinner margins compared to the more lucrative mining industry, which G4S Botswana has been unable to fully tap into due to the Citizen Economic Empowerment (CEE) legislation.
“We need to continue demonstrating our capabilities and service excellence with our existing clients which is a major seller to prospective clients. Retention has been a key lever to our revenue growth. We have in this current period, secured a number of new contracts based on our abilities on how we are servicing existing clients – which is a testament to our high service quality provision,” Molokomme noted when responding to how G4S Botswana is planning to secure more profitable contracts while maintaining service quality and customer satisfaction question.
Despite the challenges of the past year, G4S Botswana is confident in its ability to leverage its competitive advantage to reinforce its position as a leading security services provider locally. The company plans to roll out more technology-driven service offerings, drawing on its Group’s global expertise in security technology. “We plan to roll out more technology-driven service offerings, tapping from our Group position as a leading security technology provider across the world,” Molokomme stated.
This technology-focused approach will be complemented by a continued emphasis on a customer-centric strategy, positioning G4S as more than just a service provider, but a true business partner.
