By Oscar Habeenzu | for Maokanyi Magazine

Disruption, innovation, and growth of any economy begins with risk, and there is tangible evidence that the people of Botswana are a disruptive people.

This review is anchored on the Banking Supervision Annual Report 2017, and supporting reports; useful for the review so that there is consistency in the performance allowing the reader to simulate the performance of 2018 and 2019, or possible the next decade.

This review does a comparative analysis of 2007 and 2017, to show the risk-taking growth of the Botswana people as more financial resources are availed to them.

Through this report, each year, the central bank shows that the principal objective of the Bank of Botswana (Bank) is to promote and maintain monetary stability, an efficient payments mechanism, liquidity, solvency and proper functioning of a soundly based monetary, credit and financial system in Botswana; and it is this that becomes the foundation to which the economy grows.

The economy is grown by the many businesses and individuals, large businesses and small, executives and casual workers, and the like; all creating a cohesive economic engine that is called Botswana.

In 2017 Botswana’s banking industry is performing well, and that is shown by the level of borrowing by businesses and individuals, as loans and advances are a large composition of the bank’s assets and liabilities.

The report shows that the banking sector’s total assets increased by 3.5 percent (5.3 percent in 2016) from P80.6 billion in December 2016 to P83.5 billion in 2017. Gross loans and advances grew by 5.6 percent to P54.2 billion in December 2017.

Net loans and advances constituted the largest proportion of total banking sector assets (62 percent), followed by placement with other banks and credit institutions (16 percent), investment and trading securities (13 percent), cash and balances with the central bank (6 percent) and other assets (3 percent).

When businesses and individuals are confident of their livelihood, there are not afraid to borrow, as they are seeing a good clear horizon in the future of their business or family.

Risk is not usually attributed to people in Botswana, as most are laid back, simple in lifestyle, and have the basic comforts of living from one month to another; yet so, that is not the same today, as the Botswana person is not daring at levels that are making bankers happy.

Two thirds of the money in the banks is in the hands of the risktaker in Botswana.

The report shows that the Sectoral Distribution of Loans and Advances in 2016 – 2017 were composed of 61% being to Household Sector, 34% being to Private Sector Enterprises, and then 5% being to Public Sector.

A decade ago, the central bank’s report showed that the Sectoral Distribution of Loans and Advances in 2006 – 2007 were composed of 58% being to Household Sector, and the balance to Private Sector Enterprises and Public Sectors.

In 2007 the banking sector gave out P6 billion, and in 2017 banks gave out P54 billion for loans and advances to the private sector, for business ventures.

It was said in the same 2007 report, that “while banks continue to provide finance for investment by the private sector, a large proportion of the lending is towards consumption smoothing”.

Wikipedia defines consumption smoothing as “the economic concept used to express the desire of people to have a stable path of consumption. People desire to translate their consumption from periods of high income to periods of low income to obtain more stability and predictability.”

In understanding this basic fundamental of economics, the Botswana government, politicians, legislators, and the wealthy, all made sure that the citizen must never lack, and channeled resources to ensure that.

That in return has paid out, as a decade later, the people of Botswana are now daring and enterprising as shown in the 2017 reports, compared to the 2007.

In the decade of 2007 to 2017, there have been significant growth in enterprise in six industries, being Agriculture, Forestry and Fishing, Manufacturing, Construction, Commercial Real Estate, Tourism & Hotels, and the Trade, Restaurants and Bars industries.

Firstly, the enterprising efforts of the Agriculture, Forestry and Fishing industry grew to 7% in 2017, from 3% in 2007.

Secondly, the enterprising efforts of the Manufacturing industry grew to 20% in 2017, from 8% in 2007.

Third, the enterprising efforts of the Construction industry grew to 6% in 2017, from 3% in 2007.

Fourth, the enterprising efforts of the Commercial Real Estate industry grew to 21%, from 8% in 2007.

Fifth, the enterprising efforts of the Tourism & Hotels industry grew to 5%, from 2% in 2007.

Sixth, the enterprising efforts of the Trade, Restaurants and Bars grew to 35% in 2017, from 21% in 2007.

Essentially this double, triple and in some instances four times growth spike came through the transformation of the citizen from a consumer to a producer through citizen growth strategies of the central government; enter the Citizen Entrepreneurial Development Agency (CEDA).

One of the many empowerment strategic initiatives in Botswana, the Citizen Entrepreneurial Development Agency (CEDA), founded in 2001, provides a holistic approach to the development and promotion of viable sustainable citizen-owned enterprises.

This is done through the provision of financial assistance in the form of loans at subsidised interest rates, and back-up business training and mentoring services to enhance the sustainability of these enterprises.

CEDA lends from P500 to P150 000 at 5% interest per annum payable over a period of five (5) years for the small-scale category of enterprises.

CEDA lends from P150 001 to P2 million at 7.5% interest per annum payable over a period of 7 years for medium scale enterprises.

In their 2009 annual report, CEDA reported that of the 791 applications received, 292 applications were approved with a value of P189.6 million.

The percentage value by industry composed of 28% going to Agriculture, 10% going to Retail, 51% going to Services, 8% going to Manufacturing, and 5% going to Property industries.

Fast forward a decade later, you have Saone Magola founding a plant nursery business called Shortman (Pty) Ltd; husband and wife, Husband and wife team Krishna and Colleen Edakunni going into paper manufacturing as Jewel Paper Products; a form 5 school leaver, Thabo Rankoa founding a hair salon business called Gatiza Hair Salon; Ms Obakeng Kgono Sebape, a wife and mother, going into small-stock farming starting with 100 herd of goats in 2013; Mpho Mokgowe and her elder brother Modiakgotla Lucky Mokgowe decided to quit their day jobs and venture into unchartered territory as investors in the tourism industry in 2013 starting up Lucky Adventure Safari; Gaone Sedumedi, a wife and mother venturing founding XPRESS CONVENIENT STORE AND LIQUOR MART, just to name a few of the many success stories of ordinary Botswana citizens turning into entrepreneurs over the decade between 2007 and 2017.

Back to our anchor report.

The central bank’s report shows that as at December 31, 2017, total deposit liabilities of the banking system amounted to P63.6 billion, a marginal increase of 1.8 percent compared to the P62.4 billion in 2016. Accordingly, at 76 percent and 11 percent of total banking sector liabilities, respectively, customer deposits and shareholder funds remained the primary source of funding for asset growth.

Other sources of funds comprised balances due to other banks and credit institutions (5 percent), debt securities and other borrowing (5 percent), and other liabilities (3 percent).

This basically means that the 62% composing loans and advances to businesses and individuals in Botswana, has actually come from the same persons and businesses that have deposited their incomes to the tune of 76% as deposits and shareholder funds.

The banks in Botswana are good custodians of the money deposited by individuals and organisations, as they give out loans and advances to the same, who are in turn trust worthy in that they are then paying on time as they would have multiplied the money.

The report also shows that the composition of assets and liabilities for 2016 and 2017, respectively. The proportions of both assets and liabilities remain largely unchanged, with only small variations between the two periods. It is evident in the report, the major source of funding for commercial bank assets continues to be customer deposits.

As shown again in the report, from 2013 to 2017, there has been a consistent trajectory in sector performance of Commercial Banks, with Total Assets, Total Loans and Advances and Total Deposits growing steadily each year.

This consistency has been maintained by the combined effort of the banks and the people of Botswana who have been trustworthy.

That having been said, the same report shows that the banks have trusted their customers by risking more, in that, even though the deposits have been increasing as capital is injected into their markets, the risk profile has changed.

Trust of customers by the banks and empowerment strategies by government is what is helping in growing the economy of Botswana.

The Botswana citizen is fast becoming an economic innovative disrupter, and that came about when the government decided to convert the comfortable consumer into a risktaker without worrying about bread and butter issues.

The Botswana government calls this “targeted support” as highlighted on their portal.

Targeted supported came about as the government realized that “a number of constraints have been identified as impeding the growth of SMMEs in Botswana and these include lack of a conducive regulatory environment, access to finance, entrepreneurial skills, business start-up training and marketing skills. These need to be alleviated through the provision of targeted support measures.

The Agency provides business training programmes and mentoring and counselling services through the engagement of qualified consultants in the areas of basic business management, marketing and record keeping countrywide.

Technical skills training support and advisory services are also provided simultaneously with these other programmes.

When agencies like CEDA and other associations were created and operationalized, with the funding support of government through sober minded and patient banks, growth and success was not an option.

Surely, the race is not to the swift, nor the battle to the strong, but time and chance happens to them all. The citizen of Botswana has been seen across the continent as a passive person, but over the last two decades, that same person is emerging to be the most enterprising as shown in this review, and other global reports such as the Ease of Doing Business report published by the World Bank.

Botswana is amongst the top five countries in Africa that are ranked highly in the Ease of Doing Business global index.

It is these same citizens that grew the country’s GDP to US$17,41 billion in 2017, from US$10,94 billion in 2007, with GDP per capita growth up to US$7 595,60 USD ‎in 2017 from US$5,714,05 USD ‎in 2007.

In the same decade, the enterprising Botswana citizen is responsible for growing the population from 2,292 million ‎in 2017 from 1,914 million ‎in 2007.