Brian Benza
7 November 2008
As it embarks on a strategy to improve revenue growth and operational efficiency, the National Development Bank (NDB) seeks to increase its borrowing limit to P1 billion from the current ceiling of P400 million.
The bank's borrowing currently stands at308 million and plans are underway to raise a further P180 million through a bond issuance which will see it break its borrowing ceiling, hence the need to raise the limit.
Moving for the approval of raising NDB's borrowing limit in Parliament on Tuesday, the Minister of Finance and Development Planning Baledzi Gaolathe said the bank will not be utilising the whole additional P600 million straight away.
"Instead, it is envisaged that the limit will be used over several years in line with the bank's strategy and growth in its portfolio," Gaolathe said.
"Growth in revenue is to be achieved through a customer-centric strategy, which entails providing a diversified product range to a chosen market segment, especially for small and medium enterprises. "The strategy is intended to grow profit to P79 million by 2011 as compared to a profit of P33 million realised in 2007/2008."Since 2007, NDB has developed new products such as Nthatlosa Morakeng, Nthuta School Fees Loan, Bonno Home Loan and Temo Bokamoso.
These loan products have had an overwhelming response from the market, resulting in an increased monthly disbursement by the bank whose loan book has also grown substantially, going from P284 million in March 2001 to P724 million in March 2008.
"The rapid growth of the book suggests that in the short-term, the bank has to inject funding through borrowing in order to continue contributing to the growth of the economy," Minister Gaolathe told the House."The National Development Bank Act requires that any variation to the bank's borrowing limit be approved by a resolution of this House. We have set the new limit at a reasonably high level to obviate the need to (return) to this House too soon."
But it remains unclear whether the minister's seemingly long-term plans for the bank to raise its profit to P79 million by 2011 should be taken to mean that NDB's privatisation process has been halted or will be merely delayed. Even after the collapse of negotiations for the privatisation of Air Botswana, NDB looked set to become the first financial institution to be privatised.
The Head of Outsourcing at the Public Enterprises Evaluation and Privatisation Agency (PEEPA) Don Ruhukwa said in an interview with Business Week earlier this year that Nedbank Capital had outbid two other financial consultancy companies, Deloitte and Cresco, and was then tasked with devising a strategy to best unlock value in NDB.
The strategy, as Ruhukwa explained it then, would entail advising Government on the different options that could be pursued - from an outright sale to an initial public offer, to be followed by the implementation of the deal after getting the green light from Government.
Ruhukwa said because the government fretted about the dominance of foreign multinationals in Botswana's financial sector, it had specifically recommended significant citizen participation in the tender outline. Except for parastatals like the Bank of Botswana, NDB, and until 2005 the Botswana Building Society, all seven commercial banks are either wholly or majority foreign-owned.Today considerable scope exists for quasi state-owned financial institutions to become fully-fledged Batswana-owned commercial banks through privatisation and restructuring.
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