BDC bounces back to profitability
Brian Benza | Wednesday December 9, 2015 15:23
Buoyed by increased revenues, reduced expenses as well as a P60 million injection from subsidiary divestments, the government investment arm registered a profit of P110 million before tax, at company level, from a loss of P67 million in the corresponding period.
At group level, which factors in the corporation’s approximately 46 subsidiaries, revenues rose 19 percent to P340 million pushing profit before tax to P247 million from P36 million in 2014.
Addressing the media in Gaborone yesterday, managing director Bashi Gaetsaloe said the results bear evidence of the 2014-2019 ambitious turnaround plans, which target doubling the corporation’s P3.9 billion balance sheet in the period.
“During the period, which is the first full year of our transformation programme, we managed to cut expenses, particularly those related to impairment charges. We have also plugged revenue leakages with the disposal of some of our subsidiaries. While returning to profit is evidence of our efforts to run the corporation as a commercial entity, significant inroads have also been made towards making meaningful impact towards industrialisation in Botswana and thus creating employment opportunities,” he said.
When he took over the reigns at the government investment arm last year, BDC was a troubled entity weighed down by some subsidiaries that perennially bled losses.
The corporation’s troubles were headlined in 2014 by the collapse of the Fengyue Glass Plant, which resulted in BDC providing for the project in its books to the tune of about P500 million.
Writing off the infamous project was part of BDC starting its restructuring on a clean slate in a three-pronged strategy that included: fixing the business, preparing it and then growing it.
Under the restructuring exercise, BDC is divesting from approximately 12 percent of its existing portfolio; disposing of certain businesses while also investing into new ventures at the same time.
Some of the businesses that BDC has divested from during the reporting period include Metropolitan Botswana, Toro and Khawa Lodges and raising about P60 million, according to acting chief finance officer (CFO), Maranyane Makhondo.
Post the reporting period, the BDC has already announced divestments from Kwena Rocla, Asphalt Botswana, whilst a process to liquidate its 100 percent owned subsidiary, Talana Farms has begun. Going forward, Gaetsaloe told Mmegi Business that the BDC already has P10 billion worth of new projects in the pipeline with P700 million worth of them ready for funding.
Last year, the corporation said it was at an advanced stage of funding the relocation of Malaysian company, Pasdec Automotive Technologies from South Africa to Lobatse. The relocation of the company, which manufactures automotive and wiring harnesses, is expected to create about 500 jobs. As part of its ambitious strategy to double BDC’s balance in five years, the corporation plans to embark on new projects that will not only boost the industrialisation agenda of the country but also diversify Botswana’s exports composition, which is currently 80 percent dominated by diamonds.
Industries targeted under the strategy include large scale investments of not less that P30 million in sectors such as energy, in particular solar power plants, manufacturing, agriculture and other infrastructure projects. In terms of funding, BDC hopes to raise between P200 million to P300 million off its own balance sheet through the various divestments while the majority of the funding will be raised through bond issuance.
The corporation has signed a memorandum of understanding with the Development Bank of Southern Africa (DBSA), whose collaboration is expected to unlock significant financial resources.