Businesses prove resilient in tough times
Isaac Pinielo | Thursday April 13, 2017 13:27
These conditions are usually related to the slow economic growth as well as the tough regulatory environment.
In a tough economic climate, the reality of budget cuts, job insecurity and diminished employment rights usually comes to play with some companies succumbing to the pressures and ending up retrenching or closing shop.
For other businesses, these conditions usually result in businesses being proactive in order to survive and prosper.
This was evidenced by the performance of many domestic listed companies on the Botswana Stock Exchange (BSE), which proved to be resilient, as most reported stable or increased profitability in their recent financial results. Some analysts suggested that a tough economic environment could be the driving force behind most of listed companies’ profitability.
Motswedi Securities market analyst, Garry Juma said as much as the economic climate was tough, most businesses were profitable, although the level of their profitability has declined.
“Most companies used to have double digit growth in their profits, but now things have changed. It has not been business as usual for most,” he said.
He indicated that during tough times, most businesses have been proactive and introduced cost cutting measures while improving efficiencies.
Micro-lender, Letshego Holdings Limited said a difficult operating environment has meant that the group has only delivered modest growth in loans to customers and there was a decline in profitability.
In its full-year financial results for 2016, managing director, Christopher Low stated that the group has achieved a number of key milestones in its transformation agenda towards creating Africa’s leading inclusive finance group and continues to invest in expanding its African footprint and technology delivery platforms.
Another company that survived the tough economic climate was Barclays Bank Botswana, which realised a 49% jump in profit before tax for the year 2016.
The bank indicated that the economic environment continued to be tough during the year as highlighted by low growth in formal employment, rising household indebtedness and subsequently an increase in non-performing loans. “The bank delivered an excellent overall performance for the year despite severe economic disruptions such as the slowing economic growth and general slow rebound in commodity prices,” said Barclays Bank Botswana managing director, Reinette van der Merwe.
For Standard Chartered Bank, the group’s performance in 2016 grew by three percent on income in spite of the “challenging macroeconomic environment”.
The bank’s profit before tax improved by 51% and management believe that the group is making good progress against its strategic objectives.
“Disciplined focus on costs has created more capacity to invest in the key areas of infrastructure and people. The balance sheet remains strong and fit for growth in 2017 and beyond,” said Stanchart.
Cresta Marakanelo Limited said its operating profit of P47.3 million reflects strong cost containment measures implemented by management last year.
“The challenges in the Botswana market continued to increase. The market is nearing saturation point as evidenced by increased competition and influx of new entrants, primarily in Gaborone and Francistown which has exerted pressure on the company’s market share,” Cresta said.
Even the national brewer, Sechaba Brewery Holdings experienced difficulties in the last financial year, compelling it to develop sophisticated marketing practices.
Group managing director, Johan de Kok noted in the group’s unaudited results for the half year ended September 30, 2016 that the challenges faced by Sechaba’s subsidiary, Kgalagadi Breweries Limited (KBL), as a result of the traditional beer regulations have continued.
“The company continues to find the appropriate routes to market within regulations,” he said.