KEYNOTE ADDRESS AT THE 25th ANNIVERSARY GALA
DINNER OF STANBIC BANK BOTSWANA LIMITED
by
Moses D Pelaelo
Governor
March 23, 2017
It is an honour and, indeed, I am most grateful to the Board and
Management of Stanbic Bank Botswana Limited for the invitation to
officiate at this Gala Dinner, celebrating "25 Years of Stanbic Bank
Moving Forward". This event marks a significant milestone in the
history of the bank in Botswana, more so coming shortly after the
commemoration of the Bank of Botswana's 40th Anniversary on
March 31, 2016 and the 50th Anniversary of our country's
Independence, on September 30, 2016.
Distinguished guests, allow me to start by thanking, in particular,
Standard Bank Group Chief Executive, Mr Sim Tshabalala;
Chairman of the Board of Stanbic Bank Botswana Limited, Mr Craig
Granville; Chief Executive, Mr Leina Gabaraane, and the entire
management and staff of Stanbic Bank for ensuring that we are
here, today, celebrating the Silver Jubilee of Stanbic Bank
Botswana Limited. The efficiency, effectiveness and safe conduct of
banking operations cannot and ought not be taken for granted
because, as many would know, banks are accident-prone entities. It
is for this reason that the Board, Management and Staff of the Bank
of Botswana congratulate you, Mr Gabaraane, your Board and the
entire team, for the many achievements of your bank to this day
and, thus far, having conducted the affairs of the bank in a prudent,
sound and sustainable manner.
Distinguished Ladies and Gentlemen, the first part of my remarks
this evening will highlight the accomplishments of Stanbic Bank
Botswana Limited over the last 25 years in the areas of
governance, financial performance, innovation and corporate social
responsibility. Thereafter, I will offer a few perspectives on
expectations relating to banking sector regulatory compliance and
the role of banks in policy implementation.
The entry of Stanbic Bank into the Botswana financial sector should
be placed in the context of the major financial sector reforms
undertaken in the early 1990s. These reforms were informed by the
report entitled "Botswana - Financial Policies for Diversified
Growth", derived from a study by Government with the assistance
of the World Bank.
The key elements of these reforms included deregulation of interest
rates, adoption and use of indirect instruments of monetary policy,
introduction of the Bank of Botswana Certificates to influence
liquidity in the banking system and manage short-term interest
rates, liberalisation of banking licensing requirements to spur
competition in the financial sector and enhanced prudential
supervision of banks. Hitherto, there were only three commercial
banks operating in Botswana. In 1991, two additional commercial
banks were licensed, namely, ANZ Grindlays Botswana Limited and
Zimbank Botswana Limited. A year later, in 1992, the Bank of
Botswana granted UnionBank Botswana Limited, a subsidiary of
Standard Bank of South Africa, a banking licence, making it the
sixth licensed commercial bank in the country. Shortly thereafter, in
the same year, UnionBank merged with ANZ Grindlays, each with
an initial capital of P10 million, to form the bank we know today as
Stanbic Bank Botswana Limited.
Director of Ceremonies, today, 25 years on, Stanbic Bank is ranked
4th among the 10 commercial banks operating in the country, in
terms of staffing, branch network, capital and deposit liabilities.
From a modest beginning, with only 24 employees in 1993, Stanbic
Bank currently employs over 600 staff members across 10
branches, and serves in excess of 80 000 retail and business
customers. The bank asset base has grown significantly, from P138
million in 1993 to P12 billion as at December 31, 2016. During the
same period, the bank has also consistently made profits; with its
net income after tax increasing from P2.2 million in 1993 to P192
million in 2016. At present, Stanbic Bank is regarded as one of the
systemically important domestic banks operating in Botswana, with
a 15 percent market share of total banking industry assets and
deposits.
Distinguished Guests, Stanbic Bank offers a wide range of
traditional and innovative corporate, retail and investment products
and services including, more recently, like some of its peers, the
introduction of on-line and mobile banking services. I have no doubt
that these technology-based platforms, products and services will
enable Stanbic Bank to continue to be a significant player in the
industry and broader economy, as well as adapt to the emergence
of financial technology (Fintech) operators for the benefit of
customers and the economy at large. Somewhat uniquely, while
embracing technology-based banking, Stanbic Bank continues to
reinforce its position in corporate and investment banking. Amongst
other Awards in the recent past, it was named the best investment
bank in Botswana in the 2016 Europe, Middle East and Africa
(EMEA) Finance African Banking Awards. Congratulations, once
again.
Distinguished Ladies and Gentlemen, another highlight is the
evolution of leadership and governance at Stanbic Bank. Notably,
the Chief Executive position was localised in 2008 with the
appointment of Mr Gabaraane, while the majority of the bank's
Board members (six out of 10) and 80 percent of the senior
management staff of the bank are citizens. These are significant
developments in two respects: first, they reflect the attention given
to staff development and enhancement of relevant skills across the
spectrum of banking operations; and, second, the alignment of
leadership, management and operational processes to the local
context, in order to better serve the domestic economy. I can
confidently state that, based on the latest statutory returns
submitted monthly and quarterly to the Bank of Botswana, the bank
is solvent, profitable, well governed and prudently run, in the main,
by Batswana.
Director of Ceremonies, in the area of corporate social
responsibility, Stanbic Bank has a long-standing relationship with
the Cheshire Foundation; it donated therapeutic equipment to the
Rehabilitation Centres; mosquito nets to the Ministry of Health to
fight malaria; and a mobile clinic for the Shakawe community and
surrounding areas. I am informed that the bank also supports
vulnerable groups, such as orphans and underprivileged children,
through various initiatives, including a partnership with SOS
Children's Village, St Peters Day Care Centre, Metsimotlhabe
Recreational Centre and Kagisano Women's Shelter, as well as
promoting culture, arts, health and wellness.
Distinguished Guests, there is, however, one missing part of this
good story, namely that, unlike its peers, Stanbic Bank is not listed
on the Botswana Stock Exchange. To be clear, the Bank of
Botswana does not prescribe that the shares of banks operating in
Botswana be listed on the domestic stock exchange. This is
consistent with accepted best practice and governance norms that
the Board and Management of individual firms should be allowed to
determine the appropriate capital structure and economic capital
management for a bank, subject, of course, to meeting the
minimum thresholds for prudential regulatory capital adequacy
requirements. That said, the non-existence of Stanbic Bank on the
domestic bourse could be misinterpreted to mean lack of long-term
commitment and willingness to have the Botswana public
participate in the ownership of the bank. This point assumes
particular significance in the context of a country where all the 10
licensed commercial banks are subsidiaries of foreign-owned
entities.
Distinguished Guests, Ladies and Gentlemen, Stanbic Bank is a
wholly owned subsidiary of Standard Bank Group, the largest Pan-
African banking group by assets amounting R1.95 trillion;
equivalent to approximately P1.6 trillion or 154.5 billion US dollars.
Therefore, Stanbic Bank Botswana is supported by a strong parent
and a well-recognised franchise, regionally and globally. This
presents both opportunities and challenges. As regards
opportunities, the Standard Bank Group is a Pan-African bank that
also has significant representation in other international markets.
This places the Group in an advantageous position to fill the gap
that may be left by some of the global banks as they decide to
move out from certain markets, a process euphemistically referred
to as "regulatory deconsolidation" or "global de-risking" and, in
certain cases, withdrawal of correspondent banking services, for a
variety of reasons. In contrast to such disengagement, as we
witnessed recently, Stanbic Bank played a leading role in the
syndicated facility for the financing of the Morupule Power Station
project. I hasten to add that, as an internationally active financial
conglomerate, with appropriate risk management and governance
structures, resources and expertise, Standard Bank Group is well
positioned to support regional businesses and infrastructure
projects through the provision of long-term finance.
Distinguished Guests, this leads me to my second sub-theme; and I
wish to offer some thoughts on 'Moving Forward' in the next 25
years and beyond, with a special focus on the Bank of Botswana's
expectations regarding Stanbic Bank and other banks from a policy
and regulatory perspective. The global, regional and domestic
economies are projected to grow modestly in the years ahead,
constrained by a number of factors, including policy uncertainty,
change of growth models in China, low commodity prices,
slowdown in global trade and potential event risks emanating,
especially, from the Brexit negotiation process and some European
countries electoral outcomes in 2017.
Distinguished Guests, notwithstanding the foregoing, the agenda for
transformation of Botswana's economy, from a resource-based to a
well-diversified economy, supported by good public infrastructure, a
sound macroeconomic environment and a vibrant financial sector,
must continue. As indicated in the 2012 - 2016 Botswana Financial
Sector Development Strategy, "a healthy and vibrant financial
sector is crucial for the future of Botswana. Financial institutions
and markets safeguard savings, provide the financing required for a
growing private sector, and make an important and growing direct
contribution to employment and economic growth". It is in this
context that the presence of Stanbic Bank and its parent bank,
Standard Bank Group, in banking, insurance and other forms of
financial services in Botswana becomes critically important.
Distinguished Guests, banks are, by definition, risk traders and,
invariably, should be compensated for taking such risks. However,
in the context of economies, such as Botswana, there is a tendency
for some large banking groups to engage in some form of "cherry-
picking" of best corporates and wealthy customers for credit support
to the exclusion of SMMEs, non-salaried persons, low income
groups and other underserved segments of society. In order to
continue to contribute positively to sustainable economic
development, the Botswana banking system should be more
inclusive. Banks ought to invest more in risk management
infrastructure (staff and systems) to be able to tap into new
resources and opportunities, including identifying and funding
bankable projects originating from low-income groups and small
enterprises, and, I must add, in a safe and prudent manner. In the
long-term, failure to do so could marginalise banks, as we know
them today, as fintechs and block chain technologies increasingly
satisfy the demand for financial services in more innovative and
cost-effective ways.
According to the World Economic Forum Global Competiveness
Report of 2016/17, the Botswana financial sector's overall ranking is
66 out of 138 countries, representing a slight deterioration from a
ranking of 63 in 2015/16. According to the Report, "this is largely
due to weak performance in the soundness of banks, (ranked 68),
and ease of access to loans, (ranked 69)"; these aspects were
ranked 55 and 56, respectively, in the 2015/16 Global
Competitiveness Index". It is also a matter of public policy concern
that the ratio of private sector credit to GDP has increased only
marginally, from 25 percent in 2011 to 31.8 percent in 2016.
Furthermore, the proportion of mortgage loans to total GDP has
been, on average 5.2 percent in the last five years. This compares,
for example, with a ratio of 69.3 percent for Norway, 67.6 percent
for the United Kingdom and 84.3 percent for Sweden. Overall,
therefore, these particular financial indicators for Botswana are
below international norms and suggest that it may be true that lack
of cost-effective access to appropriate finance and credit is a
constraining factor towards a more diversified economy.
Distinguished Guests, post the global financial crisis, the Financial
Stability Board and other international standards-setting bodies
have been spearheading regulatory reforms aimed at enhancing the
resilience of banking systems, globally. In this regard, the Bank of
Botswana has demonstrated foresight with respect to the minimum
prudential capital requirements for banks, which has been set at 15
percent of risk-weighted assets, compared to the international
benchmark of 8 percent, since 1997. As some will be aware,
effective January 1, 2016, the Bank of Botswana implemented
those elements of the revised International Convergence of Capital
Adequacy Measurement and Capital Standards, called Basel II,
deemed relevant and proportionate to the nature of the risk profile
of banks, as well as the structure and the needs of the Botswana
economy. Furthermore, the Bank of Botswana is, along with other
stakeholders, taking steps to strengthen the framework for banking
sector safety nets and system-wide crisis management. This project
requires all systemically important domestic banks to develop
recovery plans in conjunction with their parent banks.
Distinguished Guests, the Bank of Botswana recently issued a
guidance note on cybercrime risk, imploring banks to put in place
effective risk management systems and maintain sound internal
controls, specifically designed to counter the growth of increasingly
sophisticated cyber-attacks and other forms of financial crimes.
Furthermore, there continues to be a worrisome upward trend of
cases of fraud, in the form of identity theft, scanning and cloning of
bankcards and unauthorised cash withdrawals from Automated
Teller Machines (ATMS) by individuals and organised crime
syndicates. Cybercrime, fraud and other forms of criminal activities,
including money laundering and the financing of terrorism, impose
heavy financial and economic costs on society as banks, customers
and regulators have to allocate large amounts of resources on
preventive measures. Moreover, these forms of crime have the
potential to undermine public confidence and trust in the banking
system. Given the nature of these operational risks, there is a need
for sound leadership and governance of banks, both individually
and on a consolidated basis. For banking regulators and
supervisors, these developments call for smarter and more
responsive supervisory frameworks, as well as effective
collaboration, cooperation and communication across jurisdictions.
Distinguished Guests, despite these challenges, banking
institutions, such as Standard Bank Group and its subsidiaries, in
Botswana and elsewhere, should remain strong, continuously
evolving operating environments, agile in decision making and
adapting as necessary to provide the much-needed financial
resources for economic development and job creation. There is no
doubt, in my mind, that technology is the future of banking,
particularly in a sparsely populated country such as Botswana.
However, weak, ineffective and inappropriate governance and risk
management infrastructure may compromise the safe conduct of
banking business. You will agree that for a large Pan-African bank,
such as Standard Bank Group, any deficiencies, in this regard,
could be far reaching, and have an adverse impact on business and
economic performance in several countries, including those that are
anchors of regional growth.
Distinguished Ladies and Gentlemen, as I mentioned recently at the
launch of the 2017 Monetary Policy Statement, the Bank of
Botswana's primary objective is to achieve price stability and
safeguard the stability of the financial system. I also indicated that
a sound and stable financial system is potentially more effective in
policy transmission. Put slightly differently, banks in distress, as
well as unsound and imprudent behaviour, can undermine
transmission of monetary policy signals, macroeconomic stability
and economic performance. To be absolutely clear, however, let
me note that the Botswana banking system, of which Stanbic Bank
is a significant player, complies satisfactorily with the minimum
prudential requirements, which is indicative of a generally healthy,
sound and stable financial system.
Distinguished Ladies and Gentlemen, effective monetary policy
transmission is also premised on wider financial inclusion.
Therefore, the leadership of the financial sector and policy and
regulatory authorities need to continue to work together to broaden
financial inclusion, and bring more unbanked enterprises and
households into a bankable population. It is only when there is a
formal economic relationship between a great majority of
businesses and individuals and the banks that changes in interest
rates, for example, can affect saving and borrowing decisions on a
large scale and, therefore, have the anticipated effect on price
developments, economic activity and employment creation.
From the Bank of Botswana's perspective, it is important that the
formulation of monetary policy and effective discharge of the central
bank's primary mandate are not constrained by perennial concerns
about the health of banks; and, in turn, that banks are not so
encumbered by internal weaknesses that they are unable to
respond to, and effect, changes in the Bank Rate, that is, implement
a policy decision.
As I conclude, Distinguished Ladies and Gentlemen, I wish once
again, to recognise the role of Stanbic Bank in supporting economic
development through involvement in savings mobilisation, prudent
lending, provision of payments and risk mitigation, as well as
participation in community initiatives in Botswana.
Honourable Cabinet Ministers, Distinguished Ladies and
Gentlemen, I wish Stanbic Bank prosperity as it moves forward and,
together with other players in the financial sector, foster economic
activity and wealth creation in Botswana.
I thank you for your kind attention.