BANK OF BOTSWANA
BOTSWANA STOCK EXCHANGE OPENING BELL
CEREMONY
COMMEMORATION OF THE ACQUISITION OF AFRICAN
BANKING CORPORATION OF BOTSWANA LIMITED BY
ACCESS BANK PLC
REMARKS
by
Moses D Pelaelo
Governor
October 7, 2021
Director of Ceremonies, I am delighted to join the Honourable
Minister in acknowledging today's two-themed momentous
occasion of, one, continuing the tradition of monthly
recognition and promotion of capital market activity through
the symbolic ringing of the bell to mark the start of share
trading, and, two, the coming into the Botswana banking
sector and market of Access Bank PLC, through the
acquisition of the majority shareholding in African Banking
Corporation of Botswana Limited (BancABC). I will, therefore,
complement the Honourable Minister's insightful
observations by projecting a central bank and regulatory
perspective on some key aspects.
Distinguished Guests, while the Bank of Botswana has clear
mandates as enshrined in Section 4 of the Bank of Botswana
Act, I will, for the purposes of today's event, distill and
project three aspects deriving from those mandates. These
are the interrelated roles relating to sectoral regulation and
supervision; promoting financial sector development and
inclusion; and safeguarding financial stability.
Regulation and Supervision of the Banking Sector
First, it is important to appreciate that the coming into the
market by a new entity, especially an internationally-active
banking group, such as Access Bank PLC, requires careful
and extensive evaluation that involves several elements.
These include evaluation of the ownership and governance
structures and scale of operations; financial strength and
performance; strategic intent, market, and developmental
impact; business conduct, reputation, and integrity issues; as
reflected in performance and strategic direction. In this
context, the "supervisory risk-perimeter" takes a
consolidated view of the banking group, not only to identify
sources of strength, but also likely sources of adverse impact
on financial condition, reputation and overall safety and
soundness of the financial system.
Moreover, this evaluation also entails consultations,
confirmations, and validations with the home supervisor, in
this case, the Central Bank of Nigeria, through which we also
make a judgement on effectiveness of supervision (of a large
pan-African bank with multi-jurisdictional presence) and
prospects for continuing supervisory collaboration, as well as
jurisdictional facilitation of support to the foreign subsidiary.
Honourable Minister, and Distinguished Guests, I can confirm
that in all these aspects the assessment was positive, leading
to the Bank of Botswana Board concluding that Access Bank
PLC met the licensing and prudential requirements to be
licensed as a bank in Botswana, hence the approval, in
principle, of the acquisition of 78.15 percent of ABCH shares
in BancABC, in March 2021.
Promoting Financial Sector Development and Inclusion
Turning to the promotion of financial sector development and
inclusion, the Bank of Botswana recognises, Distinguished
Guests, that in the first instance, the licensing requirements
and ongoing prudential supervision are meant to allow those
that meet the criteria and operate prudently to pursue their
business and profit/return interests and aspirations freely,
albeit within a regulated environment that safeguards safety
of deposits and integrity and stability of the broader financial
system. However, at the same time, the activities and
operations of banks play an important role in promoting and
fostering economic development, financial discipline and
innovation.
In this regard, going back to economic history, a preeminent
father of the economics profession, Adam Smith in his
classic/seminal works, "An Enquiry into the Nature and
Causes of Wealth of Nations", alluded to "the invisible hand",
a concept that describes unseen market forces of supply and
demand, leading to the unintended greater social benefits and
public good as a result of individuals acting in their self-
interest. Hence, the need, as promoted by the Bank of
Botswana, to accentuate the developmental role of banks in
the interest of economic prospects and welfare improvements
for society. Therefore, where opportune and prudent, the
Bank will continue to implore banks, including Access Bank,
into active participation and contribution to the national
development and transformation agenda.
Distinguished Guests, I have, therefore, in my engagement
with the leadership of the incoming bank highlighted the
pertinent and immediate developmental issues for Botswana,
where I observed a positive response by Access Bank,
supported by a demonstrable track record in markets in which
it currently operates. The overriding issue for Botswana is
financial inclusion generally, where it is expected that Access
Bank PLC will add to vibrancy of market competition and
broader coverage in attracting customers, diversity of
products and services, quality of service provision and related
cost rationalisation, for the benefit of both its investors and
customers. Beyond this generalisation, there are specific
areas of need where the Bank of Botswana has observed
what I would call "cherry-picking" of easier to deal with
customers and sectors and eschewing of some areas of
greater need where the developmental impact can be larger
and more pervasive. Here I am referring to support for small
and medium scale enterprises (SMMEs), owner-occupied
residential mortgages and project financing. Needless to
state, banking, by definition, is the business of trust and risk-
trading, of course in a prudent, safe and sound manner.
In terms of potential impact, there is evidence, globally, that
SMMEs are the lifeblood of any economy and are responsible
for much of employment creation, innovation and economic
growth, broadly. This is more so in our continent, Africa.
Access to mortgage finance and house ownership adds to
economic freedom and security and has great potential to
unleash wealth-enhancing possibilities in several directions.
The current estimated 15 percent share of mortgages in total
commercial bank loans in Botswana (very low compared to
peer upper middle-income economies) need to improve
markedly, which will go a long way towards helping the
economy to realise its potential.
The other area is an increasing need to complement
government efforts in funding infrastructure development and
this includes active engagement in fostering the development
of the bond market or, more broadly, capital markets, where
Access Bank PLC has the experience of operating in other
African markets and emerging economies. This, combined
with medium- to long-term project financing, would help build
the nation's productive capacity and therefore attract
investment and stimulate innovation and more vibrant and
efficient production of goods and provision of services.
Channelling back credit in this direction should, therefore,
generate more business for you, Access Bank PLC, in
Botswana.
Honourable Minister and Distinguished Ladies & Gentlemen
this plea for enhanced funding of productive domestic
economic activity is against the background of ample
domestically mobilised financial resources, especially by the
pension fund industry. A substantial part of these resources
is, for prudence and optimisation purposes, rightly invested
abroad to preserve capital and generate return, given the
domestic constraints. However, I suggest that the banking
industry, the broader financial sector and local industry need
to actively engage and innovate around finding local
opportunities for productive domestic deployment of these
resources. This would massively impact domestic economic
activity, employment creation and enhanced inclusivity.
In the area of digitalisation, an aspect of the so-called "new
normal", I also appreciate that Access Bank PLC is active in
deployment of digital channels that affords financial inclusion
and promotes enhanced access to payments platforms, funds
transfer and remittances, which, as well as being convenient,
help promote economic activity and potential for increasing
innovation, efficiency and business development.
Honourable Minister and Distinguished Guests, it is notable
that, Botswana now has a majority of regional banks or pan-
African banks. This is fitting for regional integration
aspirations. However, the immediate practicality is the
potential to facilitate regional trade, which by extension,
implies a larger market and improvement of prospects for
industrialisation, economic diversification and inclusive
growth, particularly given trade facilitation afforded by the
African Continental Free Trade Area Agreement, as well as
the support provided by the regional economic communities
such as SADC. The expectation is that the appreciation and
knowledge of the African context and institutions by the pan-
African banks would enable easier and productive
engagement of the banks with local businesses.
Given what I have said about areas of financing need,
digitalisation and trade opportunities, it is fitting to, therefore,
introduce Access Bank PLC to Botswana's Economic
Recovery and Transformation Plan (ERTP). I look forward to
your active participation alongside your competitors in this
national development and economic transformation effort,
intended to accelerate economic diversification and inclusive
growth and help to transition the country to high-income
status by 2036. At a high level, the critical elements include
promoting export-led growth involving integration of the
domestic industry into the global value chains (incidentally
your presence in Botswana is exactly that); harnessing of
information and communications technology, digitalisation,
for the purposes of efficiently and competitively driving
economic activity and for growth of new
industries/businesses; promoting enhanced use and
productivity of domestically mobilised financial resources and
therefore generate higher levels of industrialisation; fostering
infrastructure development and efficiency of provision of
government services for greater impact on private sector
operations. I believe, Mr Wigwe, that these are well aligned
to your strategic intent for the Botswana market and that you
are well endowed to be part of this, especially as I believe
you have aspirations to improve on the current position of the
bank, of a P9.1 billion asset base (as at August 31, 2021)
and 5th largest bank in the Botswana market.
Operating Environment, Strong Banks and Financial Stability
Honourable Minister and Distinguished Guests, what I have
spelt out is only possible in a stable and conducive operating
environment. From the side of Government and the Bank, I
can confidently state that Botswana offers a well-developed
public infrastructure, encompassing a liberal business
operating environment, legal protection and respect for
property rights, efficient and independent judiciary and, in
general, macroeconomic stability, as the credit rating
institutions (Moody's and S&P Global Ratings) would say,
anchored on strong institutions and predictable policies,
including successful monetary policy and stable financial
conditions. Added to this is a strong, effective and
responsive regulatory framework for the banking industry and
financial sector, broadly. Indeed, both the Bank of Botswana
Act and the Banking Act are at advanced stages of review to
modernise and align these laws to best international
standards and practices.
The expectation is that Access Bank will, as an individual
entity, continue to be well governed, operate in a sound
manner and adhere to the prudential requirements and
regulatory guidelines and therefore contribute to enduring
strength and stability of the banking system and the broader
financial sector. In addition to the prudential and conduct
aspects, there are national requirements and preferences
regarding localisation of resource procurement, including
staff of the bank (without undermining the group-wide staff
and leadership development interests) and maintenance of
good labour practices, as well as the general attention to staff
welfare. In this regard, let me add that it would be difficult
for Access Bank to achieve its strategic goals if policy making
and decision making are overly centralised in Lagos or some
foreign capital without the benefit of the local board and
Botswana citizens playing a meaningful role in executive
leadership in core banking areas such as credit underwriting,
treasury or risk management.
Above all, of course, a banking licence bestows upon the
Board and Management of Access Bank PLC a huge fiduciary
responsibility - which requires a high standard of ethical
conduct and integrity. Again, we are well aware that public
trust is the single most important asset of a bank.
Therefore, Honourable Minister, the nexus of individual bank
strength and compliance and a conducive operating
environment makes for financial stability, which has several
benefits. Among these are, first, sustained capability of
individual institutions to play their roles of financial
intermediation, risk mitigation, continuity of efficient
payments and beneficial innovation, profitably, to the greater
benefit of society. Second, a stable financial system and
prudently managed banks facilitate effective policy
transmission and therefore good prospects for countercyclical
or policy measures to have the desired impact on the
economy. Third, stability engenders system integrity and,
therefore, patronage of the sector with all the resultant and
incidental developmental and welfare-enhancing benefits for
society. Thus, the focus of the Bank of Botswana in ensuring
viability and soundness of individual banks and integrity and
stability of the financial system (including the payments
system).
As I conclude my remarks, let me appreciate the role of the
Botswana Stock Exchange in being integral to resource
mobilisation, where the floatation and trading of shares signal
economic and return prospects and accordingly channel
funds to those. In addition, the payments settlement function
of the stock exchange is not only facilitative, but also
engenders confidence and patronage of the stock exchange.
In these respects, I applaud the visible and relentless
promotion of the Botswana Stock Exchange and the
opportunities it affords. Well done Mr Tsheole.
Honourable Minister, Distinguished Guests, I thank you for
your kind attention.