Government has allocated P341 million as additional capital injection for the National Development Bank and Botswana Savings Bank in the current financial year.
According to approved budget estimates made available recently, the Ministry of Finance and Economic Development approved P200 million as a bailout to the cash-strapped National Development Bank (NDB), which has been on its knees for several years.
“NDB is facing significant financial constraints which have affected its ability to adequately carry out its business of lending to customers,” reads a note accompanying the estimates.
“This situation has been exacerbated by consecutive loss-making operations and the Bank’s failure to raise additional funding from the market.
“The Bank has therefore requested for support in terms of equity injection to the tune of P200 million from the government as the sole shareholder.”
The NDB has been weighed down largely by massive non-performing loans due to the risky nature of the sectors it finances, as well as the costs of open market borrowings.
The Bank saw its losses deepen to P168.2 million in the year ended March 2017, from P21.2 million the prior year.
The NDB, which last year retrenched staff and instituted various other cost cutting measures, told legislators in 2018 that it would require P1 billion from government as the shareholder over the next three years.
The statutory bank is in the process of commercialising, as part of a strategy towards privatisation.
“Efforts to restructure the National Development Bank continue,” Finance Minister, Kenneth Matambo said in Parliament during his budget speech in February.
“Once fully restructured, the NDB will be commercialised, with the ultimate objective of privatising it.”
According to the estimates made available recently, the Botswana Savings Bank (BSB) has requested and will receive P141 million from government for several initiatives this financial year.
“BSB has undertaken the initiative to, amongst others, replace the obsolete Core Banking System, improve the cyber security system as well as to implement its financial inclusion priority area of ‘facilitation of low cost, accessible savings products in Botswana,’” reads a note accompanying the estimates.
“The BSB also needs to adopt a new accounting standard IFRS 9 impairment model which all banks are required by the Bank of Botswana to comply with by December 2020.
“The BSB has requested for recapitalisation in order to undertake the aforementioned initiatives towards achieving its strategic objectives.”