Barclays Bank Botswana says it is ready to finance State Owned Enterprises (SOEs) on the backdrop of government cutting on funding to the parastatals. Barclays Corporate Director, Lesley Bradley told this publication on Thursday that since government is now reducing its subventions towards SOE’s the bank is coming up with structures to ring-fence those organisations’ debts so that they can be able to borrow from commercial banks without government guarantee. Bradley was speaking just after the bank held a half-day seminar for the public sector where Barclays shared its capabilities on sustainable innovative financing for SOEs. Most of the country’s SOE’s are perennial loss makers which often require them to get guarantee from government before they can source funding from financial institutions, mostly commercial banks. Before its sudden closure last year, BCL had sought a $100 million (P1 billion) loan facility from Barclays Bank Botswana which was guaranteed by government. Following the provisional liquidation of the mine which was 100 percent government owned, the loan was not passed to creditors with government stepping in to pay the bank directly. But Bradley says currently government is now moving away from giving guarantees to finance the SOEs with the model of operations now requiring them to pay taxes as well as dividends. “There is a huge shift that is happening and a lot them only have to improve on their collections,” Bradley said. She added that most SOEs are owed huge amounts of money, which often act as impediment for them to access funding to finance their capital investments.
In fact, just last week Water Utilities Corporation (WUC) vowed to disconnect all those that owe it as the company battles to recoup about P800 million owed to it. This is just another example of how parastatals are owed huge money according to Barclays Corporate Director. Bradley says what would happen now is that the SOE’s will approach the bank with all the statements of expected collections and thereafter come up with a structure to ring-fence the debts. Once that is done, she said it will be easier for the parastatals will be able to access financing from the banks without government guarantee. The bank is los working with the SOE’s to strengthen their balance sheets which will also make it easier for them to seek funds without necessarily depending on government guarantee. As it has been revealed by the Bank of Botswana (BoB) in its biennial Business Expectation Survey recently that firms prefer to borrow from outside, Bradley said during the seminar they also imparted on the SOEs on hedging facilities. Hedging could be defined as an investment to reduce the risk of adverse price movements in an asset. Though the Barclays Corporate Director says there is nothing wrong by borrowing from outside, the risk is that borrowers end up paying more as the borrow in foreign currency, in particular the US Dollar.