On Thursday Botswana Buildings Society (BBS) shareholders voted in favour of the society’s demutualisation with 99.96 of the votes casts supporting the transformation of the Society. The society has set December 2017 or January 2018 as the period in which it will file an application for a banking license with the Bank of Botswana and in the process making history by becoming the first indigenous bank. Managing Director Pius Molefe fields questions from KABELO ADAMSON
PATRIOT: Reflect on the high and low points of the Society since it was founded – stating why and when was it founded?
MOLEFE: Botswana Building Society was founded on 02 December 1976 succeeding the United Building Society of South Africa which had been in operation from August 1971. It was founded to provide affordable mortgage finance, investment and savings products to Batswana something. One of the long enduring highlights for BBS is that it has a strong legacy of financing property acquisition across Botswana, be it in urban or rural areas. Many families in Botswana can bear testimony to this fact. As for the lows, the main one is the decline in the economic environment which, however, put into sharp focus the need for the Society to demutualise.
PATRIOT: What really necessitated this transition into a Bank?
MOLEFE: First of all, to clarify this question, BBS is not transitioning to a bank status. It will first apply to be a company and then submit an application for a commercial banking license. What has necessitated BBS to apply to become a bank is that it is currently reliant only on mortgages as well as investment and savings products. It would now like to offer customer more products and services. In addition, it would like to increase shareholder value through a diversified income streams.
PATRIOT: Now that shareholders have voted in favour of demutualization, when does BBS envisage to have applied for a commercial banking license?
MOLEFE: On Thursday 24 August 2017 BBS Shareholders voted in favour of demutualisation by a 99.96% vote. Therefore, BBS intends to submit an application for a banking license either in December 2017 or January 2018.
PATRIOT: The How will the conversion position BBS in the market?
MOLEFE: BBS will become a lot more competitive because it will offer customers a diversified products and services base.
PATRIOT: Does BBS have any plans to list in the future so as to allow more citizen participation?
MOLEFE: It will not list immediately after conversion. Nonetheless, shareholders of the envisaged bank will decide when to do so, if they are so inclined.
PATRIOT: What key aspects of the Society will be taken into the new operation as a commercial bank?
MOLEFE: BBS will continue to offer mortgages, an area in which it has been dominant for many years. It will also continue to offer savings products as well as internet and mobile banking facilities.
PATRIOT: Are you not worried about the stiff competition that the banking sector is currently going through?
MOLEFE: BBS has always competed against commercial banks. Therefore, it is not concerned at all by competing against commercial banks. If anything, the conversion will enhance the Society’s competitiveness.
PATRIOT: Usually transitions bring with them restructuring that often pose as a risks to jobs. Will current jobs be protected?
MOLEFE: Various human resource strategies will be employed during the process that will include redeployment, training and recruitment.
PATRIOT: How many employees does BBS have?
MOLEFE: BBS has 204 employees across its operations in Botswana.
PATRIOT: How many branches does BBS have at the moment?
MOLEFE: BBS has nine Branches: three in Gaborone; Francistown; Serowe; Selibe-Phikwe; Maun; Kasane, and Lobatse.
PATRIOT: How many investors does BBS have?
MOLEFE: BBS has about 45,000 shareholders.
PATRIOT: Who is the majority shareholder in BBS and where possible share volumes of different holders?
MOLEFE: While specific shareholder information is confidential, BBS can confirm that a significant majority of shareholders are Batswana followed by institutions, some of which are related to the Government.
PATRIOT: What do investors stand to benefit from the transition?
MOLEFE: As stated above, investors will get more value for their investments because the bank will be able to offer more products and services.
PATRIOT: How has BBS evolved over the years in terms of its model of operation?
MOLEFE: The BBS model has always been that of a building society.
PATRIOT: Look back to the past 10 years of the society – showing how it has performed financially; stating the value of profit or loss?
MOLEFE: Refer to BBS Financials at www.bbs.co.bw (In 2007 BBS recorded P55 million in profit and has since then seen mixed fortunes with the highest profits recorded in 2010 and 2015 when profits surpassed P70 million and the lowest in the decade being P47.9 million registered in the immediate past financial year).
PATRIOT: In the same 10 years, show the total dividend paid out yearly or cumulatively to shareholders?
MOLEFE: Refer to BBS Financials at www.bbs.co.bw (Over the last decade there been a downward trend in dividend payout by the society. In 2007 it paid out a dividend of 12.6 Thebe per share and this year it paid out 6.2 Thebe in dividend per share, half of what was paid out a decade ago).
PATRIOT: State when in recent years had the Society been bailed out?
MOLEFE: Over the past 17 years, the Society has always been adequately capitalised and strongly supported by a healthy asset base. Therefore, over this period, BBS has never been bailed out.
PATRIOT: How is your relationship with Government?
MOLEFE: First of all, BBS is a private institution operating as a building society. It is not a parastatal. As stated at Question 12 above, Government, through some of its institutions, is one of its many shareholders. As stated above, BBS has over 45,000 shareholders, the majority of whom are individuals. Also, BBS has always had a cordial and respectful relationship with the Government. For instance, the Government has been very supportive of the Society’s efforts to demutualise through the Ministry of Finance and Economic Development and the Attorney General’s Chambers.
PATRIOT: During the past financial year, BBS reported a drop in profits – what occasioned this?
MOLEFE: Mainly, the low interest rate environment impacted negatively on the Society's interest income.
PATRIOT: Society assets also decreased by 11 percent during the 2016/17 year; will this not affect investors’ confidence?
MOLEFE: Given the current economic challenges, many companies, including those in the financial services sector, experienced a decline in profits and their balance sheets. Nonetheless, the BBS asset base, at about P4 billion, is very strong and is a source of investor confidence as demonstrated by their overwhelming vote of 99.96% on Thursday 24 August 2017 in favour of demutualising the business.