ABSA Bank of Botswana Limited (ABBL.bw) 2021 Annual Report
Board Chairman’s report
I am honoured to present my inaugural Absa Bank Botswana Limited report as Board Chairman, for the year-ended 31 December 2021. This is the first ever integrated report for the Bank.
The Bank voluntarily commits to requisite corporate governance disclosures in order to promote sustainable investment through improved financial, environmental and social performance. We aim, through this report to present our stakeholders, among them investors, regulators, customers and employees, with a holistic and transparent depiction of our value creation process, providing insights into our strategy, issues that materially impact us, as well as opportunities and risks in the context of our operating environment as a leading financial institution in Botswana.
The year under review continued to witness the persistence of the COVID-19 pandemic, with ever-looming threats of new variants and the potential restrictions that would accompany such outbreaks. Global economic recovery gained momentum, although the pace was uneven as developed economies recovered faster than developing ones. After contracting 3.1% in 2020, the global economy grew by 6.1% in 2021, supported by additional fiscal stimuli in developed economies along with the vaccination rollouts, allowing economies to open up further. Locally, the economy grew by 11.4% as at December 2021, compared to a contraction of 8.7% in the previous year. The higher growth rate was driven by base effects from a substantial contraction in 2020 and a recovery across most sectors of the Botswana economy, particularly diamonds. Botswana’s economic growth in 2021 was more robust than expected, and this was primarily due to accommodative policies, a stronger global backdrop that supported higher commodity prices and multilateral support.
As at December 2021, the Bank had recorded 587 COVID-19 infections. Although we experienced a high recovery rate, it is however with deep sadness that we lost five of the Bank’s employees. On behalf of the Board, Management and employees and indeed on my own behalf, I wish to convey my deepest sympathies to all families who have been affected by COVID-19 and lost loved ones.
Our business performance
For the year-ending 31 December 2021, the Bank demonstrated robust strategic, financial and operational performance, despite continuing challenges. We achieved a Profit Before Tax of P659million, which is an 81% year-on- year growth and a commendable Return on Equity of 20%, representing an improvement from 13% in 2020. All in all, our balance sheet position remained solid at P21.5 billion, with strong liquidity and capital adequacy levels throughout the period under review.
This strong performance was taken into consideration with the Board resolving to declare a dividend of 37 thebe per share, amounting to a total dividend of P319 million (comprising P83 million previously paid as an interim dividend and P236 million, at 27.69 thebe per share as a final dividend). This performance is a testament to our winning strategic endeavours, leadership teams’ strength as well as employee resilience and commitment.
In 2021, the Bank slightly pivoted from the 2020 strategy, which was more of a response strategy to defend our market share given the emergence of the COVID-19 pandemic. At the end of 2020, the Board, together with the Bank’s management, reviewed the Bank’s strategic ambitions and priorities, cognisant of the Group strategy. The Group’s strategic review process had made it clear that a fundamentally new strategy was not appropriate, but rather a re-anchoring and stimulation of the existing strategy that was launched in 2018. Considering the Bank’s operating environment, our 2021 strategy primarily focused on targeted growth and gaining momentum within a context of available resources and other relevant factors. This strategy was based on the need for business recovery post COVID-19, exceptional customer experience and building lasting legacies, underpinned by the following pillars:
- Pursuing growth selectively and defending market share
- Accelerating a digital-first business
- Leading with purpose, focusing on customers, clients, and communities
- Building our entrepreneurial culture and creating a workforce for the future
- Protecting returns, focusing on capital usage and costs.
Our strategy aims to generate sustainable growth within the Bank’s risk appetite, elevating sustainability as a priority. As the Board, we believe that the Bank is well-positioned to deliver on our chosen strategic priorities and sectors. Please refer to the Managing Director’s report on page 44 for more information on our strategic themes.
Leading with purpose
The Bank continues to be a leader in terms of contribution to the communities in which we operate across Botswana. We are confident in the measures that we developed and implemented to address the social and economic development of our communities. Despite the challenges created by the COVID-19 pandemic in the delivery of some of our desired interventions, the Bank managed to quickly embrace technology to ensure continuation of relevant assistance to Botswana. To this end, we have made significant progress in the areas of thought leadership, education and skills development and environmental sustainability, which were the key pillars of our strategy.
The F.G. Mogae Scholarship Fund is one of our crucial education programmes, where the Bank provides scholarships to deserving young Batswana who require financial assistance to pursue their masters degrees. We have supported over 75 Batswana to date, with the 2021 intake focusing on science, technology, engineering and mathematics – often referred to as STEM.
Our socio-political environment points to the challenges faced by the youth of this country and at the beginning of 2021, we launched our innovative Hackathon and Incubation programme.
The programme seeks to mobilize youth innovators and connect them with existing clients from our Business Banking portfolio.
This is in order to enable them to appreciate challenges faced and provide them with the platform to invent pioneering solutions. We also launched the Absa Youth Hub, which is an online platform dedicated to building capacity as well as upskilling the vulnerable youth group aged between 18 and 25.Since the programme’s inception in June 2021, 1500 youth have been trained and 19 placed in employment and internships.
I must mention our digital learning platform ReadytoWork, which continues to make an important contribution to the education of young people, where they are taught critical life skills that will enable them to become economically active. In this regard, in 2021, ReadytoWork was utilised to train 10,610 young people.
We remain proud of our employee