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We must create a development bank

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One thing I admire about Prime Minister Sam Matekane is that he does not hold onto sentiments. He won’t hold onto something that does not work. He has already demonstrated this character trait on numerous occasions with his business ventures (Maluti Sky & Mpilo Boutique Hotel) that were making losses (not yielding profits/returns).

I hope and wish that most of our readers could read this week’s opinion piece with an open mind and leave sentiments aside because they do not put bread on the table. We need to place bread on the table for all the children in Lesotho, finish and klaar!

I also need to highlight that Ntate Lebona impressed me when he delivered his introductory speech towards the staff members of the Ministries of Police, Local Government and Home Affairs.

I was highly impressed. He spoke with so much humility. Ka utloa ke mo rata, ke sa mo tsebe. What also struck me was when he spoke to the staff members of Maseru City Council.

He spoke with so much authority. A khalema! In my heart, I said, “Shame! If only Ntate Lebona knew what he’s dealing with. The main problem is in the planning department. Otherwise, Maseru would have sky-scrappers mushrooming all over.”
It took me three full weeks to come up with the title of this week’s piece and I had to plead with my editor not to change it.

As I was sitting in an ABSA Branch last week, a thought crossed my mind that, hey, ABSA was made up of various ‘Afrikaner banks’ such as the Allied Bank, United Bank, Trust Bank. Hana was the VolksKas Bank part of the group? Ma-2000 won’t know this stuff and this is a history lesson for them.

In 1991, ABSA (Amalgamated Banks of South Africa) was established following a merger of Allied Bank, United Bank and Bankorp.

In the new democratic dispensation, the ABSA Group Limited was joined as a single brand. After remembering this part of history, an interesting thought crossed my mind. What if we merge the LNDC ,BEDCO and Lesotho Post Bank into one development bank?

Look, let’s be honest, (this is the part where I start having fights with my editor), the LNDC, BEDCO and Lesotho Post Bank have all deviated from their core mandate. Even if the intention may be true for an institution such as BEDCO, the balance sheet is not strong enough to fulfil its mandate.

However, all those three institutions are in a way, trying to achieve the same thing and that is development finance. Re thusa lihoai.

Yes, the Lesotho Post Bank may have encroached into the territory of BEDCO by offering loans to micro and medium enterprises. Batho ba li-taxi le lihoai tsa literekere le bo-’M’e ba catering.

In my view, BEDCO should have evolved into a bank that now offers various financial instruments to SMME’s. Ao Ntate, joale we have board members that attend board meetings at most of these institutions to say a whole lot of nothing and dip biscuits into a cup of tea all day. Ba phoka tee!

As a matter of fact, I think the new Minister of Trade and Industry needs to review these boards and board members. Ho ntso itjelloa Board Fee feela in most of our parastatals and public companies.

In any case, the same could be said about the LNDC. This institution should have evolved into a development bank of sorts and start offering loans to medium enterprises. Not only loans but to get involved in various developments as equity partners (equity participation).

Look, in my view, it’s still a shame that the LNDC never got involved in some form of equity participation in the establishment of Pioneer Mall as well as the Maseru Mall.

If it wasn’t the equity participation, it should’ve been in other forms of financial assistance such as bridging finance transactions. But do something. Don’t just fold your arms and say, “no, that’s not part of my mandate.”

But you may then say, what would be the purpose of merging all those three institutions (LNDC, BEDCO and the LNDC)? The answer is: to create a new institution (Development Bank) with a fresh mandate and a healthy/stronger balance sheet.

Let’s talk about the balance sheet for a second. A bank’s ability to lend money lies in the strength of its balance sheet. I always hear people crying and saying, “No, my bank never gives us loans.” And I always ask them, have you seen the strength of its balance sheet?

There’s only so much that the Lesotho Post Bank can lend to its customers and that lies entirely on its balance sheet. But this can be corrected, though, and we need to think of a totally new way of doing business.

Here is my solution to our current problems: Let’s establish a sovereign wealth fund named the Loti Development Fund or Loti Fund. This fund will be funded through the sale of shares owned by the Lesotho government in institutions such as Letšeng Diamonds, Standard Lesotho Bank, Nedbank Lesotho, Maluti Mountain Brewery and Lesotho Flour Mills.

Those shares owned by the Lesotho government should be floated on the Maseru Securities Exchange. This would then create instant wealth to Basotho nationals because dividends yielded in those enterprises will go straight to the pockets of the people on the ground.

So, proceeds derived from the sale of those shares should be deposited in the Loti Sovereign Wealth Fund (Loti Fund).

Moreover, all the royalties from the Lesotho Highlands Water Project that Fraser Solar desperately needs, should also be deposited in the Loti Fund.

In addition to that, all the commercial buildings that the government of Lesotho owns should be sold to Basotho-owned property companies or Basotho consortia. I’m referring to assets such as the Post Office Buildings, Victoria Hotel and ‘Manthabiseng Convention Centre and Setsoto Stadium.

This could instantly unlock value to the tune of about M3 Billion. Deposit it into the fund. Now, we could easily raise about 5 Billion Maloti/Rands from the sale of shares, royalties and assets/buildings.
Funds in the Loti Fund should be invested in the global capital markets.

We don’t even need to go far. Coronation, M&G and Allan Gray could easily yield an interest of 10% per annum (hypothetically speaking). This is equivalent to M500 million per annum.

But what we need to strive for is to create a development bank with the backing of the Loti Sovereign Wealth Fund. How can we achieve that?

By merging/amalgamating the LNDC with BEDCO and the Lesotho Post Bank into one single development bank named Loti Bank or LesBank.

LesBank should be approached with an open mind. This could set up a pan-African bank like Eco-Bank, United Bank for Africa (UBA) and Zenith Bank.

I mean what’s stopping us? Our attachments to sentiments! LesBank could also be made public and listed on the JSE and the Nigerian Exchange Group. Why not?

This new approach to banking would then build liquidity plus a strong balance sheet that would give Basotho leverage to access credit.

This is exactly what the Malaysians have mastered. Look at the global success of companies such as Petronas. I’m sure we are only familiar with a local brand named Engen. But Engen is part owned by a Malaysian multi-national company named Petronas.

This is what LesBank should strive to achieve. To be a pan-African Bank or even a global bank. We limit ourselves by having a bank that is ‘BIG’ on Kingsway Road.

Let’s expand and think on a global scale. LesBank could be one of the best export products Lesotho has ever produced and the first publicly listed company on the JSE. Why not?

‘Mako Bohloa

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