FirstRand, South Africa’s banking super-major, had to shed jobs in its Botswana operations in response to the slowdown in economic activity, as the country’s major export, diamonds, came under pressure from the proliferation of cheaper lab-made gems.
The group revealed in its interim results ended in December that it engaged in a voluntary separation process in Botswana, which contributed to an increase in staff costs in the period under review.
“The group has undertaken a staff rationalisation initiative in the UK and a voluntary separation drive in Botswana, resulting in headcount reductions; one-off severance expenses have been incurred,” it said.
The separation drive in Botswana was part of the lender’s three-year labour plan, which aims to “address future skill requirements, ensuring that workforce capabilities are optimally matched to evolving business needs”.
Botswana’s economy is on its knees as diamonds, which constitute 30% of its GDP and 85% of exports, buckle in the face of rising competition from lab-grown diamonds.
The structural shift in the diamonds business has seen Anglo American put De Beers up for sale after impairments of more than $3bn in that business over the past three years.
In the six months under review, FNB’s broader Africa advances grew 3%, with strong growth in Lesotho, Zambia and Eswatini offset by contractions in Namibia and Botswana due to “lower customer demand and business risk appetite as a result of macroeconomic pressures”.
FirstRand’s broader Africa portfolio also includes Nigeria, Ghana and Mozambique. A closer inspection of the group’s results shows about R150bn in total advances in the broader Africa portfolio, R1.2-trillion in South Africa and R477bn in its UK business.
The group, Africa’s second-largest bank by assets after Standard Bank, has the biggest exposure to individuals, manufacturing, financial institutions, property development and agriculture in terms of its advances.
The Africa portfolio delivered normalised earnings of R2.6bn in the period under review and a return on equity of 20.4%. The portfolio absorbed 12% (R25.5bn) of the group’s R220bn average capital deployed. South Africa constitutes 70% of this (R155bn), with the rest going to the UK.
FirstRand said deposits account for more than 80% of aggregate portfolio funding in its Africa portfolio.
“The relatively low contribution from institutional funding observed across the broader Africa portfolio is largely structural in nature, driven by low domestic savings rates and crowding-out effects associated with government borrowing in these markets,” it said.
“In Mozambique, the limited use of institutional funding reflects a deliberate strategic positioning rather than a market constraint, aligned to balance sheet resilience and funding stability objectives.”
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