How banks export jobs to SA
In 2018 alone, the four commercial banks listed on Botswana Stock Exchange (BSE) with their operations in the country may have spent money exceeding a whopping P1.5 billion on procuring from South Africa products and services that were easily available in Botswana. While that happens, the taxman is robbed of sorely needed money while thousands of jobs that could be created in Botswana are exported to SA. KEABETSWE NEWEL and TLOTLO KEBINAKGABO report
An investigation by The Botswana Gazette has established that one of the biggest ways in which commercial banks in Botswana export jobs to South Africa is through manufacturing of debit and credit cards and procurement of management and support services. Hundreds of millions of pula are spent annually by banks in Botswana to procure these services in the Southern Africa regional superpower.
At First National Bank Botswana (FNBB), the most profitable and valuable bank by any measure in Botswana, communications specialist Modiri Mogende has confirmed this: “ Our VISA debit and credit cards are manufactured in accordance with our global payment partners VISA’s set standards. Currently, our cards are manufactured in South Africa,” Mogende said.
First Rand Bank South Africa holds a controlling 70 percent stake in FNBB while 30 percent of the shares are listed on the BSE. What Mogende means is that First Rand Bank South Africa instructs FNBB Botswana about where to manufacture their debit cards and what company to use, despite FNBB supposedly being an independent company operating in an independent market. Mogende refused to reveal the name of the company contracted to manufacture VISA their debit and credit cards to The Botswana Gazette, saying it was sensitive information. While he refused to reveal how many cards the bank manufactures annually, this publication has established that the bank has more than 300 000 active customers and that it manufactures new cards and replacements which total nothing less than 15 000.
Batswana are charged an average of P60 to manufacture a single card. For FNBB, Batswana fork out over P1 million annually to be issued with debit cards. Mogende further said the cost of manufacturing VISA debit or credit cards is aggregated and negotiated with suppliers on a contract basis. “For this reason, we are not at liberty to share the requested information,” he said.
FNBB is not alone in this. The second largest bank in Botswana, Barclays, also says it places its order with a card personalisation company in SA, which is a group certified vendor. This means that the vendor can only be approved by the ABSA Group Limited, a leading South African commercial banking brand that has taken over the Barclays Africa Group. ABSA controls a 67 percent stake in Barclays Bank Botswana. Barclays has already started re-branding Botswana branches to ABSA. Communications & Marketing Manager, Spencer Moreri, says the card personalisation company then sources the plastics based on specifications provided by the bank from a global vendor certified by Visa and Mastercard. Asked if there were any plans to localise their production, Moreri answered that the bank was happy to consider that only if it could get the economies of scale and quality in Botswana. He said Barclays manufactures a minimum of 13 000 cards annually.
At Standard Chartered Bank Botswana, the Corporate Affairs, Brand & Marketing Manager Kunda Neill said the bulk of their cards are manufactured here in Botswana, which throws into sharp relief the claims by FNBB and Barclays that there are no companies that qualify for that job in Botswana. Standard Chartered, which is the oldest bank in Botswana, said it has a panel of local vendors for all their services. Bank ABC spokesperson Polelo Kilner only said her bank engages locals where it is possible.
Sources said combined, commercial banks in Botswana, including the unlisted like Stanbic, annually manufacture over 100 000 cards, running into millions of pula. The debit and credit card procurement is just a tip of an iceberg. The expenditure is just the tip of an iceberg in the billions of pula which the banks spend annually procuring products and services from South Africa which they could acquire here in Botswana.
Information sourced from the annual statements and reports of the commercial banks shows that the banks acquire all their services out of Botswana, especially management services, group business development and sales services, finance and cash flow functions, group IT services, administration as well as for accounting and financial reporting.
During the 2018 reporting period, FNBB, which is valued at P8 billion, spent a staggering P597 million on expenses separate from staff costs. Part of these unexplained millions were used to finance IT companies and other service providers based in SA while some of the money was paid directly to the FNBB parent company in SA in support services and management fees.
During the 2018 full year, Barclays Bank spent P412 million in operating expenses, the majority of which was channeled to SA-based companies to pay for services and products. The BancABC 2018 annual financials show that P51 million was spent on general costs and administration, but there is a further P33 million which was labelled as “other costs.” These “other costs” are funds which pay SA-based companies for services which could otherwise be sought here in Botswana, costing the nation much needed jobs and economic development. At Standard Chartered, staff costs recorded stood at P238 million, but the financial statements further reveal an additional P466 million exhausted in “other costs.” Similarly, these “other costs” were for services that could have been procured here in Botswana.
Asked why FNBB spends so much money in SA for services that could be sought here, Mogende said wherever they are able to source these services within Botswana, they do so. “As part of our citizen economic empowerment commitment, we already have Batswana and Botswana-based companies as a large part of our supplier base to our operations,” he said. At Barclays, Moreri said they continue to explore possible avenues to deploy Batswana for any management and support services. Asked if he was aware of the millions shipped out by banks to SA, which means exporting jobs, the CEO of the Bankers Association of Botswana (BAB), Oabile Mabusa, said BAB does not collect information on the internal business operations of its member banks save only for information relating to clearing houses and payment system operations.
But what about the jobs being exported by these banks? The answer came that technically the acquisition of services from abroad “might” constitute job exportation. However, in measuring the true economic loss arising from such job exportation, consideration has to be made of the need to balance against any importation of jobs which takes place in the form of the extension of services by Botswana banks to their headquarters or to sister subsidiaries within their group networks. To cap it all, Mabusa said he was happy with the status quo in the banking sector. He added that as a citizen association, BAB is very much interested in seeing the prevalence of a positive net balance in the job export/import equation for the entire banking industry. Further, he said, even in the unlikely event of the prevalence of an unfavourable net deficit in the job import/export equation, any intervention would not be a matter for BAB.
“While on this point, it is important to note that the exportation of jobs is not necessarily a bad thing, after all,” Mabusa insisted. “The principle of developing Botswana as a knowledge-based economy, which is espoused in Vision 2036, requires that there should be a healthy exchange and cross-fertilisation of skills, ideas and knowledge between Botswana and the rest of the world.
The Botswana Gazette asked Mabusa how Batswana would benefit if such services were procured locally. In response, he said a factual audit would have to be undertaken to establish the nature and cost of out-sourced versus in-sourced jobs and services, the respective onshore/offshore cost structures (true cost of acquisition), as well as associated economic linkages and the extent to which they would constitute value enhancement or destruction.