BECI: Business opportunities, challenges and change

BECI has over 19 years as an export credit agency providing credit insurance (both export and domestic) to the Botswana business community. Although BECI has been in business for this long, it is still struggling with low penetration rates for the credit insurance product more especially on the export credit insurance. Appreciation and uptake of our services and products have remained constrained to little growth in terms of the Premiums and critical mass needed for profitability. With a population of just about 2.1 million, and given that unemployment and poverty levels are pretty high at 18% and 20% (according the World Bank’s April 2016 report) respectively Botswana also presents a very small market for local business to tap into. Our research has shown that with a broad spread of risk (where a company has a large number of trade credit customers), credit insurance will be more attractive to the businesses.

Botswana, like the rest of Southern African countries, has also been grappling with power & water shortages, drought and low economic growth which have made doing business difficult. This has contributed to a number of covered buyers’ insolvency (non-payment of an account and/or admission by the company that they are unable to settle a debt) directly impacting our operational costs. A number of businesses who cannot service their accounts grew by 25% from 2013 to 2015 increasing the claims costs while policy cancellations grew by 10% year on year from 2013.

The salvages in Botswana are below other ECAs average of 70%, mostly because all the companies will be near bankruptcy at the time claims are paid and the recovery/collection process starts. The legal collection process can also take long (up to three years) especially where a debtor enters an appearance to defend.

Despite these challenges the environment in Botswana has also presented opportunities to BECI for products like import/export financing, short term domestic trade financing, medium to long-term export credit insurance and investment insurance, and the need to set up a credit information services function to compete with the only credit bureau in the local market.

Two well established ECAs in the region have shown interest to assist train and equip our staff with the relevant skills. This will place BECI in a better position to fully exploit all opportunities and proactively manage all risks to the business.

Currently BECI is looking to review its business model to be able to take advantage of these opportunities. The review of the organisational structure and alignment of functions and roles is undergoing changes to improve efficiency benchmarking with other ECAs of the same size. BECI has also made a deliberate move to collaborate more with government agencies and parastatals working on economic diversification, export strategy, business development like Citizen Economic Development Agency, Local Enterprises Authority, Botswana Investment and Trade Centre etc. This relationships will put us at the forefront of advancing our interests and increasing our product awareness to a broader market nationwide.

Cowell Habana

General Manager - BECI