Botswana’s Letshego defaults on Kenya, Uganda loans

Micro lender Letshego branch in Rwanda. 

Photo credit: File | Nation Media Group

Botswana-based lender Letshego Holdings Ltd (LHL) has defaulted on a Sh3.9 billion ($30.49 million) loan for its Kenya and Uganda subsidiaries and trimmed 142 jobs in the units, just 15 months after the company warned of an imminent exit from the region this year on deteriorating economic conditions.

Disclosures showed defaults on the Kenya and Uganda loans are part of a Sh27.15 billion ($210.95 million) debt that the Botswana Stock Exchange-listed lender failed to repay as scheduled amid a Sh1.39 billion ($10.82 million) loss for the year ended December 31, 2023, that casts doubt its operations as a ‘going concern’.

The debt covenant breaches existing had implications on outstanding obligations amounting to approximately P2.9 billion ($210.95 million) at the reporting date (December 31, 2023).

In light of the possible implication of this performance and the existence of debt covenant breaches on the Group’s liquidity and funding pipeline, management made an assessment of the group’s ability to continue as a going concern,” the lender said in its newly published annual report for 2023.

The breaches of the loan covenants on Letshego’s units in Kenya and Uganda were Sh3.26 billion ($25.37 million) and Sh658.77 million ($5.12 million), respectively.

The lender however says it has put in motion mitigation factors including discussions with funders for which 'letters of no action' had not been obtained.

The lender says talks with financiers are on- going, and the group is very positive in receiving some relief.

“In the extreme circumstance of the group not being able to roll forward existing facilities and also not being able to access new funding earmarked in its future pipeline………, a forecast cash shortfall of approximately P3.5 billion would be experienced by the group during the period extending to 13 months after the issue of the financial statements,” according to the report.

Letshego reduced its workforce in Kenya, Tanzania, and Uganda by 43, 69, and 30 respectively, while in Rwanda there was a slight addition of three employees. In March last year the lender issued an alert over an impending closure of its operations in three East African markets— Kenya, Rwanda, and Tanzania—this year over worsening conditions.

It classified the three regions (Kenya, Rwanda, and Tanzania) including Ghana and Nigeria as ‘turnaround markets’ which are currently unfit for growth and appointed a turnaround master Fergus Ferguson, the former Chief Executive of Botswana with oversight over Eswatini and Lesotho (Boleswa), as the regional CEO to oversee their recovery in 10 months, failure to which a closure decision will be made this year to avoid further financial bleeding.

“The appointment of a regional chief executive supported by a competent team will oversee the transition of these businesses. However, while geographic rebalancing remains a key strategic conversation for the group, it will not be pursued at the expense of shareholder value,” the lender says.

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