Botswana Development CorporationPresentation to Investor Community

Gaborone

January 2016

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BDC is a development finance Institution founded in 1970 with the Government of Botswana as the soleshareholder. It was formed to promote and facilitate the development of industrial, commercial, andagricultural enterprises within the framework of the Government’s plan for economic development

As the country’s main agency for development, BDC remains one of the biggest investors in Botswana with investmentassets worth over BWP 2 billion, from a humble ZAR 20,000 worth of investment assets held as at the commencementof operations in 1971

After four decades of uninterrupted operations several factors combined to inform a decisive Transformation Road Mapthat the Corporation adopted in 2013. These factors include the need to re-focus on core mandate, the need to re-alignthe business model to current business climate, the need to build an operational model and structure more responsiveto investor needs, and the need for more optimal capital and funding structure

BDC's business is supported by a strong balance sheet with a well diversified portfolio of investments which has provenresilient during tough economic conditions

BDC’s Strategic Plan centres on a single, unifying Strategic Goal of “doubling the business in 5 years”. The newinvestment strategy, directly aligned to the Company’s medium term strategic plan and it’s mandate has turned BDC intoa more efficient entity with refreshed governance, operational and risk management practices and structures, thusmaking it ready to earnestly implement its 2014-2018 business strategy

BDC is therefore meeting investors to broaden its credit audience and further enhance its market access

Executive Summary

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1. Presentation Team

2. BDC’s Strong and Growing Franchise

3. Funding Requirements

4. Questions

5. Appendix

Agenda

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Managing Director

Mr Bashi Gaetsaloe BA (Economics), MA, (Economics)

• Mr. Gaetsaloe assumed the top position at BDC in March 2014

• Prior to that, he was Country Managing Director at Accenture Botswana

• Bashi has specific experience working across various sectors covering business strategy, organizational transformation, business start-ups and business turnaround, change management, and financial management

Chief Risk Officer

Mr Mbako Mbo IBAcc, BSc (Hons), MBA, FCCA, CPA (Botswana), AMCT

• Mr. Mbo officially joined BDC in May 2015 from African Development Bank where he held the position of Financial Management Expert

• Mbako has previous experience from Deloitte, Barclays, Botswana Telecommunications, Botswana Power Corporation where he held various roles including: financial accounting, management accounting, financial planning, and auditing

Chief Operations Officer

Mr Bafana Molomo Bcomm (Economics and Finance), MBA, Post Grad Diploma (Business)

• Mr. Molomo officially joined BDC in June 2015

• He began his career as an investment analyst with Fleming Asset Management Botswana followed by Vantage Capital

• He brings extensive experience in: Private equity, corporate finance, venture capital, mezzanine finance, structured finance, project finance, deal origination, market research and strategy

Chief Financial Officer (Ag)

Ms Maranyane Makhondo BAcc, ACCA

• Ms. Makhondo is currently the acting Chief Financial officer of the Corporation

• Prior to joining the Corporation Ms. Makhondo had accumulated a wealth of experience in both the private and quasi-public institutions in manufacturing and property industries where her roles included financial accounting, credit control, capital accounting and overall financial management

Introduction to BDC’s Strong Leadership Team

BDC has reinforced its executive team which now includes experienced venture capital, risk managementand finance skills with both regional and international experience

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Chief Audit Executive

Ms Marina Khan Bcomm , MSc (Strategic Management)

• Ms. Khan joined BDC in assumed the top position at BDC in August 2015

• Prior to that, she was Country Head of Audit at Standard Chartered Bank of Botswana

• She also previously held senior internal audit roles at Barclays Bank of Botswana and Botswana Power Corporation

Head of Marketing

Communications

Ms. Boitshwarelo Lebang BSc (Computer Science), MSc (Strategic Management)

• Ms. Lebang joined BDC in March 2008 as a Principal Public Affairs Officer before she rose through the ranks to become the Manager, Corporate Communications and Public relations before being elevated to the Corporation’s Head of Marketing Communications

• Prior to joining BDC she worked as a media practitioner in both television and radio and also did extensive work as a media consultant

Head of Human Capital

M. Thabile Moilpolai BSc (Business Administration)

• Ms. Moipolai officially joined BDC in July 2015

• She was previously with De Beers Global Sight holder Sales where she held the position of Human Resources Business Partner

• She brings extensive experience in the areas of HR service delivery, talent & performance management, capacity building among others

Introduction to BDC’s Strong Leadership Team (cont’d)

BDC has reinforced its executive team which now includes experienced venture capital, risk managementand finance skills with both regional and international experience”

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1. Presentation Team

2. BDC’s Strong and Growing Franchise

3. Funding Requirements

4. Questions

5. Appendix

Agenda

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• To provide, facilitate and support financing of commercially viable developments in order to contribute to a sustainable and diversified Botswana economy

• To develop new and existing industrial, commercial, property and agricultural businesses and property development

• To stimulate the growth of the private sector, diversify the economy and create wealth for the shareholder

• To invest in the region and internationally

• To conduct its business on a commercial basis and exercise special care and regard to economic and commercial merits

Our Mandate BDC Quick Facts

BDC is Integral to the Development of Botswana’s Economy

Botswana Development Corporation is an investment arm of Government

• Structure: A company limited by shares

• Ownership: 100% Government of Botswana

• Governance: Independent Board

• Products: - Debt and equity financing

- Mezzanine financing

- Structured financing

• Company Assets (2015): BWP 2.5 billion Company Revenue (2015): BWP 311 million

• Industries: Energy, Mining, Services, Industry, Property, Technology, Infrastructure

Source: BDC Annual reports, Audited Financial Statements

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Introduction to BDC

Key Performance Indicators

Company 2012 2013 2014 2015

Total Assets (BWP millions) 2,071 2,178 2,265 2,488

Total Revenues (BWP millions) 172 152 211 311

Profit Before Tax (BWP millions) -176 -222 -67 110

Net Interest Margin (%) 27 9 8 9

Cost to Income Ratio (%) 70 84 72 42

Total Equity to Total Assets (%) 69 64 62 67

ROE (%) -13 -17 -5 6

ROA (%) -8 -10 -3 4

Tier 1 Capital Ratio (%) 41 45 43 40

Capital Adequacy Ratio (%) 45 42 43 41

Transformation Journey

• In late 2013 the Board instituted a major review of the business under a Re-ModellingProgramme in order to address major challenges facing the business

Business Lines

• Debt and equity financing

• Mezzanine financing

• Structured financing

History

• Since 1970, our mandate has been to provide, facilitate and support financing of commercially viable developments in order to contribute to a sustainable and diversified Botswana economy

Strategic Goal

• Double the business in 5 years

History of Success

Strong Government

Support

Strong Balance Sheet

Diversified Portfolio

Resilient Business

Strategic Plan 2014 - 2018

As the country’s main agency for development and one of the biggest investors in Botswana, BDC isready to lead the way in the industrialisation of Botswana through the creation and growth of viable,sustainable, and innovative local and regional businesses

Source: BDC Annual reports, Audited Financial Statements

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Company 2011 2012 2013 2014 2015

Operating Revenue(BWP millions)

400 104 102 150 194

Profit Before Tax(BWP millions)

46 -176 -222 -67 110

• Changed business landscape

• Increased risks

• Skill gaps

• Redundant structures

Changing development priorities

Changing business landscape

Changing client needs

Changing shareholder expectations

BDC Transformation Journey

During the past few years, a combination of factors has dampened our performance...

... However, in late 2013 the Board instituted a major review of the business under a Re-ModellingProgramme in order to address major challenges facing the business

Source: BDC Annual reports, Audited Financial Statements

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Grow The BusinessPrepare The BusinessRe-align the Business

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Build Capacity:

• Create a platform for sustainable and viable growth

• Introduce new skills

• Build teams

Execute at speed:

• Double the investments assets in 5 years

• A comprehensive deal pipeline

• Optimize current portfolio structure

• Forge strategic alliances

Decisive actions:

• Restructure the Business

• Restructure governance

• New policies

• New systems

• New processes

2 3

A Three-Phased Approach

The focus has been to build a viable and sustainable BDC that will successfully operate within the newbusiness reality

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#NewBDC will leverage partnerships to execute its mandate

Support emerging industries Sustain critical industries Drive rural industries Promote regional cooperation through strategic investment partnerships with regional peers

Going forward BDC will focus on

commercially viable businesses over BWP 30 million

1. Pioneer new industries

2. Unlock value in existing industries

3. Stimulate private sector growth and linkages

4. Drive diversification and exports

5. Create significant employment

6. Generate wealth from outside the country

BDC’s Strategic Plan 2014 – 2018

BDC’s Strategic Plan centres on a single, unifying Strategic Goal of “doubling the business in 5 years”. Thenew investment strategy, directly aligned to the Company’s medium term strategic plan and it’s mandatehas since been developed and it aims to:

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• Strong governance

• New teams

• Improved organizational structure

• Best practice risk management & governance policies and frameworks

• Improved portfolio quality

• Strengthened business development capabilities

• A new culture of #FAST

Transformation Achievements

Operating Revenue: ↑ 29%

Total Revenue: ↑ 47%

Expenses: ↓ 28%

Provisions: ↓ 48%

Profit Before Tax: ↑ 264%

Transformation Results (FY15)

What Has Been Achieved to Date

Implementation of the Re-Modelling Programme began in April 2014 and the #NewBDC is now “live” inthe new environment. The initiative turned BDC into a more efficient entity with refreshed governance,operational and risk management practices and structures, thus making it ready to earnestly implementits 2014-2018 business strategy

Source: BDC Audited Financial Statements

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• Debt and Equity Financing

• Mezzanine Financing

• Structured Financing

Pioneering New Industries IndustrialisationFacilitating Sustainable

Employment

A History of Successful Investments and Positive Impact on the Economy

BDC’s contribution has permeated every major industry in Botswana and the Corporation has beenresponsible for some of most important companies in Botswana

Source: BDC Annual reports, Audited Financial Statements

-200

-100

0

100

200

300

400

500

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

BDC's Profit Before Tax and Revenue: 2001 - 2011

Revenue (Million Pula) PBT(Pulas)Revenue Profit Before Tax

BWP millions

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Supported by a Strong Balance Sheet

Capital StructureAssets: BWP 2.5 billion

Investment in Subsidiaries

Other Investments assets

PPE

Inter company balances

Source: BDC Annual reports, Audited Financial Statements

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

BWP billions

Total investment assets

Company Group

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

BWP billions

Shareholder funds

Company Group Group net Shareholder funds

0,0

0,5

1,0

1,5

2,0

2,5

Assets Liabilities Shareholder's Equity

BWP billions

15

-4%

-2%

0%

2%

4%

6%

8%

10%

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

BWP billions

Assets and GDP Growth

Company Group GDP Growth

Resilient Business During Tough Economic Conditions

BDC’s business has proven resilient even during tough economic times and poor financial performance

Source: BDC Annual reports, World Bank Data

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1. Presentation Team

2. BDC’s Strong and Growing Franchise

3. Funding Requirements

4. Questions

5. Appendix

Agenda

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Funding Strategy

As part of BDC’s Strategic 2014 – 2018 Plan, the Corporation aims to optimise its funding structure byintroducing more longer term debt to be acquired both locally and internationally during the short tomedium term

The Present Capital Structure

0,0

1,0

2,0

3,0

Assets Liabilities Shareholder's Equity

0.2

0.4

1.6

Short term borrowing

Long Term borrowing

Shareholder Funds

Current Funding Mix Targeted Funding Mix: Short to Medium Term

Cash Flows

2%

Internal Sources

Short term credit lines (local

commercial banks)

Creditors

16%

Short Term Revolving Credit Lines

Long term borrowings

15%

Long Term Sources

Ordinary share

Capital Retained

Earnings Reserve

72%

Shareholder Financing

Cash Flows – including divestment

proceeds from selling non strategic

investments

5%

Internal Sources

Short term credit lines (local

commercial banks)

Creditors

3%

Short Term Revolving Credit Lines

Long term borrowings

55%(This includes resources to be channelled

to co-financed investment undertakings)

Internal Sources

Ordinary share

Capital Retained

Earnings Reserve

37%

Shareholder Financing

Source: BDC Annual reports, Audited Financial Statements, BDC Internal Reports

BWP billions

BWP billions

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Sector Number of projectsInvestment requirement

(BWP million)

Agri-processing 4 415

Energy & emerging industries 6 1,487

Infrastructure 3 7,825

Property 2 700

Services 1 30

Total 16 10,457

Total employment creation: Between 3500 and 6000 direct and indirect jobs over the medium term

Solid Pipeline of Projects

Our pipeline includes 16 major projects valued at over BWP 10 billion. These are linked to our strategyand to Botswana’s development agenda

Source: BDC Internal Reports

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Up to 2017

Funding new investments BWP 700 million

Refinancing BWP 230 million

Seed capital buffer BWP 70 million

Total required BWP 1 billion

2017 and Beyond

Funding new investments: 2017 - 2019 BWP 2 billion

Funding new investments: beyond 2019 BWP 5.5 billion

70%

23%

7%

Funding Pipeline Projects

Restructuring of Short Term Debt

Capital Buffer

Capital Funding Requirements

BDC has determined its total capital funding requirement to be BWP 3 billion in the short to mediumterm. There is a clear demonstration of the ability of the projects to be financed to generate the requiredreturns and repay the financial resources expended to them

Source: BDC Internal Reports

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1. Presentation Team

2. BDC’s Strong and Growing Franchise

3. Funding Requirements

4. Questions

5. Appendix

Agenda

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1. Presentation Team

2. BDC’s Strong and Growing Franchise

3. Funding Requirements

4. Questions

5. Appendix

Agenda

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Select Key Indicators 2013 2014 2015

Composition of income

Dividends 49% 55% 51%

Interest 18% 17% 12%

Other 33% 28% 37%

Current Ratio 0.31 0.26 0.65

Leverage Ratio 1.51 1.44 1.27

Gearing 24% 26% 17%

Liquidity Coverage Ratio 20% 71% 75%

Key Ratios

Source: BDC Annual reports, Audited Financial Statements, BDC Internal Reports

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-300

-200

-100

0

100

200

300

400

2013 2014 2015 2016 (b) 2017 (f) 2018 (f) 2019 (f)

BWP millions

Financial Performance and Projections

Total Revenue Total Expenditure PBT

Our Journey Over the Next Four Years

A steady growth in profitability, driven by growing revenues and expenditure management

Source: BDC Annual reports, BDC Internal Reports

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Corporate Social Responsibility Programme and Initiatives

The Corporation’s Corporate Social Responsibility Programme is deliberately made diverse tomeaningfully benefit a significant number of individuals in communities within which we operate. Overthe past 5 years, education, arts and environmental preservation have immensely benefited from theCorporation’s Corporate Social Investment (CSI) initiatives

BDC CSR POLICY VALUE STATEMENT

“To be the leading development and investment financier that makes a significant contribution to the sustainabledevelopment of the communities in which we operate.”

BDC CSR PURPOSE VALUE

The purpose of BDC CSR programme is to build passion and pride for the BDC brand through the use of our humanand financial resources to address the needs of the communities in which we operate and invest.

For the current year, the Corporation is in the process of implementing a Corporate Social Investment Project that isaligned to its mandate:

• The targeted project will address entrepreneurship/business skills development especially among youth• This is where the bulk of the CSR budget will go and the rest will be utilised in donations and sponsorships• The programme is aimed at benefiting a considerable number of youth who will benefit from it at intervals over a

period of 3-5 years• Donations and sponsorships will continue to benefit a wide array of members of our communities

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Disclaimer

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