In the last two years markets regulator Botswana Stock Exchange (BSE) CEO Thapelo Tsheole did not spare any rod for any child to rot and this has seen suspension and exit of top contributors to trading activity, an affliction to the local bourse.
In its recently released BSE market status report for the last 12 months BSE regrets the continued suspension of Choppies which ran from its actual suspension in 2018 to its failure to get out of the status the whole of last year. Choppies failed to comply with BSE Listing Requirement by failing to timeously publish its audited financial statements for the year ended 30 June 2018. The suspension has been going on until further notice.
Choppies was suspended when its share price fell by 73 percent, plummeting from P1.69 to P0.40 in a single day of 28 September 2018. That fateful day the retailer market capitalization slumped from P2.2 billion to P521.5 million. Choppies, once the biggest contributor to the local bourse, was suspended when it stock was at P0.69. The Retail and Wholesaling sector, the second most traded after the property sector, contribution of 23 percent to domestic turnover in 2019 could have been more if Choppies shares were not put on the freezer by BSE.
Since joining the local bourse in January 2012 Choppies has been the best told success story, starting from a general dealer size in a small town of Lobatse then becoming a more than 200 store regional retailer giant when it listed on BSE. Choppies became a big profit making machine, making it a darling to investors with pension funds buying millions of the retailer’s shares as it continued to perform better in the market.
After demutualizing in 2019, in 2019 BSE put more teeth in the form of its BSE Listing Requirements and this has seen some companies bowing out of the bourse. Furnmart finished its delisting in the beginning of last year and said it left the bourse because it has seen that the demands for its shares were less and they could not comply with the new BSE regulation implemented in January 2019 which authorize companies to increase shares held by the public from 20 percent to 30 percent.
Just six month before the January 2019 deadline about 23 percent of Furnmart’s shares were in public hands, meaning the increase to 30 percent would be a goose chase. The company owners said. “With the new BSE regulations, we will no longer be able to meet the requirements in 2019 (and) delisting is a natural and obvious step.”Furnmart bowed out of the bourse as one of vital players in the market trading at P0.55. The last time Furnmart share price was high was in the first quarter of 2016 at P0.85.
Once BSE star child, Wilderness Holdings Limited walked out of BSE last year offering P6.25 for its shares and it has been one of the most successful performer in the bourse since it was listed years ago. In 2018 November its share price went up to a high of P6.56 and remained constant to April 2019 until dropping to P6.30 the same year before it delisted at P6.25.
Wilderness Holdings share has been one of the investors or buyers’ favorite for years since it was in the growing tourism sector, making revenue from its sought after safaris hence boosting the company profit. Also, Wilderness has been leading top traded counters of 2019 with P282.3 million. “Two important events held in 2019 which contributed to a reduced universe of tradeable securities; the continued suspension of Choppies Limited throughout 2019 and the delisting of Wilderness Holdings Limited and Furnmart Limited during the year.
These entities have contributed significantly to trading activity in prior years owing to their size and contribution to diversity of sectors on the Exchange,” said BSE market status for the last 12 months. According to BSE, the delisting of two companies and continued suspension of Choppies have also negatively impacted domestic market capitalization which has reduced by P3.7 Billion to P38.7 Billion from P42.4 Billion in 2018.
But BSE continues to lure investors and says, “on a balance of events, to experience a continued suspension of Choppies and a delisting of two major corporates and still restore trust, confidence and investor activity has been a remarkable feat for the Exchange and the investor community.” During BSE first Opening Bell Ringing Ceremony for the markets this year recently Chairman Tebogo Masire and Tsheole talked of how last year the market was resilient when it was bad and even performed fairly better than other bourses in the region.
Investor confidence was dizzy last year as the country prepared for the most unpredictable national polls with the former president opposing his successor, most thought of the worst to happen as it is always the case in Africa. Foreign investors held on to their money and the market remain stagnant, but the local bourse was unfazed. Masire said, “the BSE has remained resilient in the midst of subdued global performance where there was generally a downturn in all regions.”
Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status. The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.
This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago. In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.
However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced. Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.
The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.
The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.
On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.
The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.
Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.
Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).
“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.
Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.
This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.
For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.
Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers. “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.
‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’
According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.
Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.
“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.