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Firms expects credit to be less accessible in 2020

About 100 firms have revealed their shyness to take credit facilities from lenders mainly because they consider the domestic interest rates to be high and loans to be less accessible.

This is according to Bank of Botswana’s recent Business Expectations Survey (BES) for this period. This survey looked at a businesses  This report presents results of the survey carried out in the fourth quarter of 2019, covering the fourth quarter of 2019 (Q4:2019 – the current period); the first quarter of 2020 (Q1:2020); and the twelve-month period (M12) from January 2020 – December 2020 (Q1:2020-Q4:2020).

“Firms in the domestic and export-oriented markets perceived access to credit to be tight in the fourth quarter of 2019, mainly because they consider the domestic interest rates to be high,” says the survey. The survey further states that  despite anticipating tight access to credit in the domestic market the anticipated increase in borrowing volumes is consistent with the expected rise in investment, especially in plant and machinery covering.

Firms expect to focus on increasing investment in buildings, plant and machinery, vehicles and equipment in the first quarter of 2020 but are anticipating tight access to credit in the domestic market, hindrance to their performance. According to the business expectations report, the increase in lending rates goes with anticipation of increase in borrowing volumes and this spike rise in investment, especially in plant and machinery.

As revealed in the current businesses survey, firms targeting the domestic market prefer to borrow money from the domestic market in the first quarter of 2020. However export-oriented firms prefer to borrow from the international markets other than South Africa also intending to reduce their borrowing from the domestic market.

Sixty-eight percent of firms that contribute to the domestic economy have complained that there is less availability and accessibility of the required loan products as the basis for their borrowing decisions. But 32 percent of businesses irrespective of whether funds would be sourced from Botswana or elsewhere would borrow if the credit facility is affordable, overlooking at the fact whether the loan is available or accessible.

With difficulty in accessing credit and finance, especially from abroad, businesses also decried unavailability of skilled labour which was cited as the greatest challenge facing businesses in the fourth quarter of 2019. This was also put together with difficulties in recruiting foreign skilled labour by most of the local businesses. The lack of skills is prevalent in manufacturing, trade, hotels, restaurants, transport and communications sectors. Firms in the manufacturing sector cited shortage of raw materials as the greatest challenge to their business operations.

Matsheka takes on the suitcase for the first time amid business community high expectations

When finance minister Thapelo Matsheka takes on the red carpet of Parliament buildings in a suit seemingly almost specifically accustomed for the much publicized national event while clenched to the symbolic black suitcase, the business community is expected to the most attentive of the audience.

In the recent businesses survey results firms show less optimistic about economic activity in the fourth quarter of 2019 compared to the third quarter of 2019. As the third quarter of 2019 shows Botswana to be on trade deficit, businesses also expected a decrease in exports of goods and services; sales; and investment in buildings, vehicles and equipment in the fourth quarter of 2019. Firms expect cost pressures to be subdued in the first quarter of 2020, the time of the launch of the 2020/21 financial year which will be kick-started by Matsheka who will be making a debut as a minister in the finance ministry.

Inflation

The firms expect cost pressures to be subdued in the first quarter of 2020 and this is attributable to the expected downward pressure on rentals, wages and transport costs. There is also expected rise in public wages (last year salary hike was for two years) and this will come with the burden of upward pressure on private sector wages. But Firms expect inflation not to escape the 3-6 percent objective range.

According to a survey on businesses, firms expect cost pressure to fall slightly in the first quarter of 2020, reflecting the anticipated downward pressure on rentals, wages and transport costs. Despite this, firms do not expect any inflationary effect but believe inflation will remain stable, within medium-term objective range of 3 – 6 percent.

Hope in 2020

The survey was not without a gleam of hope as business conditions are perceived to improve in the first quarter of 2020, which is now. “Firms anticipate improvements in capacity/resource utilization; production/service capacity; stocks/inventories; exports of goods and services; profitability; employment; and investment in plant and machinery, buildings, vehicles and equipment in the first quarter of 2020.

These, in combination with expectations of increased growth in the trade, hotels and restaurant and mining sectors contribute to the improved expectations relating to the overall business conditions,” said a survey on firms. The domestic market-oriented firms’ optimism improves in both the first quarter of 2020 and the twelve-month period to December 2020 (M12) compared to the fourth quarter of 2019, according to the recent survey.

According to BES, confidence in the domestic market-oriented firms is mainly driven by the trade, hotels and restaurants, transport and communications and the finance and business services sectors. Export market-oriented firms’ optimism decreases in the first quarter of 2020 compared to the fourth quarter of 2019, but improves for the twelve-month period to December 2020 (M12), according to the survey.

“Firms expected the economy to have grown by 3.3 percent in the fourth quarter of 2019, lower than 3.5 percent growth projected for the third quarter of 2019. These developments were reflected in responses by firms in the trade, hotels and restaurants and transport and communications, the construction as well as the manufacturing sectors the finance and business services and mining and quarrying sectors were optimistic about economic activity in the fourth quarter of 2019. Meanwhile, the GDP estimates indicate that the economy grew by 3.1 percent in the third quarter of 2019,” said the survey on firms.

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Business

The Bulb World starts operations in South Africa

8th April 2021

Homegrown LED light manufacturing company, The Bulb World, has kick started operations in South Africa, setting in motion the company’s ambitious continental expansion plans.

The Bulb World, which was partly funded by Citizen Entrepreneurial Development Agency (CEDA) at the tune of P4 million, to manufacture LED lighting bulbs for both commercial and residential use in 2017, announced last year that it will enter the South African market in the Special Economic Zone (SEZ) of North West province under the auspices of North West Development Corporation (NWDC).

The company has already secured a deal with South Africa authorities which entails production factory shells and tax incentives arrangements.

The company founder and Chief Executive Officer, Ketshephaone Jacob has also previously stated that the company is looking for just under P50 million to finance its expansion strategy and is reaching out to institutional investors such as Botswana Public Officers Pensioners Fund (BPOPF) and government investment arm, Botswana Development Corporation (BDC).

However, Jacob told WeekendPost that instead of sitting and waiting for expansion funding the company has started hitting the ground running.

“We have decided to get in the streets of SA, start selling lights from door to door, ” said Jacob who is in currently in Rusternburg to oversee the introduction of The Bulb World products in the market.

Jacob explained more brand activations will be undertaken in South Africa. “The plan is to do it the whole of North West and Limpopo province, through hawkers, we give the hawkers the lights to sell at a factory price and they put a mark up and make a living,” he said.

The Bulb World operates from Selibe Phikwe, it currently employees 65 young people, 80 % of which are Phikwe youth. The company plans to add 100 jobs this year alone as it forges ahead with its regional and continental expansion plans.

In July this year Bulb World products will hit South African Shelves:  Pick n Pay, Checkers and Africa’s largest retailer Shoprite.

The Bulb World has been registered as a company in South Africa; the company will start producing lights from Mogwasa after striking a special economic zones deal with North West Development Corporation in North West Province South Africa.

“Over the next 10 years we are looking to create over 5,000 jobs in Africa. Through our expansion into all of Africa we will be able to create employment for various individuals in different sectors namely; manufacturing, distribution electronics and retail,” Jacob told this publication earlier this year.

Jacob said if all goes well, the plan is to have taken over Africa or rather penetrated, and have prevalent presence in the African market.

“We are gunning to have at least 30 percent market share by then. According to a 2016 Market Survey, the total valuation of sales for LED Lighting was 57BN, a portion of which we plan to have taken over by then,” he said.

 

While the company has set its eyes on Africa, Jacob said, the company has not fully exploited its local growth, indicating that there could be strategic factories built to supply neighbouring countries of Angola and Zimbabwe.

“There is potential for further local expansion as well to other areas of Botswana if things run smoothly as anticipated. Hopefully in the long-term if our fellow Africans and all these markets receive us well we are planning to build another factory,” he said.

“We are looking to build another factory in the Chobe/Ngamiland Area that will give priority to markets in Zimbabwe and Angola,” he said

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Business

‘Oil exploration will have minimal impact’

30th March 2021
Okavango-River-Basin

The Maun based Okavango Research Institute (ORI) has downplayed the impacts of oil and gas exploration in part of Okavango delta arguing that given the distance proposed the likelihoods of negative impacts drilling these exploration wells on the surface water systems is likely to be negligible.

The Institution released a position paper titled ‘Proposed Petroleum (Oil and Gas) Exploration Operations in the Petroleum Exploration License (PEL) No. 73,’ with findings stating that, in the event of discovery of economically viable hydrocarbon deposits, much more careful consideration of the impacts and economic benefits of development of the resource will be needed.

For example, the fracking process for gas and oil extraction is known to require large volumes of underground water.

It further argues that increased extraction of the underground water is likely to affect the water table level and further affect the overall water availability in the river-basin.

“The effect on water availability and use may become worse if surface water is reticulated or sourced by any means from the Kavango River. Should the exploration and fracking for oil and gas expand to Block 1720, 1721 and 1821, the impact on water availability and quality will be significant, especially if the wastewater is not well managed,” said the paper.

The research unit recommends close communication between the relevant Basin State Ministries (Mineral Resources, Environment) and the Permanent Commission on the Okavango River Basin, OKACOM, and other stakeholders must be facilitated.

This will facilitate sharing of the correct information on the desired intentions of the basin states and compromises sought for the sustainability of the ecosystems in the downstream of the Cubango-Okavango river Basin, states the position paper.

ORI as a key stakeholder with scientific information says it is positioned to provide scientific advice and guidance to decision-makers on the potential impacts of both exploration and development and operation activities.

It also recommends that while the impacts might be minimal at the exploration stage, environmental impacts during the development and extraction process are significant.

Findings also state that the SADC Protocol places a mandatory duty to make a notification of planned measures undertaken in any riparian state in cases where such measures hold the potential to cause ‘significant adverse effects.’

It further states that where the planned development is trivial and not expected to cause any significant harm, the development state is not under duty to notify other riparian states.

Given that the drilling in the Kavango Region in Nambia is merely for exploratory purpose and the possibility of harm is minor, it is therefore not surprising that the Namibian government did not inform Botswana.

However, should it be found that the oil can be profitably or economically exploited, the Namibian government would be under a duty to notify both Angola and Botswana.

The institution further states that to ensure sustainable development in the Okavango Delta the following in the context of exploration for and potential development of hydrocarbon deposits within the Cubango-Okavango River Basin, it must be considered that the Okavango Delta is a World Heritage Site listed in 2014 by UNESCO and one of the binding requirements of the listing is the non-permissible commercial mining of any mineral, gas or oil within the World Heritage Site.

It states that the Okavango Delta is also a RAMSAR site in which mining is not allowed.

Should the exploration for minerals, oil and gas be allowed, there is a high chance that a mineral, oil or gas may be found given that the Delta is sitting on karoo sediments and shale rocks which in other parts of the world have been found to be sources of oil and gas deposits. Should oil or gas be discovered, there will be a strong socio-economic pressure to mine oil or gas and create jobs for the masses.

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Business

Pakmaya yeast penetrates local market

30th March 2021
Pakmaya Africa Sales Manager: Cem Perdar

Manufactured in Turkey, Pakmaya Instant Dry Yeast can be used in the production of various fermented products, as it is suited for both traditional and industrial baking processes. All kinds of breads, buns and fermented pastry products are typical examples of applications.

Pakmaya Africa Sales Manager Cem Perdar says Pakmaya has 4 plants in across the world, further indicating that all of the plants have the highest standards of quality certificates and approvals. Regarding raw material, molasses is the main ingredient for yeast. Concerning production activities, yeast manufacturing requires high know-how and capability. Pakmaya has all those capabilities and aspects more than 45 years.

According to Perdar, Pakmaya has been existent in African markets since 30 years. From South to North, Central to East and West, a consumer can find Pakmaya in nearly every part of Africa continent.

“With its high quality, rich product selection and good service, our brand has become the favorite yeast of many Africans. On the other hand, our distributors in African countries are working very hardly and loyally in order to promote our products in their markets. After some time, we are becoming like families with our exclusive distributors in Africa and this enables both parts to work harder and keeps our product sustainable in market,” he said in an interview this week.

The yeast manufacturing giant made its way to Botswana market. The company has been smoothly working with Kamoso Distribution, a local distribution company. Perdar told BusinessPost that two entities have been working hard to earn is market locally.

“At the moment we have a good market share with them in Botswana market. I’m sure during 2021 long, we will be increasing our sales and market position. Soon we are going to start a marketing campaign in Botswana, so that means Batswana will see and recognize Pakmaya more and more. Pakmaya wants to be the best friend of bakers in bakeries and ladies at homes in Botswana.”

As per global COVID-19 regulations to curb the spread of the COVID-19, Botswana just like other country closed borders. Providentially, the restrictions did not affect the company destructively.

Perdar says “Kamoso Africa is a very important and strong partner in Botswana territory. With Kamoso’s hard work and strict measurements, we have done a very good job. So as Pakmaya, we have not suffered any distribution problem. Our partner is doing the needful at the reaching our products to end users.”

He further said “We are doing well in Botswana market and hoping to make much more. Our aim is to enter every single corner in Botswana territory. With our new marketing campaigns, we are planning to be the most preferred yeast in Botswana market.”

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