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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

Inflation spike building further upwards

27th October 2020
Inflation spike

In the coming months prices will go up and inflation will shoot sharply above the target of 3 percent to 6 percent towards the third quarter of 2021, the Bank of Botswana on the other hand will continue to withhold its knife on the Bank Rate. This is according to a forecast made by Kgori Capital in its recent Market Watch Segment.

Statistics from Statistics Botswana show that the recent 1.8 percent increase in the September inflation, from 1 percent in August, was a reflection of the upward adjustment in public transport fares (Transport (from -6.9 to -3.9 percent) in September 2020, which is estimated to have increased inflation by approximately 0.64 percentage points.

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Plans to erase Edgars, Jet trademark from Botswana malls underway

27th October 2020
Edgars Jet trademark

Local anti-trust body, Competition and Consumer Authority (CCA), this month received back to back acquisition proposals from South African clothing retailers to wipe out their former rivals, Edcon, from Botswana malls.

Last week BusinessPost was in possession of Merger Notice No 23 of 2020 whereby a South African clothing retailer owner, Retailability Proprietary Limited, through Oclin Proprietary Limited, proposed to acquire parts of the Edgars business conducted by Edcon in Botswana (through Edcon Botswana), as a going concern, consisting of certain assets and identified liabilities.

South African government’s Business Rescue Practitioners earlier this year announced that Retailability will buy Edgars, after the latter filed for a business rescue plan in April after it failed to pay suppliers. This move will see Retailability add Edgars to its portfolio consisting of brands such as; Legit, Beaver Canoe and Style.

Retailability landed on Botswana shores 18 years ago with its flamboyant urban fashion Style which had 17 stores. Style, having almost the same target market as Edgars as it offers men’s and ladies’ contemporary and formal fashion, gave the 91 year old legendary clothing retailer a run for its money, and has won the battle as its parent company has taken over Edgars.

Retailability brands are synonymous with Botswana shopping centres and there are currently five (5) Beaver Canoe stores, 10 Style stores and seven (7) Legit stores across this country. The Beaver Canoe stores sell clothing apparel for men and boys only. The Legit stores have a fashion store format which focuses on the retailing of clothing, footwear, accessories, colour cosmetics and cellular products.

Retailability operates in over 460 stores across South Africa, Namibia, Botswana, Lesotho, and Eswatini. Many observers suggest that because of the deal with Retailability to swallow Edcon, most Edgars stores in Botswana will change their name and be branded Style. A sad tale for religious consumers of the Edgars trademark who got used to love their favourite brand for years.

According to CCA’s Merger Notice No 23 of 2020, Retailability is controlled by Clifford Raymond Lines (through a company which functions solely as a holding company of his interests in Retailability) and Metier Investment and Advisory Services Proprietary Limited (“Metier”). Metier is a private equity enterprise with investments in a number of industries spanning from healthcare, hospitality, FMCGs and telecommunications.

Retailability directors are mostly South Africans; Clifford Raymond Lines, Mark Richard Friday and Norman Victor Drieselmann. Only Nasreen Essack, who was appointed February this year, is a Motswana. He comes after Brian Thuto Tsima left on the same date. Retailability 100 percent owns Oclin Proprietary Limited, the company it is acquiring Edgars with, by a capacity of 3000 shares.

The target business, Edgars, offer textiles, cosmetics and cellular products. Edcon has a Motswana director, Charles Mzwandile Vikisi, a South African, Shane Van Niekerk and Zimbabwean Jethro Kamutsi.

“The Target Business comprises of two (2) Edgars franchise brands and private label stores across Botswana. These stores target middle to upper income customers and are home to a range of private label brands such as Free2BU, Charter Club and Stone Harbour, and a wide range of market label brands (such as Levi’s and Guess) for clothing, footwear and cosmetics.

In addition, the Target Business operates iconic Edgars Home and Edgars Beauty stores as store-in-store formats rounding out the department store offering in Botswana,” said CCA.
Foshini also lines up to take Jet Botswana from Edcon.

The Foschini Group (TFG) released a statement confirming its latest intentions to acquire Edcon assets or Jet for a cash purchase consideration of R480 million. This was after the business rescue practitioners offered TFG to buy Jet by that amount.

CCA is currently mulling on a proposed merger by TFG to take over Jet operations in Botswana. Merger Notice No 21 of 2020 from TFG came a few days before the Retailability proposal. In this merger TFG, acting through Foschini Botswana, want to take over “parts” of the Jet business conducted by Edcon through Jet Supermarkets Botswana.

TFG will be willing to add Jet to its portfolio of 30 retail brands that trade in clothing, footwear, jewellery, sportswear, homeware, cell phones, and technology products from value to upper market segments throughout more than 4085 outlets in 32 countries on five continents. TFG will also get Jet’s distribution centre located in Durban and certain stores in Botswana, Lesotho, Namibia and Eswatini. Also part of this fat deal is that the company is looking to also acquire JET Club and all existing JET stock of no less than R800 million.

Johannesburg listed TGF owns Foschini Retail Group which owns the local operations called Foschini Botswana, the acquiring enterprise according to CCA merger notice. “TFG is not controlled by any enterprise/s and for completeness, the three largest shareholders of TFG holding shares greater than 5% as at 27th March 2020 are: Government Employees Pension Fund (16.2%) Public Investment Corporation (13.2%); Old Mutual Limited (6.7%); and Investec Asset Management (6.3%). The remaining issued share capital in TFG is widely held,” said the merger notice.

Only Abdool Rahim Khan is a Motswana in the Foschini Botswana directorship, the rest; Ganeswari Shani Naidoo, Anthony Edward Thunström and Gustav Jansen (alternate director) are South Africans.

According to the CCA merger, the Jet Business is Edcon’s discount department store division, selling clothing, footwear, homeware and some cosmetics as well as cellular products and targets lower-to-middle income consumers throughout Botswana. The Jet Business does not directly or indirectly control any enterprises, says the notice. CCA seeks any stakeholder views for or against the proposed merger, which may be sent within 10 days from date of this publication to the following address.

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Business

BOCRA, associates to provide broadband internet in schools

27th October 2020

Botswana Communications Regulatory Authority BOCRA signed a memorandum of Agreement (MoA) with the Ministries of Transport and Communications (MTC), Basic Education (MoBE) as well as Local Government and Rural Development (MLGRD).

The MoA seeks to continue the collaboration that dates back to 2016 when the three parties first agreed to work together in a project aimed at computerizing and providing broadband Internet to primary schools in remote and underserved areas of Botswana.

The project benefitted 68 primary schools and 9 secondary schools through the construction of Local Area Network (LAN) in each primary school, provision of 5 Mbps dedicated broadband Internet to each Primary School and provision of Wi-Fi enabled tablets, laptops and related peripherals such as printers and copiers.

Further, the project will see the augmentation of computers in 9 Junior Secondary Schools with 30 laptops per identified school and employment of Information Technology (IT) officers at each primary school.

When speaking at the signing ceremony in Gaborone, Chief Executive of BOCRA and Chairperson of Universal Access and Service Fund (UASF) Board of Trustees Martin Mokgware said the project’s ultimate goal is to facilitate pupils in schools and host villages to be able to play a meaningful role in the digital economy.

Mokgware indicated that this necessitates upgrading of existing Telecommunications infrastructure to high capacity broadband that will support delivery of education, accessibility to the quality Internet and usage of ICTs.

The Fund began its inaugural programme by sponsoring the provision of WiFi hotspots in public areas around the country as its first project. Following the successful implementation of public WiFi hotspots, the Fund identified Kgalagadi, Ghanzi and Mabutsane areas for mobile network upgrades, schools computerization and internet provision.

Conscious that the project would not be possible without buy-in and support from MoBE, MTC and MLGRD, the Fund facilitated the signing of the first MoU between the three parties in 2016 for implementation of the project.

BOCRA Chief Executive said the signing of this agreement is aimed at benefitting the Kweneng District, adding that they have already assessed the area and have determined that they will be covering 62 underserved villages and 119 schools, 91 of which are primary schools.

“This is a project for which the partner Ministries need to re-commit for its success. Lessons from the previous schools’ computerization and internet connectivity project require that we increase our involvement and resources dedicated to the project for it to be successful. It is my belief as the project coordinator, that we will not do things the way we did them during the first project, for if we do, then we will not have learnt anything,” he said at the signing ceremony.

The purpose of learning is so that there can be continuous improvement to minimize the length of time and amount of resources utilized, he said expressing confidence that their partners will step up to the plate and ensure they play their part in the implementation of the project and that it will progress smoothly having already tread along a similar path.

UASF’s role lies mainly in funding and project management. According to Mokgware, once the project is completed, the work to integrate ICTs into the classroom begins in earnest. Therefore, he said, the project will not succeed without full cooperation and oversight of partners.

“MoBE will put in place the necessary content and ensure that the curriculum is available to all. MLGRD will provide, among others, the enabling environment by ensuring readiness of the school’s infrastructure and necessary security.”

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