Botswana to catch cold from SA struggling economy
Business
South Africa, one of Africa’s biggest economies and most advanced is projected to go into significant slowdown in the coming year 2020, this is because of a weak economic growth, deteriorating debt situation and other setbacks for state-owned enterprises currently besieging the over 50 million population country.
Leading global economic think tanks, the International Monetary Fund (IMF) and S&P Global Ratings, have called on South Africa to enact urgent economic reforms. A report issued by the IMF released on Monday following a recent research mission predicted that on current policies, the medium-term growth outlook would remain subdued, accompanied by muted inflationary pressures. According to the IMF, economic growth is set to remain below population growth for the sixth consecutive year in 2020.
In their 2020 Outlook for Emerging market also released this week US rating agency Moody’s revealed that South Africa‘s persisting high unemployment, income inequality and the social and political challenges are proving to be strong obstacles to the government’s plans to raise potential growth. This week at the African Securities and Exchange Association Conference hosted by Botswana Stock Exchange (BSE) in Kasane, First National Bank Botswana (FNBB) Chief Economist, Moathodi Sebabole said the subdued economic growth in South Africa will affect Botswana negatively.
The leading Botswana Economist noted that South Africa is third largest in terms of buying power in the region trailing behind Nigeria and Egypt. When South African economy shakes, households in Botswana feel the imapct, this is because the former is the latter’s biggest trading partner. The trade is a one way street as over 80 percent of Botswana‘s imports and in particular domestic commodities and food supplies are from South Africa.
Between 2014 and 2018, South Africa and Botswana traded R291.9 billion (about P212.2 billion) with Botswana receiving R 263.8 billion (P191.8 billion) worth of goods and services from South Africa, whilst South Africa received only R 28.2 billion (P20.5 billion) worth of goods and services from Botswana. At the South Africa-Botswana Business Forum during the 2019 Global Expo it emerged that between 2014 and 2018 South Africa enjoyed a trade surplus of R 235.7 billion. However, trade between the two countries has been muted, growing at a compound annual growth rate of 1.1 per annum since 2014.
Sebabole observed that the forecasted slow economic growth in South Africa could constrain private investment and household consumption further depressing the country’s ability to produce goods. Potential negative spillovers into Botswana include higher inflation, lower exports and decline in SACU revenue, although the risks are considered to be moderate in the overall depending on growth waves.
Botswana’s trade composition with Africa is relatively concentrated in a few products for exports and diversified for imports. In 2017, intra-Africa exports and imports were valued at about US$757 million and US$3.9 billion, respectively. Intra-Africa exports account for 13% of Botswana’s global exports while intra-Africa imports account for 73% of Botswana’s global imports.
The bulk of exports (90%) were destined to SACU with South Africa accounting for 71% and Namibia 19% of total exports. Other exports were destined to SADC with Zimbabwe Zambia and Malawi as top destinations. Top 10 export destinations accounted for 97% of Botswana’s total intra-Africa exports. In terms of import sources, again SACU members dominated as suppliers with South Africa accounting for 88% share and Namibia another 9% share of total intra-Africa imports. SADC members Mozambique; Zambia and Zimbabwe also feature as top suppliers of Botswana albeit at low base.
Botswana's trade deficit rose to BWP 1,370.8 million in August 2019 from BWP 1,223.5 million in the corresponding month of the previous year. Exports fell 4.2 percent to BWP 3,700.4 million, mainly dragged down by shipments of meat & meat products which declined 48.6 percent , machinery & electrical equipment lowered by 15.4 percent while the main export commodity diamonds reduced by 0.8 percent.
Main export partners were the United Arab Emirates accounting for 25.3 percent of total overseas sales, India coming second at 19.7 percent , Belgium third at 12.6 percent and South Africa just behind at 2.4 percent. This according to Moathodi Sebabole clearly indicates how South Africa is an important trading partner to Botswana
Meanwhile, imports decreased only 0.3 percent to BWP 5,071.2 million, as lower purchases of diamonds -9.3 percent and fuels -9 percent were partly offset by rises in those of food, beverages & tobacco at 19.1 percent; machinery & electrical equipment at 0.4 percent and chemicals and rubber products 8.5 percent.
In the imports fronts South Africa came first at 67.4 percent of total acquisitions, Namibia came second at 10.5 percent and Canada (3.7 percent). Balance of Trade in Botswana averaged -123.06 BWP Million from 2005 until 2019, reaching an all time high of 4102.21 BWP Million in March of 2007 and a record low of -6683 BWP Million in July of 2012.
Business
CA SALES revenues rose to R9.5 billion
The Botswana and Johannesburg Stock Exchange listed distributor of fast-moving consumer goods
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Business
Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Business
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.