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Controversial Pula Steel sale hit a snag again

The winners of the Pula Steel sale tender DH Machine Manufacturing will have to go back to the drawing board, now at the full mercy of creditors, after it emerged that it made a shortfall when paying the required payment of 10 percent deposit offer amount plus VAT and commission for the plant.

However, a hurried letter from Pula Steel liquidator John Hinchliffe to creditors this week seen by BusinessPost shows the liquidator admitting of an error which resulted from an “honest communication. One of the requirement of the tender was that the offeror (buyer) submit proof of payment of a 10 percent deposit on the offer amount plus VAT and commission into the bank of Pula Steel. According to tender documents, the proof of payment was required to be submitted simultaneously with the offer.

According to a letter from Hinchliffe who agreed with the auctioneer from South African WH Auctioneers to sell Pula Steel to DH for P26 million recently as the Vermas with their company Wealth Key Trading offered a lesser bid of  P17 million. Wealth Key did not submit proof of payment of the 10 percent deposit as it was required while DH did submit proof of payment. Hinchliffe also admitted in his letter that he was asked at the 4 August 2019 creditors meeting whether DH paid the full amount of the deposit and responded the company made the payment.

However it emerged that what Hinchliffe said was not true as the money was short of over P400 000 causing the sale to fail and go back to the drawing board with immediate effect.  “…it came to my attention that the deposit that was paid amounted to 10 percent of the capital sum. It did not include the additional 10 percent payable on the Vat and commission. The deposit received amounted to P2 140 121. There was the shortfall of P469 479 which was the 10 percent payable on the Vat and commission and a small exchange rate variation.

Hinchliffe told creditors in a letter leaked to BusinessPost that the error in payment occurred according to an “honest miscommunication.” The Pula Steel creditors explained that this error happen between him, WH Auctioneers which was facilitating the sale of the plant and DH which is the winner of the bid. Hinchliffe also DH made an 11 hour payment for the shortfall. The liquidator produced the bank statement reflecting the initial amount received from DH as well as the notification of payment of the shortfall both attached to the letter as proof.

According to observation, it further emerged that Pula Steel liquidator Hinchliffe and WH Auctioneers sat on a payment error for a period more than a month as payment for the shortfall was paid after five weeks. According to the bank statements seen by this publication, DH paid P2 140 120.71 to WH Auctioneers on 4 July 2019. This is the amount which had a shortfall. Last week Friday DH further made a payment of P469 479.26 to the Pula Steel account at First Rand bank account, according to bank statements seen by this publication.

In an interview with BusinessPost, Hinchliffe contradicted what this publication saw on the bank statements and said original payments were done on 24 July, not on 4 July until additional payment was done last week Friday, and the error was discovered after comments received from the unsuccessful offeror, Wealth Key. He said after DH rival launched a complaint they double checked the calculations and the wording of the offer requirements document and detected the error.

When asked if it would be fair for him to be asked of negligence for committing such an error, the Pula Steel liquidator reiterated what he wrote on his letter to creditors saying the error occurred due to an “honest mistake.” According to Hinchliffe, nothing will change on the sale of Pula Steel as creditors still stand by their vote for DH and reject the Vermas who still desperately covet the plant. “I must also point out that the majority of the creditors have opted to stand by their votes as passed at the meeting despite the error,” Hinchliffe told BusinessPost.

No cost or any delay will be felt in the process as all the creditors who voted in favor of DH to take over Pula Steel have confirmed that the recent error will not affect their voting, according to Hinchliffe. However the Pula Steel liquidator said there could be a possibility of significant cost and delays as a result of an urgent application from the Verma seeking to set aside the resolutions passed by the majority of the creditors and to stop the sale of assets.

Representing Wealth Key, Deepak Verma confirmed that he has lodged an urgent application with the high court to set aside the sale as it has flaws. He corrected that this was a private treaty not a tender and all conditions of the treaty were not met. Verma told this publication that he gave the liquidator a cash bank guarantee for full amount but was still rejected and DH got the nod. He accuses the Pula Steel liquidator of favoring DH and trying to bend the rules for the company by hook or crook.

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BITC assisted companies rake in P2.96 billion in export earnings

21st June 2022
BITC-CEO-Keletsositse-Olebile

Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.

In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.

The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.

With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.

Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.

BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.

During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.

BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.

As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.

In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.

BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.

Another tool used for export development by BITC is the Botswana Trade Portal, which has experienced some growth in terms of user acceptance and utilisation globally. The portal provides among others a catalogue of information on international, regional and bilateral trade agreements to which Botswana is a party, including the applicable Rules, Regulations and Requirements and the Opportunities for Botswana Businesses on a product by product basis.

The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.

BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.

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Inflation up 2.3 percent in May

21st June 2022
Inflation

Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.

According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).

With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.

In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.

Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.

The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.

The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.

The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.

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Global high inflation, slow growth bad news for Botswana

21st June 2022
World Bank President: David Malpass

In the latest June 2022 global economic prospects, released last week the World Bank has warned that low global economic growth and economic activity in global commodity markets such as China and Europe could negatively affect export revenues for Botswana and other Sub Saharan countries.

Recent data from Statistics Botswana show that Botswana’s exports destined to the global markets such as Asia and the European Union (EU) on monthly basis accounts for around 60.1 percent and 20.1 percent respectively.

The World Bank last week lowered its 2022 projections of global economic growth and indicated that the new forecasts could be bad news for countries like Botswana who are dependent on export mineral revenues. The Bank noted that just over two years after COVID-19 caused the deepest global recession since World War II, the world economy is again in danger and stated that this time it is facing high inflation and slow growth at the same time.

In the recent June projections, the bank lowered its forecast of global economic growth from the January 4.1 percent to 2.1 percent. “Our June forecasts reflect a sizable downgrade to the outlook: global growth is expected to slow sharply from 5.7 percent in 2021 to 2.9 percent this year. This also reflects a nearly one-third cut to our January 2022 forecast for this year of 4.1 percent,” a team of World Bank economists noted in the June 2022 Global Economic Prospects.

The World Bank indicated that exports from Botswana and other Sub Saharan countries could suffer from a substantial deceleration of activity in China and Europe. The Bank noted that exporters of industrial metals, crude oil, and ores such as Angola, Democratic Republic of Congo, Republic of Congo, South Africa, and Zambia could suffer from a substantial deceleration of activity in China.

On the other hand a sharp contraction of growth in the euro area could hurt exporters of agricultural products such as beef, coffee, tea, tobacco, cotton, and textiles from Botswana, Ethiopia, Madagascar and Malawi. “The faster-than-expected deceleration of the global economy and increased volatility of commodity prices could hurt many SSA commodity exporters,” said World Bank President David Malpass.

Malpass indicated that subdued growth in the global markets for Botswana and other Sub Saharan exports will likely persist throughout the decade because of weak investment in most of the world.

He noted that with inflation now running at multi-decade highs in many countries and supply expected to grow slowly, inflation could remain higher for longer than currently anticipated. “Even if a global recession is averted, the pain of stagflation could persist for several years— unless major supply increases are set in motion. Amid the war in Ukraine, surging inflation, and rising interest rates, global economic growth is expected to slump in 2022. Several years of above-average inflation and below-average growth are now likely,” said Malpass.

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