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Transport sector performs below par in Q1 2019

Statistics Botswana’s transport and infrastructure brief indicates that the sector performed extremely poorer in the first quarter of 2019. The sector consists of air, water and railway transport as well as motor vehicle registrations.

A total of 14,795 aircraft movements were recorded for Q1 2019, which was a 24.3 percent decrease compared to Q4 2018. The bulk of aircraft movements were domestic, which constituted 70.9 percent of the total aircraft movements while international aircraft movements accounted for the remaining 29.1 percent. In comparison to the same quarter of the previous year, Q1 2018, total aircraft movements decreased by 5.7 percent, international movements increased by 6.3 percent while domestic movements decreased by 9.9 percent.

Air transport gives the movement of aircrafts and air passengers both locally and internationally. The movements are categorised into scheduled, non-scheduled and private movements. Scheduled aircrafts refers to commercial airlines operating on a time table while non-scheduled aircrafts refers to commercial aircrafts which do not have to operate using a time table but operate as and when needed. Private movements refers to non-commercial individual aircrafts.


In Q1 2019 most aircraft movements were non-scheduled movements, they accounted for 67.7% percent of total movements. Scheduled and private movements accounted for 28.3 percent and 3.9 percent of total aircraft movements recorded respectively. In comparison to the previous quarter, Q4 2018, all the types of movements recorded a decrease. Non-scheduled movements registered a decrease of 30 percent. Scheduled and private movements decreased by 6.4 and 32. 1% respectively. Compared to the same quarter of the previous year, only scheduled movements registered an increase of 7.6% while private and non-scheduled movements decreased by 10.4 and 5,1% respectively.

In Q1 2019, non-scheduled arrivals and departures accounted for 34 and 33.9% respectively to total aircraft movements. Scheduled movements both arrivals and departures constituted the largest proportion in international aircraft movements while non-scheduled movements dominated in domestic aircraft movements. Scheduled flights made up 74.2 percent of total aircraft movements while non-scheduled flights accounted for 87 percent of total domestic aircraft movements.

Most of aircraft movements were recorded in Maun, with 57.2% of total aircraft movements, Sir Seretse Khama International Airport accounted for 27% of total aircraft movements making it the second highest aircraft movements. Ghanzi and Selibe-Phikwe airports received the least number of aircraft movements constituting only 0.1% each. The month of March registered most aircraft movements, with 40% of the total. January and February accounted for 31.4% and 29% of total aircraft movements respectively.

During the quarter under review, most of the international movements were recorded at Sir Seretse Khama International Airport with 70% of total international aircraft movements. Maun airport handled mostly domestic movements, accounting for 74% of the domestic movements. Compared to the previous quarter, Q4 2018, in international movements, only two airports namely Ghanzi and Selibe-Phikwe registered an increase, while the other airports recorded a decrease. In domestic movements, all airports recorded a decrease, with the most notable decline at Selibe-Phikwe airport (57%). This may be due to the fact that Selibe-Phikwe and Ghanzi airports only deal with private aircrafts.

During the quarter under review, 179,843 air passenger movements were recorded. This was a decrease of 20% compared to those recorded in the previous quarter. Compared to the same quarter of the previous year, Q1 2018, Q1 2019 recorded an increase of 6% in air passenger movements. International movements contributed 60% to total passenger movements and the remaining 40% were domestic movements.

Scheduled passenger flights accounted for 81% of total air passenger movements while non-scheduled and private passenger flights contributed 18.1% and 1% respectively. When compared to the previous quarter, Q4 2018, all the three types of flights recorded a decrease; private passenger flights recorded a decrease of 26 percent, while scheduled and non-scheduled flight movements decreased by 15% and 40% respectively.

Motor vehicle registration deals with licensing of vehicle with respect to those registered for the first time and renewal pf pre-existing ones. A total of 13 thousand vehicles were registered for the first time in Q1 2019. This was a decrease of 11.7% compared to the previous quarter, Q4 2018. Most of the vehicles registered for the first time were passenger cars accounting for 74.5%, followed by vans with 10%. Motor cycles were registered the least number of first registrations with 0.4%. Compared to the same quarter of the previous year, Q1 2018, vehicles registered for the first time increased by 6%.

Most of the first registrations done in Q1 2019 were used vehicles constituting 80% of total first registrations. Brand new and rebuilt vehicles accounted for 20% and 0.1% respectively. The highest number of firstly registered vehicles were imported from Japan with 72% of the total first registrations. Out of these, 99.5% were used vehicles and only 0.5% were new. South Africa followed with 19.5 percent of total imported vehicles with 84 percent of those vehicles being new.

Singapore was the third in line of those countries from which Botswana imports vehicles, it accounted for 3% of total first registrations. Most of the new vehicles were imported from South Africa which accounted for 84% of total brand new vehicles. Vehicles bought in Botswana followed with 7%. Brand new vehicles from Japan and Korea accounted for 1.9% each. Rebuilt vehicles originated from only three countries; Botswana at 72 percent, Japan 18 percent and United Kingdom at 9%.

In Q1 2019, Gaborone accounted for a high number of first registrations with 67% of total first registrations, Francistown followed with 9.2% of total vehicles registered for the first time. Lobatse recorded 5 percent, Ramotswa 4.0% while Molepolole and Maun registered 3.6 and 2.8% respectively. Most of the registration stations recorded a decrease in vehicles registered for the first time in Q1 2019 compared to Q4 201. Vehicles registered for the first time in Gaborone went down by 8.7%, Francistown registered a 12% decrease. The most notable decrease was in Bobonong with 83%. Other registration stations with high decreases were Tsabong with 65%, Kang 57% and Gumare with 50%

Toyota proved to be the most popular motor vehicle make, registering 40% of total first registrations.it was followed by Honda with 13%, VW was the third favourite make registering 9% of total first registrations. Mazda and Nissan registered 7.7 and 6.7% of total first registrations respectively. Massey Ferguson was the favourite make for tractors. It constituted 59% of the total registered tractors. Home-made vehicles contributed 31% of the total registered trailers.

Compared to the previous quarter Q4 2018, Q1 2019 showed a decline in most makes of vehicles. Toyota recorded a 13% decrease in first registrations while Madza and VW declined by 30 and 9% respectively. Nissan declined by 4% in Q1 2019 compared to vehicles registered in Q4 2018. In Q1 2019 most of the registrations were done in the month of March which accounted for 37% of total first registrations. The months of January and February constituted 31 and 32% respectively. Compared to the same months of the previous year, Q1 2018, January increased by 11%, while February and March registrations increased by 7.7 and 1.2% respectively.

A total of 306 thousand net tonnes were transported using rail in Q1 2019 which was a 16.1 percent decrease from goods transported in Q4 2018. Goods transported by rail in Q1 2019 decreased in most categories compared to Q4 2018. Total imports decreased by 24% and total exports decreased by 17%. Local traffic went down by 2.2% while Botswana total declined by 18%. An increase was realized in transit traffic which went up by 94% percent. Transit traffic is not marketed, so it is up to people who transport goods to other countries if they want to use Botswana rail or not, that is why transit traffic is not consistent. Compared to the same quarter at the previous years, goods transported by rail in Q1 2018 decreased by 27%.

Total revenue of P62.6 Million was generated in Q1 2019, showing an increase of 13.4% from what was generated in the previous quarter, Q4 2018. Compared to the same quarter of the previous year, Q1 2019 registered a decline of 27.3% in revenue generated. Most of the revenue generated in Q1 2019 came from Botswana total which accounted for 96.3% of total revenue. Revenue generated from Botswana Origin goods made up to 61.4% of total revenue while revenue from Total Exports and total imports constituted 45% and 35% of total revenue respectively.

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Diamond industry crises not over yet – De Beers Chief

13th January 2021
De Beers Group Chief Executive Officer: Bruce Cleaver

Following a devastating first half of the year 2020 due to COVID-19, the global diamond industry  started gaining  positive momentum towards the end of the year as key markets entered into  thanks giving and holiday season.

However Bruce Cleaver, Chief Executive Officer of De Beers Group cautioned that the industry is not out of the woods yet, citing prevailing challenges ahead into 2021.

The first half of 2020 was characterized by some of the worst challenges in history of global diamond trade.

The midstream, where rough diamonds are traded in wholesale and bulk to cutters and polishers, was for the most part of second quarter 2020, suffocated by international travel restrictions as countries responded to the contagious Corona Virus.

This halted movement of buyers and shipment of  the rough goods , resulting  in unprecedented decline of sales, in turn  ballooning stockpiles as the upstream  operations produced with little uptake by the midstream.

The situation was exacerbated by muted demand in the downstream where jewelry industries and tail end retailers closed to further curb the spread of COVID-19.

However towards the end of third quarter getting into the last quarter of the year, demand in both midstream and downstream started to steadily pick up as countries relaxed COVID-19 restrictions.

De Beers, the world’s largest diamond producer by value started reporting significant recovery in sales in the sixth and seventh cycle, figures began to reflect an upswing in sentiment as well as increase in uptake of rough goods by midstream.

Sales for the sixth cycle amounted to $116 Million, following a sharp downturn in the previous cycles, significant jump was realized during the seventh cycle, registering $320 million, an over 175 % upswing when gauged against the proceeding cycle.

De Beers noted that diamond markets showed some continued improvement throughout August and into September as Covid-19 restrictions continued to ease in various locations.

“Manufacturers focused on meeting retail demand for polished diamonds, particularly in certain product areas, accordingly, we saw a recovery in rough diamond demand in the seventh sales cycle of the year, reflecting these retail trends, following several months of minimal manufacturing activity and disrupted demand patterns in all major markets,” said De Beers Chief Executive, Bruce Cleaver in September last year.

The diamond mining behemoth continued to register impressive sales in the eighth and ninth cycle signaling the industry could end the year on a positive note.

The momentum was indeed carried into the last cycle of the year. The value of rough diamond sales (Global Sightholder Sales and Auctions) for De Beers’ tenth sales cycle of 2020 amounted to $440 million, a significant increase from the 2019 tenth sales cycle value.

Against what seemed like a positive year end that would split into the New Year Bruce Cleaver, CEO, De Beers Group, however warned the industry not to count eggs before they hatch.

“Positive consumer demand for diamond jewellery resulting from the holiday season is supporting the continuation of retail orders for polished diamonds from the diamond industry’s midstream sector. This in turn supported steady demand for De Beers’s rough diamonds at our final sales cycle of 2020,” Cleaver had said in December.

In caution the De Beers Chief noted that “While the diamond industry ends the year on a positive note, we must recognise the risks that the ongoing Covid-19 pandemic presents to sector recovery both for the rest of this year and as we head into 2021.”

All segments of the supply chain were severely impacted by the global lockdown measures introduced in response to the Covid-19 pandemic in the first half of 2020.

After a strong US holiday season at the end of 2019, the rough diamond industry started 2020 positively as the midstream restocked and sentiment improved.

However, from February 2020, the Covid-19 outbreak began to have a significant impact on diamond jewellery retail sales and supply chain, with many jewelers suspending all polished purchases and/or delaying payments to their suppliers.

Rough diamond sales were materially affected by lockdowns and travel restrictions, delaying the shipping of rough diamonds into cutting and trading centers and preventing buyers from attending sales events.

These resulted in significant decline in total revenue for the business in the first six months of 2020. Total revenue decreased by 54% to $1.2 billion from $2.6 billion registered in the prior half year period ended 30 June 2019.

For the entire first six (6) months of the year 2020 De Beers Rough diamonds sales fell drastically to $1.0 billion from $2.3 billion in the prior H1 period ended 30 June 2019. Sales volumes decreased by 45% to 8.5 million carats compared to 15.5 million carats registered in the prior period.

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Gov’t coffers depleting to record low levels 

13th January 2021
Dr Matsheka

Next month Minister of Finance & Economic Development, Dr Thapelo Matsheka will face the nation to deliver Botswana‘s first budget speech since COVID-19 pandemic put the world on devastating economic trajectory.

The pandemic that broke out in late 2019 in China has put the entire world on unprecedented chaos ,killing over P1 million people across the globe , shattering economies and almost rendering  the year 2020 – a 12 months stretch of complete setback.

The 2021/22 budget speech will come at time when Botswana’s economy is still trying to emerge out of this.

National lockdowns and local travel restrictions have hit small medium enterprises hard, while international travel restrictions halted movement of both good and people, delivering by far some of the heaviest and worst catastrophic blows on the diamond industry and tourism sector, the likes of which this country has never seen before on its largest economic sectors.

As Minister Matsheka faces parliament next month, the reality on the ground is that Botswana’s national current cash resource, the Government Investment Account (GIA) is depleting at lightning speed.

On the other hand the COVID-19 economic mess is  prevailing,  the virus is reported to have taken a new dangerous shape of a deadly variant, spreading like fueled veld fire and causing some of the world’s super powers back to tough restrictions of lockdown.

According official figures released by Bank of Botswana, in October 2020 the GIA was running at P6 billion compared to the P18.3 billion held in the account in October 2019.

However reports indicate that the account could be currently holding just about P3 billion.  The draw down from the GIA has been by exacerbated by declining diamond revenue, the country‘s largest cash cow. The sector was experiencing significant revenue decline even before COVID-19 struck.

 

When the National Development Plan (NDP) 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at a budget deficits.

This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively, since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances.

Taking into account the COVID-19 economic mess in 2020/21 financial year, the budget deficit could add up to P20 billion after revised figures.

Drawing down from government cash balances to finance these budget deficits meant significant withdrawals from the Government Investment Account, hence the near depletion of this buffer.

Meanwhile  should Botswana’s revenue streams completely dry up to zero levels; the country would only have 11 months, before calling out for humanitarian  aids and international donors, because  foreign reserves are also on slow down.

During 2019, the foreign exchange reserves declined by 8.7 percent, from Seventy One Billion, Four Hundred Million Pula (P71.4 billion) in December 2018 to Sixty Five Billion, Three Hundred Million Pula (P65.3 billion) in December 2019.

The reserves declined further in 2020, falling by 2.3 percent to Sixty Three Billion, Seven Hundred Million Pula (P63.7 billion) in July 2020.  This was revealed by President Masisi during State of the Nation Address in November last year.

The decrease was mainly due to foreign exchange outflows associated with Government obligations and economy-wide import requirements.

However latest statistics(October 2020)  from Bank of Botswana reveal that Botswana’s foreign reserves are estimated at P58.4 billion, with  government’s share of these funds significantly low.

Government has since introduced several measures to contain costs and control expenditure with the most recent intervention being the halting of recruitment in government departments and parastatals.

Furthermore, Value Added Tax has been signaled to go up  from 12% to 14% in April this year with more hikes and service fees anticipated as government embarks on unprecedented domestic revenue mobilization.

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Cresta signs lease agreement for Phakalane golf estate hotel. continues with growth agenda despite covid-19 impact

13th January 2021

Botswana Stock Exchange listed hotel group Cresta Marakanelo Limited (“CML” or “the Company”) announced the signing of a lease agreement for Phakalane Golf Estate Hotel & Convention Centre, which will see CML extend its footprint by adding the 4 star Gaborone property to its already impressive portfolio.  The agreement is subject to regulatory approvals therefore the effective date of the transaction is expected to be 1 February 2021.

 

CML brings a wealth of expertise to the lease and despite the difficult year for the tourism and hospitality industry, due to the impact of the COVID-19 pandemic, CML remains confident in the recovery of the sector and the need to invest in expanding the Company’s footprint.

CML Managing Director, Mr Mokwena Morulane commented: “Our continued efforts to improve our offerings, understand the market dynamics and modern day trends in the face of global challenges, means we are ready for the changing face of tourism and international travel, and this addition to the Cresta portfolio signals our confidence in the future.  

 

“Despite the headwinds faced in 2020, Management has continued to focus on projects that enhance CML’s product offering such as the refurbishments at Cresta Mowana Safari Resort & Spa in the tourism capital Kasane and the ongoing refurbishment of Cresta Marang Residency in Francistown. The signing of the lease for the 4 star Phakalane Golf Estate Hotel & Conference Centre is a great addition to the Cresta portfolio and will unlock shareholder value in the future.

 

“We remain vigilant to value-enhancing opportunities including acquisitions or leases, after having reconsidered our pipeline against current and expected market conditions.”  

 

Commenting on the lease agreement, the Chief Executive Officer, Mr S Parthiban, speaking on behalf of Phakalane  noted; “No hotel chain holds as much expertise in the region, understands our local culture and tastes and what hospitality is about better than Cresta Marakanelo Limited. We believe that the renovations done to the property has made Phakalane Hotel and Convention Centre a unique product in Botswana and at par with international facilities.  We believe that this lease will benefit not only us as Phakalane , but the market in general as Cresta has run hotels successfully in Botswana for over 30 years and is therefore expected to bring new offerings that appeal to the local and international markets as well as the residents and visitors to the Golf Estate. We look forward to a long mutually beneficial relationship with Cresta.” 

 

CML like the rest of the tourism and hospitality industry and the entire value chain was hard hit by lockdowns  with the surge of COVID-19. By investing during the low period, the company hopes to realise the future value of spending time in preparing for the new consumer dynamics and behaviour.  Despite business interruptions as a result of a six-month long state of emergency and several lock-down periods declared by the Government of Botswana to limit the spread of COVID-19, the Company is starting to record an increase in occupancies, which bodes well for the recovery of the industry and the Company’s future prospects.

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