Botswana Stock Exchange Limited this week released their Market performance report for the six month period from 1st January to 30th June 2019. One of the major highlights from the Thapelo Tsheole led Exchange Market is the low figures recorded on the equity Market front.
The performance analysis in this space indicates that turnover was comparatively low with respect to trading activity and liquidity. As at 30 June 2019, the BSE has recorded a turnover of P866.9 Million from a volume of 257.4 Million shares traded. During the same period in 2018, the BSE had registered a turnover of P1, 084.7 Million and a total volume of 411.6 Million shares traded.
During this period, the top 3 traded companies in terms of value, on a year to-date basis were the currently delisting Safaris outfit Wilderness Holdings at P282.3 Million, Botswana Insurance Holdings Limited (BIHL) at P120.6 Million while local brewer Sechaba Holdings came in at P114.9 Million. In 2018 Half year 1, three companies accounted for 74.1%. For half year 2019 the three top companies combined turnover closed the six month at only 59.7% mirroring an improved contribution to turnover by companies in 2019 relative to 2018.
Of the poorly performed companies during the period under review, Standard Chartered Bank Botswana share price decreased by 50.0% followed by Tlou Energy and SeedCo which declined by 48.7% and 45.5% respectively. FNBB share price gained the most during the period, increasing by 12.2% followed by Letlole and Sechaba share prices which increased by 5.1% and 2.8% respectively. Of the 35 companies listed including the Serala OTC registered BBS Limited on the Exchange, 6 experienced a share price increase, 19 registered a share price decline and share prices of 10 companies ended the period flat.
Trading of local companies listed on Botswana Stock Exchange comparatively improved during the first half of 2019. This is depicted by Domestic Company Index (DCI) figure of 2.9 % depreciation compared to a steeper decline of 5.2% during the same period in 2018. According to Stock Market performance report on the Foreign Company Index (FCI) front figures depreciated by 0.4% on a year to date basis in 2019 compared to a decline of 0.2% over the same period in 2018. As at 30th June 2019, the DCI Total Return Index (DCTRI) had depreciated by 0.2%
When gauging companies on Investor contribution to equity market, figures indicates that during the first half of 2019, local companies contributed 58.7% to total turnover compared to 60.1% in the corresponding period in 2018. Furthermore local individuals contributed 4.7% of total turnover recorded during the period 1 January to 30 June 2019 in comparison to 3.5% in the corresponding period in 2018.
Trading in Exchange Traded Funds (ETF) was relatively low in the first half of 2019 compared to the same period in 2018. The value of units traded decreased in the year to date period to P62.0 Million compared to P186.9 Million in the corresponding period in 2018, whereas the number of units traded decreased from 2.0 Million units in 2018 and 0.58 Million units in 2019. “From a return perspective, the ETFs performed well in comparison to the equities.” Reads the report.
The NewGold, NewPlat and NewFunds ETFs gained 10.6%, 4.5% and 7.7% respectively.The Bond market experienced a slowdown in trading activity compared to the same period in 2018. BSE says the value of bonds traded during the year-to-date period was P523.8 Million compared to P755.7 Million traded during the same period in 2018.
At its first bond auction of 2019 on 1 March 2019, Bank of Botswana (BoB) offered additional tranches of BW013 allotting additional P137 Million, while BW014 was reopened and additional P335.0 Million allotted. The Treasury Bill was allotted an additional P350 Million. At its second auction of the year conducted on 31 May 2019, BW007 ,BW014 , BW015 were reopened and allotted additional P150 Million ,P227 Million ,P100 Million respectively In addition, a Treasury Bill was reopened and issued with an additional P300.0 Million.
During this first 6 months period of 2019 Botswana Stock Exchange registered two bond listings in being the RDCP001 at P47.35 Million, and CGL001 at P128.51 Million. On the back of this Government bonds’ re-openings and new corporate issuances, the market capitalization of listed bonds increased to P15.8 Billion compared to P14.6 Billion as at the same period in 2018.
When gauging against other strategic benchmark market BSE reports that its selected exchanges the Johannesburg Stock Exchange All Share Index and the MSCI Emerging Market Index realized positive returns during the first half of 2019, appreciating by 12.2% and 9.6% respectively. On the other hand, the SEMDEX and the DCI depreciated by 4.1% and 2.9% on a year-to-date basis respectively.
The partnership between Debswana and Botswana Oil Limited (BOL) which was announced a fortnight ago will create under 100 direct jobs, and scores of job opportunities for citizens in the value chain activities.
In a major milestone, Debswana and BOL jointly announced that the fuel supply to Debswana, which was in the past serviced by foreign companies, will now be reserved for citizen companies. The total value of the project is P8 billion, spanning a period of five years.
“About 88 direct jobs will be created through the partnership. These include some jobs which will be transferred from the current supplier to the new partnership,” Matida Mmipi, Head of Stakeholder Relations at Botswana Oil, told BusinessPost.
“We believe this partnership will become a blueprint for other citizen initiatives, even in other sectors of the economy. Furthermore, this partnership has succeeded in unlocking opportunities that never existed for ordinary citizens who aspire to grow and do business with big companies like Debswana.”
Mmipi said through this partnership, BOL and Debswana intend to impact citizen owned companies in the fuel supply value chain that include transportation, supply, facilities maintenance, engineering, customs clearance, trucks stops and its support activities such as workshop / maintenance, tyre services, truck wash bays among others.
“The number of companies to be on-boarded will be determined by the economics at the time of engagement,” she said. BOL will play a facilitatory role of handholding and assisting emerging citizen-owned fuel supply and fuel transportation companies to supply Debswana’s Jwaneng and Orapa Letlhakane Damtshaa (OLDM) mines with diesel and petrol for their operations.
“BOL expects to increase citizen companies’ market share in the fuel supply and transportation industries, which have over the years been dominated by foreign-owned suppliers. Consequently, the agreement will also ensure security of supply for Debswana operations, which are a mainstay of the Botswana economy,” Mmipi said.
“Furthermore, BOL will, under this agreement, transfer skills to citizen suppliers and transporters during the contract period and ensure delivery of competent and skilled citizen suppliers and transport companies upon completion of the agreement.”
Mmipi said the capacitating by BOL is limited to providing citizen companies oil industry technical capability and capacity to deliver on the requirements of the contract, when asked on helping citizen companies to access funding.
“BOL’s mandate does not include financing citizen empowerment initiatives. Securing funding will remain the responsibility of the beneficiaries. This could be through government financing entities including CEDA or through commercial banks. Further to this, there are financial institutions that have already signed up to support the Debswana Citizen Economic Empowerment Programme (CEEP),” Mmipi indicated.
While BOL is established by government as company limited by guarantee, it will not benefit financially from the partnership with Debswana, as citizen empowerment in the petroleum value chain is core to BOL’s mandate.
“BOL does not pursue citizen facilitation for financial benefit, but rather we engage in citizen facilitation as a social aspect of our mandate. Citizen facilitation comes at a cost, but it is the right thing to do for the country to develop the oil and gas industry,” she said.
Mmipi said supplying fuel to Debswana comes with commercial benefits such as supply margins. These have traditionally been made outside the country when supply was done by multi-nationals for a period spanning over 50 years. With BOL anchoring supply for Debswana, this benefit will accrue locally, and BOL will be able to pay taxes and dividends to the shareholders in Botswana.
PwC Africa has presented the eighth edition of the VAT in Africa Guide – Africa re-emerging. This backdrop of renewal informs on the re-emergence of African economies and societies which have been affected by the COVID-19 pandemic.
In this edition, which has been compiled by PwC Africa’s indirect tax experts, covers a total of 41 African countries. It is geared towards sharing insight with our clients based on the constantly changing tax environments that can have a significant impact on business operations.
Within Africa, governments continue to focus on expanding the tax net by improving revenue collection through efficient compliance systems and procedures. PwC Africa has observed that revenue authorities also continue to take a keen interest in indirect taxes as part of revenue mobilisation initiatives.
Maturing VAT system and upskilling SARS
“In South Africa, VAT is becoming more relevant as a revenue source for the government,” says Matthew Besanko, PwC South Africa’s Indirect Tax Leader. “Strides have been made to upskill South African Revenue Service (SARS) staff and identify VAT revenue leakages, particularly in respect of foreign suppliers of electronic services to people and businesses in South Africa.”
Broadening the tax base and digital economy
In the past year, South Africa, Mozambique and Zimbabwe saw updates to their VAT legislation, or introduced specific legislation targeting electronically supplied services (ESS), which is in line with the global trend of attempting to tax the digital economy. “The expectation is that Botswana will also introduce VAT legislation in due course, while the National Treasury in South Africa has also made mention of revising the rules to account for further developments in the digital economy,” Besanko says.
South Africa’s National Treasury has also drafted legislation with the intention to introduce a reverse charge on gold, which is expected to come into effect later in 2022. While in Zimbabwe, revenue authorities have introduced a tax on the export of raw medicinal cannabis ranging between 10% and 20%, which came into effect on 1 January 2021.
ESG and carbon tax
Key strides have also been made within the Environmental, Social and Governance (ESG) space. “ESG leadership, strategising and reporting is essential now for organisations that wish to flourish and remain relevant,” Kabochi says. He adds that companies need to consider how ESG and tax intersect, since tax is a significant value driver when businesses need to deliver on their ESG goals.
In South Africa, a carbon tax regime, which is being implemented in three phases, has been adopted. The second phase was scheduled to start in January 2023, however phase one was extended by three years until 31 December 2025.
Until then, taxpayers will enjoy substantial tax-free allowances which reduce their carbon tax liability. At the beginning of 2022, the South African government increased the carbon tax rate to R144 (about US$9), which is expected to increase annually to enable South Africa to uphold its COP26 commitments.
With effect from 1 January 2023, carbon tax payers in South Africa will also be required to submit carbon budgets and adhere to the provisions of the carbon budgeting system which will be governed by the Climate Change Bill. Where set carbon budgets are exceeded, the government plans to impose penalties. “At PwC, we are continuously focused on our renewed global strategy, ” The New Equation,” Kabochi says. “Through this strategy, a key focus area for PwC Africa is to support clients in adding value to their ESG ambitions and building trust through sustained outcomes.”
The New Equation is also an acknowledgement of the fundamental changes in the business environment in which PwC’s clients and other stakeholders operate. PwC continues to reinvent and adapt to these changes as a community of problem solvers, combining knowledge and human-led technology to deliver quality services and value.
Local and international economists have lowered their projections on Botswana’s economic growth for 2022 and 2023, saying the country is highly likely to fail to maintain high growth rate recorded in 2021 hence will not reach initial forecasts.
Economists this week lowered 2022 forecasts for Botswana’s economic growth rate, from the initial 5.3% to 4.8% and added that in 2023 growth could further decline to 4.0%. The lower projections come on the backdrop of an annual economic growth that recovered sharply in 2021 with figures showing that year-on-year real Gross Domestic Product (GDP) growth increased to 11.4%, up from a contraction of 8.7% in 2020.
Economists from the local research entity, E-consult, this week stated that the 2021 double digit growth that exceeded projections made at the time of the 2022 budget may be short lived due to other developments taking place in the global economy. E-consult Economist Sethunya Kegakgametse stated that the war in Ukraine has worsened supply problems in the global economy and added that before the war, macroeconomic indicators were seen as improving and returning to pre-COVID levels.
According to the economist the global economy was projected to improve in 2022 and 2023. Recent figures show that global growth projections have been revised downwards from the initial forecast of 4.9% in 2022 with the World Bank’s new estimate for global growth in 2022 at 3.2%.
The statistics also shows that International Monetary Fund revised their growth projections for 2022 and 2023 down by 0.8% and 0.2% respectively, falling to 3.6% for both years. “The outbreak of war has severely dampened the global recovery that was under way following the COVID-19 pandemic,” said the economist.
She stated that despite Botswana being geographically removed from the conflict, the country has not and will not be exempt from the disruptions in the global economy. “The disruptions to global supply chains resulting from the war will have a negative effect on both Botswana’s growth and trade activities.
The economic sanctions against diamonds from Russia will add uncertainty to the market which will have knock on effects to Botswana’s growth, exports, and government revenues,” said the economists who added that the disruptions are driving prices up and result with very high inflation in the local economy.
Kegakgametse projected that in an attempt to limit inflation Bank of Botswana will be forced to raise interest rate “Should the sharp increase in both global and local inflation persist, Bank of Botswana much like other central banks around the world will be forced to raise interest rates in a bid to control rising prices. This would mean an end to the expansionary monetary policy stance that had been adopted post COVID-19 to aid economic growth,” she said.
In the latest projections, the UK based economic research entity Fitch Solutions lowered 2022 real GDP growth forecast for Botswana from 5.3% to 4.8% “In 2023, we see economic growth rate decelerating to 4.0%,” said Fitch Solutions economists who also noted that the 2022 and 2023 economic growth projections may come out lower than the current forecasts, as it is possible that new vaccine-resistant virus variants may be identified, which could result in the re-implementation of restrictions. “In such circumstances, we cannot rule out that Botswana’s economy may post weaker growth than our baseline scenario currently assumes,” said the economists.
According to the projections, Fitch Solution stated that there is limited scope for Botswana government to increase diamond production and exports, following the economic sanctions imposed on Russian diamond mining companies operating in Botswana. The research entity added that De Beers is unlikely to scale up diamond output from Botswana in order to prop up diamond prices.