Botswana retail and office rental space continues to be a major revenue spinner for diversified property giant Turnstar Holdings Limited even during sluggish Sub-Saharan economic growth.
According to the group‘s abridged audited financial results for the year ended 31st January 2019 Turnstar’s Botswana portfolios withstood the year’s challenging economic conditions to register 3 percent increase in rental revenues and contain operational expenses against unfavourable trading environment. On the other hand, Mlimani Holdings a wholly owned subsidiary of Turnstar housing the group’s Tanzanian portfolio suffered suppression from unfavourable trading conditions of the East African market.
According to the Botswana Stock Exchange listed property outfit, the current downturn in the Tanzanian economy has negatively affected Mlimani Commercial Office and Conference Centre revenues because of a significant number of the vacancies in the Commercial Office space experienced during the year under review. Turnstar however reports that according to their forecast several office blocks will be tenanted during the current year.
“The conference centre has been refurbished, and is currently attracting several new bookings” states Turnstar management in the report. On a positive noted for Turnstar‘s Tanzania business the retail mall is performing to its optimum capacity with satisfactory tenancy. Furthermore, Turnstar says due to the downturn in the Tanzanian rentals, particularly in the Commercial Office space, Mlimani Holdings has reported a Fair Value loss for the year.
“It should be noted that Fair Values are calculated on current rentals, projected into the future on a discounted cash flow basis. It does not reflect the actual cost of the buildings, and may change from year to year, depending on occupancy levels,” reads an extract from the financial statement. Against the fair value drop by the Tanzanian business Botswana properties recorded substantial Fair Value Gains to further back and push the group into a year fair value gain.
During the year under review the US Dollar appreciated against the Botswana Pula. The appreciation according to the report resulted in an exchange gain in the Turnstar and Group results for the year ended 31 January 2019. Foreign exchange translation gains and losses are dependent on the US $ / BWP exchange rate as at year end, therefore Turnstar says it ensured that, the US Dollar dominated liabilities are serviced by US Dollar income, and hence the Group was not exposed to actual exchange fluctuations during the 12 month trading period under review.
“The translation gain reported for the year ended 31st January 2019, occurred when translating the US Dollar denominated investments and other financial assets of the Group’s Tanzanian and Dubai subsidiaries to Botswana currency “reports the BSEL listed property outfit. For the previous financial year ended January 2018, US-dollar /Pula exchanges negatively affected the Group’ financial results. The group posted significant decline in profits after tax because of the depreciation of the US Dollar against the Botswana Pula.
This then intern adversely affected the Group results for the year ended 31 January 2018 because of translation loss reported occurred when translating the US Dollar denominated investments and other financial assets of the Group’s Tanzanian subsidiary, Mlimani Holdings Ltd to Botswana Currency. Turnstar subsidiaries report in US Dollar and UAE Dirham currencies; whilst the Group’s functional currency is the Botswana Pula.
“It should be noted that, these foreign exchange translation gains are unrealized and dependant on the US $ / BWP exchange rate at the financial year end” further laments Turnstar top brass. The Group closed the year at a Goodwill impairment of US$1.1, equivalent to P11.5 million arrived at from an assessment of Goodwill carried out in terms of IAS 36.
Still in this year financial report the Botswana homegrown, now a diversified billion Pula property conglomerate reveals that its local subsidiary Turnstar Botswana intends to dispose of the Land and Buildings on Plot 14444 Gaborone West, to Zambesi Corporation (Pty) Ltd, at a proposed sale price of BWP 12 million.
The property constitutes 0.5 percent of the value of the Group’s Property portfolio. “The opinion of an independent professional valuer has been obtained, and it is confirmed that the property is being disposed at market value and that the transaction is at “arm’s length’” explains Turnstar Managing Director Gulaam Husain adding that Botswana Stock Exchange Limited has been notified and has no objection to the transaction while the approval of the Competition Authority has been sought.
Turnstar Holdings Limited is a diversified regional sub-Saharan African property loan stock company listed on the Botswana Stock Exchange (BSE) in 2002, currently one of the most diversified property company on the BSE with property assets valued at over P1. 7billion. Turnstar’s unique sectoral and geographically diversified property portfolio comprises of 13 properties: 6 properties in Gaborone, 2 in Mogoditshane, 1 in Francistown, and 4 in Dar-es-Salaam, Tanzania through its subsidiary Mlimani Holdings Limited. Turnstar also owned a million-dollar property in Dubai through its subsidiaries Turnstar Investments Limited –United Arab Emirates and Palazzo Venezia Holdings Limited.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at 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. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”