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Choppies chaos crashes BSE Domestic Company Index

Failure by Choppies Enterprise Limited a fast expanding pan-African retail giant to submit and publish audited financial results on time has crashed the Botswana Stock Exchange (BSE) Domestic Company Index (DCI) figures, resulting in 11.4 percent decline for the year 2018.

On the 28th September 2018; Choppies lost 76.3 percent of its value when the share price plummeted from P1.69 to P0.40 in a single day. On that day, its market capitalisation slumped from P2.2 Billion to P521.5 Million. The DCI is indicia that shows aggregate changes in market value on the basis of share prices. For the year 2018 DCI declined by 11.4 percent compared to a decline of 5.8 percent in 2017.

 Eight companies compared to 12 in 2017 registered positive price changes while 14 compared to 11 in the prior year registered negative price movements and four compared to 1 in 2017 closed the year with share prices back to their 2017 levels. A market status report for the period January –December 31st 2018 released by BSE this week reiterates that the impact of Choppies Enterprise Limited, arising from its failure to submit audited financials on time, on the decline in the total domestic market capitalisation and subsequently the DCI cannot be ignored.

“Due to this, Choppies contributed 41.2 percent to the decline in the DCI. In other words Choppies contributed negative 4.7 percentage points to the negative 11.4 percent decline in the DCI in 2018,” reads the report. Equity markets figures for the year 2018 depicts turnover levels drop of 25 percent when compared to that of 2017. The Exchange attributes this experience mainly to three events that occurred in the year and also in the prior year.

 These are the introduction of the minimum brokerage commission of 60 basis points (0.60 percent) in April 2016, the reallocation of investment mandates in 2018 by some of the largest pension funds in the country following termination of investment management contracts at two of the largest local asset managers and lastly the decline in share prices.

“Given the dominance of institutional investors both local and international in our market, the increase in transaction costs was definitely a sensitive issue particularly coinciding with a slowdown in corporate earnings as it effectively eroded their returns. Perhaps the suspension of Choppies could be an additional factor, given its liquidity in the market,” states the report.  Prior to its suspension from trading Choppies was the 4th most traded company on the BSE.

A further assessment of equity market Statistics indicates that majority of the listed companies recorded reduced earnings resulting in share price declines, but to the delight of the investors they maintained attractive dividend payouts closing the year at total dividend yield of 5.5 percent versus 5.1 percent in 2017.

BSE registers record high tradability and liquidity during 2018

On a positive note BSE closed the year 2018 on record high overall tradability and liquidity of listed instruments. A total turnover of P4.4 billion was recorded in 2018 compared to P3.2 billion in 2017. This information is also contained in the BSE market status report. The stock exchange discharged impressive performance on the capital market by raising a total of P3.2 billion locally in the bond market compared to P2.3 billion in 2017, mirroring an improvement of 39.1percent.

On the equity market, P296.8 million was raised as BancABC was the only company that undertook a public offer in 2018 compared to P575 million raised through public offers in 2017. Seed Co listed by introduction. For the Bond Market BSE trades it’s Index Series (BBIS) under a series of four bond indices being Composite Bond Index (BBI), Government Bond Index (GovI), Corporate Bond Index (CorpI) and Composite Fixed Rate Bond Index (BBIFixed).

In 2018, the BSE Bond Index Series (BBIS) appreciated by 3.2 percent whereas the GovI and CorpI registered returns of 3.5 percent and 3.3 percent respectively. The BBIFixed returned 2.6 percent since its introduction in April 2018. Inflation averaged 3.2% in 2018; meaning that listed bonds provided purchasing power protection, save for the fixed rate bonds. 10 Inflation in the year predominantly remained within the objective range of 3 percent-6 percent whereas interest rates were held constant throughout the year.

The value of bonds traded increased over four times from P535.6 million in 2017 to P2, 222.7 million in 2018. Government bonds continued to dominate liquidity of the market accounting for 97.9 percent of total turnover. The BSE registered a record number of new bond listings as 10 new bonds came on board compared to 8 in 2017. “This cushioned the impact of the 4 bond delisting in the year.

Even though Government bonds accounted for the majority of trading activity corporate bonds dominated in terms of the quantity of bonds listed, a phenomenon that in most African markets is the reverse,” explains the market status report. At sector level, the profile of the bond market at the end of 2018 was such that Government bonds accounted for 63.8 percent of market capitalization, Quasi-Government (1.3 percent), Parastatals (7.9 percent), Corporate (25.3 percent) and Supranational (1.7 percent).

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Gambling Authority tender dangles as a jittery lottery quandary

30th November 2020
SEFALANA MD: CHANDRA CHAUHAN

Lucrative and highly anticipated national lottery tender that saw several Batswana businessmen partnering to form a gambling consortium to pit against their South African counterparts, culminates into a big power gamble.

WeekendPost has had a chance to watch lottery showcase even before the anticipated and impending national lottery set-up launches. A lot has been a big gamble from the bidding process which is now set for the courts next year January following a marathon legal brawl involving the interest of the gambling fraternity in Botswana and South Africa.

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The uncertainty of getting the next meal in Botswana

30th November 2020
uncertainty of getting the next meal

Households representing more than half of Botswana’s population-mostly residing in rural areas- do not know where their next meal will come from, but neither do they take into consideration the quality and/or quantity of the food they consume.

This is according to the latest Prevalence of Food Insecurity in Botswana report which was done for the 2018/19 period and represents the state of food insecurity data even to this time.
The Prevalence of Food Insecurity was released by Statistics Botswana and it released results with findings that the results show that at national level 50.8 percent of the population in Botswana was affected by moderate to severe food insecurity in 2018/19, while 22.2 percent of the population was affected by severe food insecurity only.

According to the report, this translates to 27 percent of the population being food secure that is to say having adequate access to food in both quality and quantity. According to Statistician General, Burton Mguni, when explaining how the food data was compiled, Food and Agriculture Organization of the United Nations (FAO), is custodian of the “Prevalence of Undernourishment (PoU)” and “Prevalence of moderate or severe food insecurity in the population based on the Food Insecurity Experience Scale (FIES)” SDG indicators, for leading FIES data analysis and the resultant capacity building.

“The FIES measures the extent of food insecurity at the household or individual level. The indicator provides internationally comparable estimates of the proportion of the population facing moderate to severe difficulties in accessing food. The FIES consists of eight brief questions regarding access to adequate food, and the questions are answered directly with a yes/no response. It (FIES) complements the existing food and nutrition security indicators such as Prevalence of Undernourishment.

According to the FIES, with increasing severity, the quantity of food consumed decreases as portion sizes are reduced and meals are skipped. At its most severe level, people are forced to go without eating for a day or more. The scale further reveals that the household’s experience of food insecurity may be characterized by uncertainty and anxiety regarding food access and compromising the quality of the diet and having a less balanced and more monotonous diet,” says Mguni.

The 50.8 percent of the population in Botswana which was affected by moderate to severe food insecurity are characterized as people experiencing moderate food insecurity and face uncertainties about their ability to obtain food. These people have been forced to compromise on the quality and/or quantity of the food they consume according to the report on food insecurity.

Those who experience severe food insecurity, the 22.2 percent of the population, are people who have typically run out of food and, at worst, gone a day (or days) without eating. According to the statistics, rural area population experienced moderate to severe food insecurity at 65 percent while urban villages were at 46.60 percent and cities/town were at 31.70 percent. Those experiencing the most extreme and severe insecurity were at rural areas making 33.10 percent while urban villages and towns were at 11.90 percent and 17.50 respectively.

According to a paper compiled by Sirak Bahta, Francis Wanyoike, Hikuepi Katjiuongua and Davis Marumo and published in December 2017, titled ‘Characterization of food security and consumption patterns among smallholder livestock farmers in Botswana,’ over 70 percent of Botswana’s population reside in rural areas, and majority (70%) relies on traditional/subsistence agriculture for their livelihoods.

The study set out to characterize the food security situation and food consumption patterns among livestock keepers in Botswana. “Despite the policy change, challenges still remain in ensuring that all persons and households have access to food at all times. For example, during an analysis of the impacts of rising international food prices for Botswana, BIDPA reported that food prices tended to be highest in the rural areas already disadvantaged by relatively low levels of income and high rates of unemployment,” said the study.

According to the paper, about 9 percent of households were found to be food insecure and this category of households included 6 percent of households that ranked poorly and 3 percent that were on the borderline according to the World Food Programme’s (WFP) definition of food security.

Media reports state that the World Bank has warned that disruption to production and supply chains could ‘spark a food security crisis’ in Africa, forecasting a fall in farm production of up to 7 percent, if there are restrictions to trade, and a 25 percent decline in food imports.

Food security in Botswana or food production was also attacked by the locust pandemic which swept out this country’s vegetation and plants. The locust is said to have contributed to 25 percent loss in production.

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Solid demand for diamonds towards the ‘gift’ season

30th November 2020
Diamonds

Global lockdown have been a thorn in diamonds having shiny sales, but a lot of optimism shows with the easing of Covid-19 restrictions, the precious stones will be bought with high volumes towards festive season. The diamond market is however warned of the resurgence of Covid-19 in key markets presents ongoing risks amid the presence and optimist about the new Covid-29 vaccines.

The latest findings published as De Beers Group’s latest Diamond Insight ‘Flash’ Report, which looks at the impact of the pandemic on relationships and engagements, has revealed that in the US that more couples than ever are buying diamond engagement rings. Bridal sales is mostly the primary source of diamond jewellery demand in recent months, De Beers said.

According to De Beers, interviews with independent jewellers around the US revealed that the rate of couples getting engaged has increased compared with the period when Covid-19 first had an impact in the US in the spring.

“In addition, despite challenging economic times, consumers were spending more than ever on diamond engagement rings – often upgrading in colour, cut and clarity, rather than size. Several jewellers speculated that with consumers spending less on elaborate weddings and/or honeymoons in the current environment, they had more to spend on choosing the perfect ring,” said De Beers.

According to De Beers, a national survey of 360 US women in serious relationships, undertaken in late October in collaboration with engagement and wedding website, The Knot. This survey is said to have found that the majority of respondents (54%) were thinking more about their engagement ring than the wedding itself (32%) or the honeymoon (15%), supporting jewellers’ hypothesis that engagement ring sales were benefiting from reduced wedding and travel budgets in light of Covid-19 restrictions.

When it came to researching engagement rings, online was by far the predominant channel for gaining ideas/inspiration at 86% of consumers surveyed, with 85% saying they had saved examples of styles they liked, according to De Beers. According to the survey, only a uarter of respondents said they had looked in-store at a physical location for design inspiration.

“For many couples, the pandemic has brought them even closer together, in some instances speeding up the path to engagement after forming a deeper connection while experiencing lockdown and its associated ups and downs as a partnership. Engagement rings are taking on even greater symbolism in this environment, with retailers reporting couples are prepared to invest more than usual, particularly due to budget reductions in other areas,” De Beers CEO Cleaver said.

According to De Beers Group, its Diamond Insight Flash Report series is focused on understanding the US consumer perspective in light of Covid-19 and monitoring how it evolves as the crisis evolves. Also, the company said, it is augmenting its existing research programme with additional consumer, retailer and supply chain touch-basis to understand the pain points and the opportunities for stakeholders across the diamond pipeline.

Demand for diamonds is as hard and resilient as the precious stone itself. De Beers pocketed US$ 450 million in its recently held ninth rough diamond sales cycle, and the company says it is more flexible approach to rough diamond sales during the ninth sales cycle of 2020, with the Sight event extended beyond its normal week-long duration.

“Steady demand for De Beers Group’s rough diamonds continued in the ninth sales cycle of the year, reflecting stable consumer demand for diamond jewellery at the retail level in the US and China, and expectations for reasonable demand to continue throughout the holiday season. However, the resurgence of Covid-19 infections in several consumer markets presents ongoing risks,” said De Beers CEO Bruce Cleaver recently.

High expectations are on diamonds being a sentimental gift for holiday season or as the most fetished gift. However the ninth cycle was lower than the eighth which registered US$ 467 million. For the last year period which corresponds with the current one, De Beers managed to raise US$ 400.

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