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Botswana 2019 elections to delay fiscal consolidation efforts

Rating agency Moody's hawk-eyed prediction sees Botswana going at a snail’s pace in fiscal consolidation efforts and this could increase policy uncertainty ahead of the 2019 general elections. “Ahead of elections in Botswana, the authorities now envisage a more gradual pace of fiscal consolidation…” the rating agency said in an outlook this week.

Botswana is bracing for national elections in eight months. According to Moody’s, upcoming elections could increase policy uncertainty and delay fiscal consolidation efforts in countries like Botswana who are having elections this year. Elections will take place in a number of Sub Saharan Africa countries, including South Africa, Nigeria, Senegal, Botswana, Namibia, Cameroon and Mozambique in 2019.

 Moody’s is of the view that some of the factors that are constraint to credit quality is political ranging from domestic civil unrest, conflicts, succession risk, or simply from policy unpredictability  and their credit implications vary across the region. The rating agency also believes that political risk is an ever present credit constraint in Sub-Saharan Africa. However, Moody’s expects limited election-related policy uncertainty in Botswana, Namibia, Senegal and Ghana, “given their track records of political stability.”

“Overall, we expect the pace of fiscal adjustments to remain gradual at best as growth implications, political considerations and budget rigidities complicate consolidation efforts in some countries. (eSwatini, Namibia, Kenya), while in others, spending pressures ahead of elections may delay fiscal consolidation plans like in Botswana,” says Moody’s outlook. Moody’s also expects fiscal balances to improve or stabilize in most countries, with the median fiscal deficit of our rated Sub-Saharan Africa sovereigns narrowing to 3.1 percent of GDP in 2019 from an estimated 3.7 percent in 2018.

The rating agency also states that commodity exporters will achieve the largest deficit reduction in 2019 while some fiscal deterioration will occur across non-resource rich countries. Moody’s outlook for sovereign creditworthiness in 2019 in Sub-Saharan Africa remains negative overall, reflecting the rating agency expectations for the fundamental credit conditions that will drive sovereign credit over the next 12-18 months.

The negative outlook reflects still present credit challenges stemming from fiscal and external vulnerabilities amid tightening global liquidity conditions and intensifying global trade tensions, despite gradually improving growth prospects, according to Moody’s. Despite predicting that spending pressures ahead of elections may delay fiscal consolidation plans, Moody’s further stated that “we expect government debt ratios to deteriorate only marginally or stabilize in 2019, reflecting ongoing fiscal consolidation and the positive impact of higher growth rates on the denominator of debt-to-GDP.”

Moody’s Assistant Vice President Daniela Re Fraschini said: “Our negative outlook for sovereigns in Sub-Saharan Africa is driven by persistent credit challenges related to their ongoing fiscal and external vulnerabilities. That said, we expect credit pressures to ease relative to previous years, despite a more challenging external environment, as credit profiles display some resilience at their lower rating levels."

In this elections year, public servants expect government to increase their salaries and the sitting President Mokgweetsi Masisi soon after becoming a state head last year rode in that promise, experts and observers believe this will increase spending pressures ahead of this year’s general elections.  In his maiden State of the Nation Address Masisi hinted that he is going to increase public servants salaries.

"I wish to inform this August House that Government has appointed a consultant (PEMANDU Associates SDN.BHD of Malaysia) to, among others, review the current Public Service remuneration system in terms of salaries, allowances and benefits. The consultancy work is expected to be concluded before the end of December this year. Once the PEMANDU report has been finalized, Government will engage Public Sector Unions on the recommendations thereto,” said Masisi who is expected to heed the political pressure by increasing public servants salaries.

Last year Masisi also appointed a commission mandated to review salaries of senior government officials and politicians.  This commission is mandated to inquire into salaries, Conditions of Service and Other Entitlement of the President, Vice President, The Speaker of the National Assembly, Ministers, Deputy Speaker, Assistant Ministers, Leader of Opposition, Members of Parliament, Chief Justice, President of the Court of Appeal, Justices of Appeal, Judges of the High Court, Chairman of Ntlo ya Dikgosi, Members of Ntlo ya Dikgosi, Chairpersons of District Councils, Mayors, their Deputies, Chairpersons of Sub-Councils and their Deputies and Councillors. Masisi also said to the commission, "don't be intimated, feel free to recommend salary deductions if you feel so.”

“The Commission is expected to submit its recommendations in December this year (2018). It is the wish of Government for any recommendations agreed upon to be budgeted for and effected on 1st April, 2019,” said Masisi in his State of the Nation Address. Unemployment remains Masisi’s government’s biggest task towards this year’s elections and creation of jobs has been perpetually high on the incumbent president’s campaign card. Unemployment rate in Botswana is estimated to be around 19 percent.

Masisi’s administration has come with a National Employment Policy (NEP) which will come with implementable solutions to address the unemployment problem facing the country. “The goal of the NEP is to assist the country to achieve productive, gainful and decent employment for all, to contribute to the reduction of income inequality and as well as to support Government’s poverty eradication efforts.

To develop the NEP, Government obtained financial and technical support from the World Bank,” said Masisi in his first State of the Nation Address. Masisi added that the Draft National Employment Policy for Botswana is expected to be delivered by March, 2019, seven month before the general election in October 2019.

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Inflation spike building further upwards

27th October 2020
Inflation spike

In the coming months prices will go up and inflation will shoot sharply above the target of 3 percent to 6 percent towards the third quarter of 2021, the Bank of Botswana on the other hand will continue to withhold its knife on the Bank Rate. This is according to a forecast made by Kgori Capital in its recent Market Watch Segment.

Statistics from Statistics Botswana show that the recent 1.8 percent increase in the September inflation, from 1 percent in August, was a reflection of the upward adjustment in public transport fares (Transport (from -6.9 to -3.9 percent) in September 2020, which is estimated to have increased inflation by approximately 0.64 percentage points.

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Plans to erase Edgars, Jet trademark from Botswana malls underway

27th October 2020
Edgars Jet trademark

Local anti-trust body, Competition and Consumer Authority (CCA), this month received back to back acquisition proposals from South African clothing retailers to wipe out their former rivals, Edcon, from Botswana malls.

Last week BusinessPost was in possession of Merger Notice No 23 of 2020 whereby a South African clothing retailer owner, Retailability Proprietary Limited, through Oclin Proprietary Limited, proposed to acquire parts of the Edgars business conducted by Edcon in Botswana (through Edcon Botswana), as a going concern, consisting of certain assets and identified liabilities.

South African government’s Business Rescue Practitioners earlier this year announced that Retailability will buy Edgars, after the latter filed for a business rescue plan in April after it failed to pay suppliers. This move will see Retailability add Edgars to its portfolio consisting of brands such as; Legit, Beaver Canoe and Style.

Retailability landed on Botswana shores 18 years ago with its flamboyant urban fashion Style which had 17 stores. Style, having almost the same target market as Edgars as it offers men’s and ladies’ contemporary and formal fashion, gave the 91 year old legendary clothing retailer a run for its money, and has won the battle as its parent company has taken over Edgars.

Retailability brands are synonymous with Botswana shopping centres and there are currently five (5) Beaver Canoe stores, 10 Style stores and seven (7) Legit stores across this country. The Beaver Canoe stores sell clothing apparel for men and boys only. The Legit stores have a fashion store format which focuses on the retailing of clothing, footwear, accessories, colour cosmetics and cellular products.

Retailability operates in over 460 stores across South Africa, Namibia, Botswana, Lesotho, and Eswatini. Many observers suggest that because of the deal with Retailability to swallow Edcon, most Edgars stores in Botswana will change their name and be branded Style. A sad tale for religious consumers of the Edgars trademark who got used to love their favourite brand for years.

According to CCA’s Merger Notice No 23 of 2020, Retailability is controlled by Clifford Raymond Lines (through a company which functions solely as a holding company of his interests in Retailability) and Metier Investment and Advisory Services Proprietary Limited (“Metier”). Metier is a private equity enterprise with investments in a number of industries spanning from healthcare, hospitality, FMCGs and telecommunications.

Retailability directors are mostly South Africans; Clifford Raymond Lines, Mark Richard Friday and Norman Victor Drieselmann. Only Nasreen Essack, who was appointed February this year, is a Motswana. He comes after Brian Thuto Tsima left on the same date. Retailability 100 percent owns Oclin Proprietary Limited, the company it is acquiring Edgars with, by a capacity of 3000 shares.

The target business, Edgars, offer textiles, cosmetics and cellular products. Edcon has a Motswana director, Charles Mzwandile Vikisi, a South African, Shane Van Niekerk and Zimbabwean Jethro Kamutsi.

“The Target Business comprises of two (2) Edgars franchise brands and private label stores across Botswana. These stores target middle to upper income customers and are home to a range of private label brands such as Free2BU, Charter Club and Stone Harbour, and a wide range of market label brands (such as Levi’s and Guess) for clothing, footwear and cosmetics.

In addition, the Target Business operates iconic Edgars Home and Edgars Beauty stores as store-in-store formats rounding out the department store offering in Botswana,” said CCA.
Foshini also lines up to take Jet Botswana from Edcon.

The Foschini Group (TFG) released a statement confirming its latest intentions to acquire Edcon assets or Jet for a cash purchase consideration of R480 million. This was after the business rescue practitioners offered TFG to buy Jet by that amount.

CCA is currently mulling on a proposed merger by TFG to take over Jet operations in Botswana. Merger Notice No 21 of 2020 from TFG came a few days before the Retailability proposal. In this merger TFG, acting through Foschini Botswana, want to take over “parts” of the Jet business conducted by Edcon through Jet Supermarkets Botswana.

TFG will be willing to add Jet to its portfolio of 30 retail brands that trade in clothing, footwear, jewellery, sportswear, homeware, cell phones, and technology products from value to upper market segments throughout more than 4085 outlets in 32 countries on five continents. TFG will also get Jet’s distribution centre located in Durban and certain stores in Botswana, Lesotho, Namibia and Eswatini. Also part of this fat deal is that the company is looking to also acquire JET Club and all existing JET stock of no less than R800 million.

Johannesburg listed TGF owns Foschini Retail Group which owns the local operations called Foschini Botswana, the acquiring enterprise according to CCA merger notice. “TFG is not controlled by any enterprise/s and for completeness, the three largest shareholders of TFG holding shares greater than 5% as at 27th March 2020 are: Government Employees Pension Fund (16.2%) Public Investment Corporation (13.2%); Old Mutual Limited (6.7%); and Investec Asset Management (6.3%). The remaining issued share capital in TFG is widely held,” said the merger notice.

Only Abdool Rahim Khan is a Motswana in the Foschini Botswana directorship, the rest; Ganeswari Shani Naidoo, Anthony Edward Thunström and Gustav Jansen (alternate director) are South Africans.

According to the CCA merger, the Jet Business is Edcon’s discount department store division, selling clothing, footwear, homeware and some cosmetics as well as cellular products and targets lower-to-middle income consumers throughout Botswana. The Jet Business does not directly or indirectly control any enterprises, says the notice. CCA seeks any stakeholder views for or against the proposed merger, which may be sent within 10 days from date of this publication to the following address.

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BOCRA, associates to provide broadband internet in schools

27th October 2020

Botswana Communications Regulatory Authority BOCRA signed a memorandum of Agreement (MoA) with the Ministries of Transport and Communications (MTC), Basic Education (MoBE) as well as Local Government and Rural Development (MLGRD).

The MoA seeks to continue the collaboration that dates back to 2016 when the three parties first agreed to work together in a project aimed at computerizing and providing broadband Internet to primary schools in remote and underserved areas of Botswana.

The project benefitted 68 primary schools and 9 secondary schools through the construction of Local Area Network (LAN) in each primary school, provision of 5 Mbps dedicated broadband Internet to each Primary School and provision of Wi-Fi enabled tablets, laptops and related peripherals such as printers and copiers.

Further, the project will see the augmentation of computers in 9 Junior Secondary Schools with 30 laptops per identified school and employment of Information Technology (IT) officers at each primary school.

When speaking at the signing ceremony in Gaborone, Chief Executive of BOCRA and Chairperson of Universal Access and Service Fund (UASF) Board of Trustees Martin Mokgware said the project’s ultimate goal is to facilitate pupils in schools and host villages to be able to play a meaningful role in the digital economy.

Mokgware indicated that this necessitates upgrading of existing Telecommunications infrastructure to high capacity broadband that will support delivery of education, accessibility to the quality Internet and usage of ICTs.

The Fund began its inaugural programme by sponsoring the provision of WiFi hotspots in public areas around the country as its first project. Following the successful implementation of public WiFi hotspots, the Fund identified Kgalagadi, Ghanzi and Mabutsane areas for mobile network upgrades, schools computerization and internet provision.

Conscious that the project would not be possible without buy-in and support from MoBE, MTC and MLGRD, the Fund facilitated the signing of the first MoU between the three parties in 2016 for implementation of the project.

BOCRA Chief Executive said the signing of this agreement is aimed at benefitting the Kweneng District, adding that they have already assessed the area and have determined that they will be covering 62 underserved villages and 119 schools, 91 of which are primary schools.

“This is a project for which the partner Ministries need to re-commit for its success. Lessons from the previous schools’ computerization and internet connectivity project require that we increase our involvement and resources dedicated to the project for it to be successful. It is my belief as the project coordinator, that we will not do things the way we did them during the first project, for if we do, then we will not have learnt anything,” he said at the signing ceremony.

The purpose of learning is so that there can be continuous improvement to minimize the length of time and amount of resources utilized, he said expressing confidence that their partners will step up to the plate and ensure they play their part in the implementation of the project and that it will progress smoothly having already tread along a similar path.

UASF’s role lies mainly in funding and project management. According to Mokgware, once the project is completed, the work to integrate ICTs into the classroom begins in earnest. Therefore, he said, the project will not succeed without full cooperation and oversight of partners.

“MoBE will put in place the necessary content and ensure that the curriculum is available to all. MLGRD will provide, among others, the enabling environment by ensuring readiness of the school’s infrastructure and necessary security.”

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