Strong performance of the United States Dollar (USD) during the larger part of 2018 as well as vibrant American market has bolstered Wilderness Safari‘s businessfor the half year period ended August 2018 , a report from the Pan African tourism outfit has revealed.
The report released last week signals strong sets of unaudited financial results for Wilderness Safaris Limited.The Botswana Stock Exchange Limited (BSE) listed Safari camp operator has registered an impressive 11 percent hike on revenue to close H1 2018 at P780 million following significant improvement in yields as well as 3 percent rise in bed nights sold to 104 855 compared to 101 404 in the six-month ended August 2017.
This revenue for the represented 65percent of the company’s total sales compared to 64 percent of the corresponding period last year.This, according to the company which recently experienced significant shifts in board directorship, is amongst other factors attributable to the successful launch of the newly built Mombo as well as political stability in Kenya.During the period under review the company matched its best ever occupancy rate of 71 percent, normalised for Governors’, or 67 percent overall, which is the highest recorded since the acquisition of Governors’.
The appreciation of the US Dollar since the beginning of the financial year and a strong US market is further underscored as key factor that provided tailwinds to significant growth. Wilderness Safaris which operates one of the luxurious camping and hospitality sites in Africa, including in Botswana’s elite tourist attraction places has a strong American market base. A significant share of the company’s booking transactions are actually done in US dollar currencies. These factors saw Wilderness’ trading profit jump by 26 percent to P235 million in spite of just one percentage point increase in total available bed nights capacity to 156 788.
The Group posted 36 percent increase in headline earnings per share
Trading profit margin increased from 26 percent to 30 percent.Keith Vincent, Group Chief Executive Officer (CEO) says the increase in profit margins mirrors from the impact on the bottom line of the strong demand for bed nights and the improved utilisation of the Group’s assets.“The impact on revenue of the depreciation of the local currencies was negligible, largely because of the adoption of IFRIC 22 which requires that foreign currencies be converted at the earlier of receipt or service” explained Vincent in the results report.
The Group chief further shared that Wilderness Group’s collection period is primarily from February to July, thus a substantial portion of revenue was recorded at exchange rates lower than those prevailing last year, as the Pula exchange rate to the US Dollar lagged behind until June 2018.“Costs have remained well contained at 7% higher than prior year. Some level of upward pressure is evident in transport costs due to higher fuel prices and greater activity, as well as lease costs (impact of new leases and their accounting smoothing” reads an extract of the brief commentary by the company directors.
Wilderness also notes that Staff costs increased marginally higher than inflation, largely because of a slight increase in headcount and higher share-based payments charges, increasing by 34 percent to P3.3 million from P2.4 million.Other gains of P4.5 million include proceeds from insurance claims amounting to P2.1 million and profit on sale of a subsidiary of P2.4 million.Financial figures suggest that Impairment losses amounted to P5.2 million and relate to the impairment of Mombo Trails Camp which seats at P3.5 million and a damaged aircraft which cost the company P1.5 million.
The Group’s effective tax rate increased to 25 percent from 14 percent in the prior year, largely due to the recognition in the prior year of a P10 million deferred tax asset in the Governors’ Group.Capital expenditure amounted to P100 million for the period, continuing with the Wilderness’s philosophy to ensure the Group’s properties and assets remain in pristine condition.Approximately P9 million was spent on a temporary camp and one new camp, and P45 million on rebuilding existing camps and one additional aircraft.
Vincent says the balance is defensive in nature.In addition, figures highlight that cash balances and less overdrafts, have increased by 83 percent to P508 million as a result of strong cash generated from operations amounting to P323 million, offset by an outflow in investing activities of P79 million and loan repayments as well as dividends payment.
In terms of segmental performance all geographical segments, other than South Africa, reported increases in segment profit. The two main drags on South Africa were additional corporate recoveries as well as a slow-down in the road transfer business due to the impact on tourism following the water crisis in Cape Town. Wilderness Safari’s footprint stretches across Africa currently doing business in seven countries operating over 40 camps.
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”