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Alcohol levy slash, fuel hike wont move November inflation

Economists and researchers said the November inflation would not change much despite the slash of the alcohol levy or the recent increase in fuel prices.

On the beginning of this month the Ministry of Investment, Trade and Industry took a decision to cut the alcohol levies by 20 percent while the Ministry of Mineral Resources, Green Technology and Energy Security hiked fuel prices. These changes will not have significant inflationary effect according to experts.

On the reduction of alcohol levy, FNBB economist MoatlhodiSebabolesaid “the 20 percent reduction in levy is not significant enough to move the headline inflation because alcohol beverages weight is low on the Consumer Price Index, so minimal impact on inflation.”  Sebabole said the fuel prices increase to slightly push up inflation from its current 12 month averages of 3.1 percent. He said the forecast is for inflation rate of 3.5 percent for 2018.

They will be upward pressure on inflation, but minimal. He said administered prices of fuel, water and electricity will induce upward pressure on inflation whereas the reduction in alcohol and communication tariffs will exert downward pressure.  “That means we are having supply side inflationary pressure (cost push); not demand side (demand pull). The FNBB researcher concluded that inflation will remain low and close to the lower inflation objective.

Another economists Garry Juma, a top economic and market researcher at Motswedi Securities, concurred with Sebabole that inflation will not be moved that much next month. He said this is because fuel prices were increased just in the beginning of this month (15 October 2018). He said people should not expect “a sudden jump in inflation” that soon.

KBL refusal to decrease prices

Just after government decision to slash down the alcohol levy, Botswana’s premium brewer Kgalagadi Breweries Limited (KBL) decided not to follow suit and decrease alcohol prices, a decision which was met with a lot of disapproval.  In a leaked communication believed to be destined to liquor outlets such as bottle stores, wholesalers and distributors, written by Botswana and Namibia Managing Director Renaud Beauchamp to “Dear Valued Customer”, the brewer said it, “will not be reducing prices on its products.”

KBL spokesperson MasegonyaneMadisa confirmed that the letter was from the brewer to liquor outlets. He said KBL is yet to release a statement on their stance regarding the reduction of the alcohol levy. The reason being, the brewer sees this as “an opportunity to recover and to return to profitability.” This statement was made much to the chagrin of alcohol drinkers who stopped short of calling the brewer opportunistic, capitalist and a vulture.

This name calling thronged local radio stations and social media platforms.  KBL said the hiking of the alcohol levy by government in the past affected their Corporate Social Investment (CSI) initiatives which had to roll back. The reduction of alcohol levy which the brewer called a “breather” will improve the company’s financial performance which will help sustain jobs in Botswana and in the process enable KBL to implement robust Corporate Social Investment (CSI) projects “in order to play a positive and meaningful role within the communities it operates.”

However, Juma warned against KBL not following suit and decreasing prices as expected by alcohol consumers. He explained that KBL stands a risk of losing its customers and this will make the brewer’s market to go down since drinkers have always been desperate for reduction on alcohol prices. Juma hopes the refusal to reduce prices is only a temporary move because it will cause frustration to KBL’s market.He gave an example that consumers will now opt for KBL rivals and take in imported beverages to avoid paying more for alcohol.

“There could be a consumer switch, especially when important beverages become much cheaper. This will make drinkers to desert the KBL products for imported alcoholic beverages,” said Juma. According to Monetary Policy  Report of October 2018, Monetary policy has, so far in 2018, been implemented in the context of a favorable medium-term inflation outlook, associated with moderate domestic demand resulting from the restrained increase in personal incomes and modest increase in foreign prices.

Hence, the Bank Rate was maintained at 5 percent at the October 2018 Monetary Policy Committee meeting. The last policy change was in October 2017, when the Bank Rate was reduced by 50 basis points from 5.5 percent to 5 percent, said the Report. The Report further says upside risks to the inflation outlook relate to any substantial upward adjustment in administered prices, international oil and food prices as well as government levies and taxes beyond current forecasts. 

However, the report says, restrained growth in global economic activity, technological progress and productivity improvement, along with modest wage growth, present downside risks to the inflation outlook. The Bank’s formulation and implementation of monetary policy focuses on entrenching expectations of low and sustainable inflation through a timely response to price developments. The Bank remains committed to responding appropriately to ensure price stability without undermining economic activity.

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Grit divests from Letlole La Rona

22nd March 2023

Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.

The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.

Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.

This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.

In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.

Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.

The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.

“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said

In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.

The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.

Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.

Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.

Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.

Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.

“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.

LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.

The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.

An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.

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Stargems Group establishes Training Center in BW

20th March 2023

Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.

The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.

“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.

In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices.  Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.

“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.

Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy,  Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.

“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.

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Food import bill slightly declines

20th March 2023

The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.

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