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Sluggish corporate earnings shrink BSE equity market performance

Botswana Stock Exchange Limited (BSEL) Domestic Company Index (DCI) has depreciated during the 2018 trading period January 1 to September 30. This was revealed by the BSEL market performance report released this week.

The document highlights that in comparison to the 2017 corresponding period where the performance of the DCI declined by 5.0 percent, this year the graphs hit a steeper downward wave as the (DCI) hit a double depreciation to11.5 percent. BSLEL reports that the decline can be attributed to similar challenges experienced last year, which are by in large characterised by sluggish corporate earnings despite the macro economy showing signs slight recovery.

Also, during the period under review the Foreign Company Index (FCI) has depreciated by 0.2 percent, a slightly better performance compared to a more decline of 0.5 percent in 2017. With effect from 1st January 2018, the BSE introduced the Domestic Company Index Total Returns (DCTRI) following Main Committee and Non-Bank Financial Institutions Regulatory Authority (NBFIRA) approvals in December 2017.  

More figures from the report reveals that as at 30 September 2018, the DCTRI had depreciated by 7.2 percent, reflecting the cushioning effect of dividends over the year to date period. The depreciation in market performance during the period under review is also mirrored by a significant decline in equity turnover. Trading activity was noticeably reduced during the period under review. As at 30 September 2018, the BSE has recorded a turnover of P1, 231.3 Million from 470.7 million shares traded.

During the same period in 2017, the BSE had registered a turnover of P2, 144.4 million and a total volume of 655.6 million shares traded mirroring a significant decline in traded shares volume and turnover. An in-depth analysis of the turnover during the period from January to September 2018 depicts that the trading activity was relatively unstable compared to the same periods in the previous four years.

 BSEL observes that a relatively lower number of companies accounted for a relatively larger amount of turnover over this period compared to the same period in 2017.  “This further explains the lower stability of turnover compared to 2017,” reads the report. Zooming into the figures it is evident that the top 3 traded companies in terms of value, on a year to date basis, were; Letshego at P376.8 million, NAP at P293.2 million and CA Sales at P194.4 million and these accounted for 70.2 percent of total turnover during the first three quarters of 2018.

During the same period in 2017, three companies accounted to 50.2 percent of turnover, an indication of turnover concentration in 2018 relative to 2017. This according to BSEL further substantiates the deduction in traded shares volume. During the year to September 2018, local companies contributed 57.1 percent to total turnover compared to 56.9 percent in the corresponding period in 2017.

Furthermore, local individuals contributed 4.4 percent of total turnover recorded during the period 1st January to 30 September 2018 compared to 5.1 percent in the year 2017 corresponding period. On a slight positive note Exchange Traded Funds (ETFs) realised a hike in traded value during the first three quarters of 2018 compared to the same period in 2017.

The value of units traded increased in the year to date period, reaching P216.2 million compared to P133.2 million in the corresponding period in 2017 whereas the number of units traded amounted to 2.4 Million units in 2018 compared to 3.2 Million units in 2017. Another positive performance during the period under review can be noted under the Bond Market, BSEL reports that activity in the bond market has improved compared to the same period in 2017.

The value of bonds traded during the period January –September was P1, 608.6 Million in comparison to P273.0 million traded during the same period in 2017. Bank of Botswana (BoB), on behalf of Government, held three bond auctions this year . At its first bond auction of 2018 on 2 March, additional tranches of BW007 (P77 Million, BW008 (P100 Million and BW011 (P100 Million) amongst other bonds and treasury bills were offered.

At the second auction of the year conducted on 1 June, BoB re-opened three more bonds while the third Government Bond Auction conducted on 31 August saw the re-opening of the BW013 and the issuance of two new bonds; BW014 and BW015. Issuing of long dated bonds by government has been noted by industry commentators as progressive move that sparks confidence and boosts the annuity book across investment & insurance market.

Catherine Lesetedi-Letegele, Chief Executive Officer (CEO) of leading financial services, insurance and investment group Botswana Insurance Holdings Limited (BIHL) also remarked these sentiments early last months. Lesetedi-Letegele noted that government decision to participate more, coming up with a reviewed framework that speaks to a specified and defined interval of bond issuing was commendable.

“We are quite pleased that at the last auction Government came to the market with a new bond BW 0015 which is a 25-year tenure bond, and this is very helpful for anyone who is in the market for annuities to manage their liabilities,” she said. BSLE chief, Tsheole also quoted in previous interviews saying: “We need to have more government bonds issued to maintain a robust risk-free curve and the viability of the existing BSE bond indices.

These wide gaps in the yield curve negatively impact the pricing of assets such as corporate bonds that ordinarily reference risk free assets and this brings distortions in pricing and compromises the liquidity and the appetite for debt instruments,” he said in July 2017. BSLE has registered five corporate bond listings during the first three quarters of 2018, on the back of issuances, the nominal amount in issue of listed bonds increased to P13.8 billion compared to P12.9 billion as at the same period in 2017.

This year BoB has left bank rate unchanged at 5.0 percent on several monetary policy committee sittings, in view of the positive outlook for price stability. With Inflation decreased from 3.2 percent in December 2017 to 2.9 percent in September 2018 BSEL says a low inflationary environment helps the bond coupons maintain purchasing power.

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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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