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Choppies remains towering on FAR Property far-reaching expansion

Botswana Stock Exchange-listed FAR Property Company (FPC) property portfolio continues to go far and its three previous financial reports show a trend of giant retailer Choppies being the mainstay of its evergreen growth.

In FPC latest abridged financial results released this week; Choppies is shown as a towering figure in the company’s property portfolio dominating the FPC portfolio. In the portfolio by Gross leasable area (GLA), industrial property holds majority of 53 percent and it is dominated by Choppies. Also, Choppies takes Grade A of Segment Split by Tenant Grade while local tenants takes Grade B and new start-up companies got Grade C.

“The development and growth of our portfolio was initially fuelled by Choppies’ growing footprint as well as mounting demand for commercial and industrial properties in Botswana,” says FPC. Owners of retail giant Choppies formed FPC in 2010 and according to the property giant this was with a view of establishing a portfolio of properties that could answer the requirements of the ever growing Choppies Group. Former President Festus Mogae, wealthy billionaires Ramachandran Ottapathu and Farouk Ismail on the boards of the two companies; Choppies and FAR Property.  

In 2016 before FPC listing on BSE, stockbrokerage firm Motswedi Securities said the company was positioned to grow with the help or benefit from “Choppies rapid expansion” and the recently released financial results shows the same move. A year after Motswedi Securities horoscopic financial view, FPC and Choppies Chairman Mogae also put the retail giant forth as FPC’s anchor in the property segment.

“FPC has continued to grow its property portfolio. There has been sufficient investment into the land bank for continuing development growth into future years. This, in addition to other tenanting, will assist meeting the needs of the prime tenant, Choppies, particularly with regard to its infrastructural requirements as well as retail outlets,” said Mogae.

According to the recently released financial results, six commercial and two industrial properties are close to completion at the current date these. According to FPC, these will add to revenue growth in 2019, meaning the company’s growth is expected to continue to the next financial year.

FPC revenue increased from P121.8 million for the year to June 2017 to P134 .8 million for the year to June 2018, according to the latest financial results.  This means the revenue increased by 11 percent. FPC profit after net finance cost improved by 6 percent from June last year to June 2018.  While rent yield increased by 7 percent, property portfolio also grew by 5 percent from the last financial year.

FPC PROPERTIES

The investment property portfolio is estimated to have increased to close to P1.3 billion in the current financial year with considerations of new prospects. FPC has in the last financial year expanded out of Botswana borders to Zambia and South Africa. Top properties for FPC include the 10304m2 GLA industrial building called ERF 2282 base in the Rustenburg in South Africa. According to FPC, this is the largest development outside the boundaries of Botswana and it was custom built to cater for the needs of Choppies Warehousing Services (Proprietary) Limited. Last valued at R46 million, is dominated by occupancy of Choppies.

Another development in Rustenburg is the much anticipated ERF 2288 which whose extension must be up by now because in the last financial year as the building was said to be facing completion in this current financial year of 2017/2018. The development is also valued at R46 million.

In August 2017 FPC expanded to Lusaka, Zambia with an acquisition of a USD2,3 million shopping centre which is anchored by giant retailer Choppies. Other tenants of the Lusaka mall are Standard Chartered Bank Zambia Limited, Stanbic Bank of Zambia Limited, Finance Bank of Zambia Limited, First National Bank of Zambia Limited, AB Bank of Zambia Limited and List Café.

In an interview with BusinessPost FPC Director Ottapathu confirmed that the company has reaped better this year because of their new developments. In discussion was also the company’s mall in the country’s second city of Francistown. The 2150 square feet mall was built on the banks of Tati River in the last financial year. “It is doing well and its tenant occupancy is almost 80 percent. It has surely added value to our portfolio as we continue to expand,” said Ottapathu.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

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.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

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.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

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”

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