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Tafa, Tollmans exit Wilderness

Corporate lawyer, Parks Tafa has finally bowed out of Wilderness Holdings after spending the entire just ended financial period on the sidelines owing to ill-health. Tafa has served Wilderness for the past eight years and has been chairman of the board since 2013. Tafa decided to retire as chairman of Wilderness Holdings by rotation with effect from 30 August 2018.

BusinessPost understands that Tafa has been suffering from ill-health since the past financial year and former deputy chairman Micheal Tollman had to stand in for him for the whole period. Tafa never attended all the required four board meetings of Wilderness. “Unfortunately, the Group’s Chairman, Parks Tafa, has been indisposed for some time and I have agreed to deputize for him in this letter. We wish Parks all the best for a speedy and complete recovery,” said Tollman.

As suggested by his company, Tafa had to take advantage of the company’s constitution which states that a third of the directors retire by rotation each year and are eligible for re-election by shareholders at the annual general meeting. Other directors who joined Tafa in exiting Wilderness Holdings door are the Tollmans; Michael and Gavin Tollman who resigned from the ecotourism company last month. Michael served the board since 2005 while Gavin who only attended one board meeting in the last financial year’s service was for the last eight years.

The billionaire Tollman family which boasts a travel and hospitality empire disinvested from Wilderness as the largest single shareholder in the company through Wine Investment Limited. The Tollman family had 80 697 582 ordinary shares translating to 33.99 percent shareholding. Through Wine Investment the Tollmans sold their entire stake to The Rise Fund. They are estimated to have sold the shares for P472.9 million.

After pocketing an estimated P472.9 million the Tollmans bought an entity called Great Exploration from Wilderness for P16, 8 million. Micheal Tollman was part of the board that sold Great Explorations to his own company Mountbatten. During the transaction Mountbatten was considered to be a related party in view of the fact that Gavin Tollman was a member of board of directors for both Wilderness and Wine Investments which is owned by Mountbatten.

The company that is now owned by the Tollmans, Great Exploration, owns Xigera Camp located in the tourism wealthy Paradise Island in Okavango. Wilderness explained that it sold Xigera because “has performed below expectations in the preceding five years and requires a substantial capital investment for refurbishment.”

In a previous interview with BusinessPost, Micheal Tollman said they are going to turn Xigera into a five star hospitality hub. After the sale of Xigera it was stated in Wilderness reports that “Mountbatten is willing to inject the required capital investment into the Camp.” Also exiting Wilderness with the Tollmans and Tafa is independent director Roux Marnitz who resigned by rotation with effect from 30 August 2018. Martinitz chose not to offer himself for re-election during the company’s AGM.

Tafa and the Tollmans leave the company with increased revenue by 9 percent to P1 209 million (2017: P1 107 million) driven by the increase in bednights sold. According to the Wilderness financial report, overall bednight sales increased by 8 percent to 178 347 (2017: 165 864); excluding Governors’, bednight sales grew by 4 percent. The Group’s occupancy rate was up slightly to 59 percent (2017: 58 percent).

On the low the Pula gained more than 5 percent against the US Dollar over the year impacting negatively on revenue, and this was also the cause of the large foreign exchange losses on conversion of the Group’s foreign currency position. Also, EBITDA margin declined from 19 percent to 17 percent, primarily due to the higher foreign exchange losses as well as lower ‘Other gains’. The financial report also state that these gains primarily comprise insurance proceeds and net profit on disposal of assets, and have declined from P16 million to P1 million in the current year.

According to Wilderness financial report, impairment losses amounted to P9.6 million and relate to the impairment of decommissioned camp assets and camp assets damaged by flooding. Net finance costs were 108 percent higher at P19.2 million (2017: P9.2 million), being a consequence of the inclusion of Governors’ and the increased debt to finance capital investment and acquisitions, according to the financial report.

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Business

New study reveals why youth entrepreneurs are failing

21st July 2022
Youth

The recent study on youth entrepreneurship in Botswana has identified difficult access to funding, land, machinery, lack of entrepreneurial mindset and proper training as serious challenges that continue to hamper youth entrepreneurship development in this country.

The study conducted by Alliance for African Partnership (AAP) in collaboration with University of Botswana has confirmed that despite the government and private sector multi-billion pula entrepreneurship development initiatives, many young people in Botswana continue to fail to grow their businesses into sustainable and successful companies that can help reduce unemployment.

University of Botswana researchers Gaofetege Ganamotse and Rudolph Boy who compiled findings in the 2022 study report for Botswana stated that as part of the study interviews were conducted with successful youth entrepreneurs to understand their critical success factors.

According to the researchers other participants were community leaders, business mentors, Ministry of Trade and Industry, Ministry of Youth, Gender, Sport and Culture, financial institutions, higher education institutions, non-governmental institutions, policymakers, private organizations, and support structures such as legal and technical experts and accountants who were interviewed to understand how they facilitate successful youth entrepreneurship.

The researchers said they found that although Botswana government is perceived as the most supportive to businesses when compared to other governments in sub-Saharan Africa, youth entrepreneurs still face challenges when accessing government funding. “Several finance-related challenges were identified by youth entrepreneurs. Some respondents lamented the lack of access to start-up finance, whereas others mentioned lack of access to infrastructure.”

The researchers stated that in Botswana entrepreneurship is not yet perceived as a field or career of choice by many youth “Participants in the study emphasized that the many youth are more of necessity entrepreneurs, seeing business venturing as a “fall back. Other facilitators mentioned that some youth do not display creativity, mind-blowing innovative solutions, and business management skills. Some youth entrepreneurs like to take shortcuts like selling sweets or muffins.”

According to the researchers, some of the youth do not display perseverance when they are faced with adversity in business. “Young people lack of an entrepreneurial mindset is a common challenge among youth in business. Some have a mindset focused on free services, handouts, and rapid gains. They want overnight success. As such, they give up easily when faced with challenges. On the other hand, some participants argue that they may opt for quick wins because they do not have access to any land, machinery, offices, and vehicles.”

The researchers stated that most youth involved in business ventures do not have the necessary training or skills to maintain a business. “Poor financial management has also been cited as one of the challenges for youth entrepreneurs, such as using profit for personal reasons rather than investing in the business. Also some are not being able to separate their livelihood from their businesses.

Lastly, youth entrepreneurs reported a lack of experience as one of the challenges. For example, the experience of running a business with projections, sticking to the projections, having an accounting system, maintaining a clean and clear billing system, and sound administration system.”

According to the researchers, the participants in the study emphasized that there is fragmentation within the entrepreneurial ecosystem, whereby there is replication of business activities without any differentiation. “There is no integration of the ecosystem players. As such, they end up with duplicate programs targeting the same objectives. The financial sector recommended that there is a need for an intermediary body that will bring all the ecosystem actors together and serve as a “one-stop shop” for entrepreneurs and build mentorship programs that accommodate the business lifecycle from inception to growth.”

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Business

BHC yearend financial results impressive

18th July 2022
BHC

Botswana Housing Corporation (BHC) is said to have recorded an operating surplus of P61 Million, an improvement compared to the previous year. The housing, office and other building needs giant met with stakeholders recently to share how the business has been.

The P61 million is a significant increase against the P6 million operating loss realized in the prior year. Profit before income tax also increased significantly from P2 million in the prior year to P72 million which resulted in an overall increase in surplus after tax from P1 million prior year to P64 million for the year under review.

Chief of Finance Officer, Diratsagae Kgamanyane disclosed; “This growth in surplus was driven mainly by rental revenue that increased by 15% from P209 million to P240 million and reduction in expenditure from P272 million to P214 million on the back of cost containment.”
He further stated that sales of high margin investment properties also contributed significantly to the growth in surplus as well as impairment reversals on receivables amounting to P25 million.

It is said that the Corporation recorded a total revenue of P702 million, an 8% decrease when compared to the P760 million recorded in the prior year. “Sales revenue which is one of the major revenue streams returned impressive margins, contributing to the overall growth in the gross margin,” added Kgamanyane.

He further stated professional fees revenue line declined significantly by 64% to P5 million from P14 million in the prior year which attributed to suspension of planned projects by their clients due to Covid-19 pandemic. “Facilities Management revenue decreased by P 24 million from P69 million recorded in prior year to P45 million due to reduction in projects,” Kgamanyane said.

The Corporation’s strength is on its investment properties portfolio that stood at P1.4 billion at the end of the reporting period. “The Corporation continues its strategy to diversify revenue streams despite both facilities management income and professional fees being challenged by the prevailing economic conditions that have seen its major clients curtailing spending,” added the CEO.

On the one hand, the Corporation’s Strategic Performance which intended to build 12 300 houses by 2023 has so far managed to build 4 830 houses under their SHHA funding scheme, 1 240 houses for commercial or external use which includes use by government and 1 970 houses to rent to individuals.

BHC Acting CEO Pascaline Sefawe noted that; BHC’s planned projects are said to include building 336 flat units in Gaborone Block 7 at approximately P224 million, 100 units in Maun at approximately P78 million, 13 units in Phakalane at approximately P26 million, 212 units in Kazungula at approximately P160 million, 96 units at approximately P42 million in Francistown and 84 units at approximately P61 million in Letlhakane. Emphasing; “People tend to accuse us of only building houses in Gaborone, so here we are, including other areas in our planned projects.”

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Business

Commercial banks to cash big on high interest rates on loans

18th July 2022
Commercial-banks

Researchers from some government owned regulatory institutions in the financial sector have projected that the banking sector’s profitability could increase, following Bank of Botswana Monetary Policy Committee recent decision to increase monetary policy rate.

In its bid to manage inflation, Bank of Botswana Monetary Policy Committee last month increased monetary policy rate by 0.50 percent from 1.65 percent to 2.15 percent, a development which resulted with commercial banking sector increasing interest rate in lending to household and companies. As a result of BoB adjustment of Monetary Policy Rate, from 1.65 percent to 2.15 percent commercial banks increased prime lending rate from 5.76 percent to 6.26 percent.

Researchers from Bank of Botswana, the Non-Bank Financial Institutions Regulatory Authority, the Financial Intelligence Agency and the Botswana Stock Exchange indicated that due to prospects of high inflation during the second half of 2022, there is a possibility that the Monetary Policy Committee could further increase monetary policy rate in the next meeting in August 25 2022.

Inflation rose from 9.6 percent in April 2022 to 11.9 percent in May 2022, remaining above the Bank of Botswana medium-term objective range of 3 – 6 percent. According to the researchers inflation could increase further and remain high due to factors that include: the potential increase in international commodity prices beyond current forecasts, logistical constraints due to lags in production, the economic and price effects of the ongoing Russia- Ukraine conflict, uncertain COVID-19 profile, domestic risk factors relating to possible regular annual administered price adjustments, short-term unintended consequences of import restrictions resulting with shortages in supplies leading to price increases, as well as second-round effects of the recent increases in administered prices “Furthermore, the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices could add upward pressure to inflation,” said the researchers.

The researchers indicated that Bank of Botswana could be forced to further increase monetary policy rate from the current 2.15 percent if inflation rises persistently. “Should inflation rise persistently this could necessitate an upward adjustment in the policy rate. It is against this background that the interest rate scenario assumes a 1.5 percentage points (moderate scenario) and 2.25 percentage points (severe scenario) upward adjustment in the policy rate,” said the researchers.

The researchers indicated that while any upward adjustment on BoB monetary policy rate and commercial banks prime lending rate result with increase in the cost of borrowing for household and compnies, it increase profitability for the banking sector. “Increases in the policy rate are associated with an overall increase in bank profitability, with resultant increases in the capital adequacy ratio of 0.1 percentage points and 0.2 percentage points for the moderate and severe scenarios, respectively,” said the researchers who added that upward adjustment in monetary policy rate would raise extra capital for the banking sector.

“The increase in profit generally reflects the banking industry’s positive interest rate gap, where interest earning assets exceed interest earning liabilities maturing in the next twelve months. Therefore, an increase of 1.5 percentage points in the policy rate would result in industry gains of P71.7 million (4.1 percent increase), while a 2.25 percentage points increase would lead to a gain of P173.9 million (6.1 percent increase), dominated by large banks,” said the researchers.

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