Botswana Investment & Trade Centre (BITC) revealed this week that since its inception in 2013, the organization has opened export windows worth over P10 billion. Newly appointed BITC Chief Executive Officer (CEO), Keletsositse Olebile shared this during a round table discussion with the media in Gaborone this week.
“We have developed compelling value propositions , this are well package documents that says in the beef value chain for example where are the specific opportunities that we can take out to market and not just in beef but also in coal, soda ash just to name but few,” he said. Olebile explained that export-led investment promotion was a key deliverable in the BITC mandate and the organization take pride on considerably satisfactory output in such.
He underscored that this was the export earnings of companies they assisted only, and products uptake they facilitated. “We only measure our performance in areas and companies we assisted,” he said. Olebile explained BITC pushes the export-led narrative because the local market is small for business.
“For Botswana it is a reality that we are a very small population and the most pronounced reason why investors pick a particular location to set up shop has been established to be the size of a market, because we are such a limited market it becomes very key for us to though a location in Botswana find access into the region for our Botswana based factories and commodity producers. That is why we running some of this commendable drives for export promotion,” explained the new BITC chief.
BITC CEO also highlighted that one of the key export promotion initiatives that b fruits were inter boarder trade to leverage fully on duty free arrangements, SACU and other trades facilitation windows. “We have also successfully managed to facilitate cross boarder value chain linkages to say, if a certain industry is flourishing in one of our neighboring countries how can we tap in the value chain and supply some commodities required in that particular industry,” he said.
He cited an example of car manufacturing in South Africa. “That is to say for industries such as vehicle manufacturing or assembly plant we will be on the look out to identify what we can effectively house in Botswana to be able to accelerate job creation here,” he said. According to BITC, cross boarder linkages have been able to create a very effective window for Botswana based companies to access established and much bigger regional markets.
“We emphasize auto components manufacturing to say let companies set up here with a view to supply bigger industrial plants in South African for example, and we have successfully delivered that with companies such Kromberg & Schubert, and a number of manufacturing companies in Lobatse, which are doing business without sister government investment arm Botswana Development Corporation(BDC)”
BITC Director for Export Promotion shared that for the five year period under the just ended strategy ,leading products which contributed significantly to BITC ‘s facilitated export earnings basket were salt and soda ash ,coal and even the struggling beef industry. “We have been working closely with Botswana Ash and we assisted them with improving their effectiveness as an exporter, facilitating them to access established market such as the Zambian & DRC markets which are key consumers of salt and soda ash after South Africa,” she said.
BITC executives further explained that to continue pushing the export-led economy agenda various strategic proposition were already being put in place to harness value chain businesses that can be birthed from salt and soda ash, coal and beef. “We are already in final stages of completing a feasibility study to look at how we can facilitate the setting-up of chemical processing plants and glass manufacturing using the soda ash to ensure that we create the much needed jobs,” shared the Acting Chief Operations Officer, Reginald Selelo.
Olebile highlighted that in the new strategy for BITC deliberate actions will be taken to push and advocate for the liberation of the beef sector “through regional opportunities mapping, identification of natural endowments that can sponsor economic sectors to thrive in a particular environment, the beef industry has been established as a key sector that we have comparative and competitive advantage as a country so we are pushing for the transformation of BMC and by in large the entire sector so that it performs to its full potential of delivering even more jobs for our people” he said
BITC also revealed that there were plans to resuscitate Ostrich farming industry to further deliver more export earnings. “We have recently visited the Dibete Ostrich facility where plans were conceived to revitalize the industry with assistance from benchmarking missions in our neighboring South Africa, the latter account for more that 65 percent of global market share, so we have engaged with the Ministry of Agriculture in that regards,” shared the CEO.
It was also signaled that processes were in place to implement Coal value propositions in a bid to unearth the industry value chains. Leading minds in the coal industry have reiterated that Botswana needs not to look any further in creating jobs for its people and diversifying the mining industry from diamond sector dominance. Latest prospected reserves indicate that Botswana sits on over 200 billion tonnes of coal deposits of which contain different segments of grade value as per economically minable mineralization.
Though a number of companies mostly with Australian origin are already on the ground exploring the economic mineralization of the coal deposits, experts observed that further robust steps must be taken to develop a world class coal industry that can attract global capital and major investment players in turn birthing rigorous industrialization. BITC says in its international missions to lure investors into Botswana such as the recent one in Dubai and upcoming one in China coal industry was one the earmarked sectors to woo external capital into the country.
“We are looking into the entire energy sector, in the areas of renewable energy –coal-methane space, bio gas and bio diesel, we are also working with relevant stakeholders to find investors for the coal-liquid plant which is earmarked to leverage on the abundant coal and make fuel out it, petroleum products, industrial reagents and factory chemical components in turn creating thousands of jobs, boosting our export earnings and growing our economy,” shared Olebile.
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.”
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.”
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.