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Special Funds hold over P8 billion

As of last Friday, all of government’s 34 Special Funds stood at a total of 8 billion pula, Minister of Finance and Economic Development, Kenneth Matambo revealed to the media this Tuesday at the ministry headquarters.

The briefing followed the minister’s presenting to parliament progress of the funds last week Friday. Matambo shared that since his ministry had now taken charge of all government special funds, his ministry would facilitate the transfer of the funds into the Government Remittances Account held at the Bank of Botswana immediately.  

“We have began the process of transferring all these funds into into the Government Remittances Account held at the Bank of Botswana,  this is to ensure that government closely monitors the use of such funds thereby ensuring compliance with both the Public Finance Management Act and the Fund Order,” he said.

Matambo also said that following approval by cabinet, his ministry as highlighted in parliament on Friday will review all the 34 special funds, “This is a key process that will inform many of decisions to make afterwards such as possible abolishment of some funds, but the interest here is to improve their management and administration, and we anticipate that the process of an intensive review be completed in 3-4 months.”

On Friday Minister Matambo told lawmakers that as the overall custodian of the country's public finances, his ministry was concerned with the management of several of the special funds citing non-compliance issues such as use of funds for unintended purpose as one of the key concerns.

“From now on and as of after the review we will be very effective in ensuring that these funds which are resourced by public monies will not be diverted to what it wasn’t established for, we will be the ones making payments and authorizing any transaction so we will screen prior to issuing out this monies for any financial requisite,” he said.

A unit has been established under the office of the Accountant General to ensure that there is compliance with the Public Finance Management Act provisions as well as to ensure consistency with domestic anti-money laundering and counter financing of terrorism laws and standards.

Matambo noted that where the review reveals non-compliance with the statute establishing the special fund or where there was proof of gross mismanagement, the ministry would exercise its powers and re-designate another public officer to take over the administration of the fund.

The establishment of special funds by government is guided by Section 117 of the Constitution of Botswana and Section 37(1) of the Public Finance Management Act of 2011 which states that “any fund of public revenues established by any written law for some specific purpose or any trust fund held by government and any fund created by the minister in exercise of powers conferred upon him by Section 38”. From this definition, three types of Special Funds can be created: (i) through any written law; (ii) by deed of trust; and (iii) through a Fund Order.”

Regardless of the type, collectively, all Special Funds are implemented through a Statutory Instrument known as a Fund Order. Among the key components of a Fund Order are: (i) purpose for which the Fund is established: (ii) sources of funding for the Fund; (iii) the accounting officer for the Fund, who is responsible for its administration; and

(iv) investment of surplus funds. With regards to the latter i.e. investment of surplus funds, Section 40 (5) of the Public Finance Management Act states that “…any moneys held in a Special Fund which are not required for immediate use may be invested in accordance with the objects of such Special Fund as the Accountant General may direct.”

Government has learnt hard through the National Petroleum Fund (NPF) scandal. The matter, which is now before the courts is regarded as the biggest money laundering scandal to have hit this country.

Early this year, when responding to the 2017/18 Budget Speech while still a back bencher Specially Elected Member of Parliament, Bogolo Kenewendo reiterated that The NPF case exposed cracks in the public finance management system. “Though these funds such as the NPF are by law, they remain subject to very little scrutiny,” she said.

The Public Accounts Committee (PAC) also recently scrutinized these special funds and reported that some appeared in the Auditor General’s report but were not in the government accounts, while some of the special funds did not appear in both books. The Vocational Training Levy was cited by PAC as one fund whose management and administration did not reconcile with governance and financial management principles.

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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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