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Afinitas Group to tackle its lofty deficit this year

Afinitas Limited British Managing Director Rupert McCammon believes the company will grow in leaps and bounds this year despite its latest financial report showing that it has been operating on deficit in 2017.  Afinitas is a green field investment pan African company incorporated in Botswana and listed in the Botswana Stock Exchange.

According to the latest results of the financial year which ended in 31 December 2017, Afinitas Limited recorded a loss of US$ 1 408 252 while last year its operating loss was at US$ 382 319. The Afinitas loss increased by US$1 025 933 in the last financial year. Between 2016 and 2017(for the period recorded) Afinitas did not move up its revenue as it only increased its revenue by US$ 119 595. McCammon wishes in this year, the company can grow its revenue in his statement.

“2017 was a year of building appropriate corporate structures and systems that will allow your company to grow in future years, these are now mainly in place. The challenge for 2018 and onwards will be to focus on increasing revenue in all three of the investee companies,” said McCammon.

Afinitas also increased expenses in 2017 to US$1 878 401 from US$704 058 in 2016. The expenses increased by US$ 1 1743 43. The report shows that in 2017 Afinitas spent more US$ 751 602 in Consulting and professional fees which took most of their expenses as the consultancy charges increased by US$ 594 577 from the US$157 045 in 2016.

Afinitas chairman Lesang Magang reiterated McCammon’s worry that the company has been making less revenue  if not nose-diving as far as revenue is concerned. Magang said from now on the company will focus on revenue growth across the Afinitas Group. He further promised that the existing corporate structure and their talented team will provide a strong platform to achieve this.

Magang said the operational focus for the Group was on building operational and corporate structures to support the business strategy in each of the investee companies. Afinitas has three investee businesses namely, Africa Events Limited, Ethiopia Investments Limited and Adventis Limited. Ethiopia Investments Limited is a holding company for investments in Ethiopia, Adventis is a pan African fund management company while Africa Events is a high level events management company.

According to the latest financial statement, Afinitas’s main revenue are derived from Africa Events Limited as its biggest event, the Africa Financial Services Investment Conference(AFSIC)  continued to show strong growth in delegate numbers, and revenue as it develops into one of the most important Africa investment events globally. Afinitas believes that AFSIC will thrive and grow more as Africa is likely to become one of the more exciting investment destinations globally.

Afinitas is also confident that Ethiopia Investments Limited that will grow this year amidst Ethiopia experiencing some political issues since 2015. “In light of the ongoing political and social developments in Ethiopia, it was deemed prudent to make an impairment provision for the operations in Ethiopia. Shareholders are advised that despite this provision management is optimistic that the Ethiopia operations have good potential for growth,” said Afinitas.

Commenting on Ethiopia’s political tension effect on the company’s performance, Afinitas Executive Director Leutlwetse Tumelo told BusinessPost that the political landscape in Ethiopia has not had any material adverse effects on their  operations in the country. “We maintain a positive long term outlook on Ethiopia as an investment destination,” he said.

The executive directors on the Board of Afinitas are Rupert McCammon (Managing Director) and Tumelo (Executive Director). Renowned economist Keith Jefferies is an independent non-executive director while Magang is a non-executive chairman. Magang takes a director’s fee of $7799, Jefferis $8644 and McCammon who does not earn a salary in his capacity as managing director pockets fee of $7802. As an executive director, Tumelo is entitled to a monthly salary of $74 394.

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

21st September 2020

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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