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Letshego brings agric financing segment to Botswana

Pan African micro finance lending Group, Letshego Holdings Limited is exploring prospects of tapping into the Agricultural sector as a way of diversifying its portfolio and contributing to the national economic diversification agenda of Botswana.

This was revealed by Letshego Group Executives in Gaborone this week on the sidelines of their Shareholders General meeting. When presenting the group 2017 financial results in Gaborone recently the Chief Executive Officer, Chris Low, said Letshego already has a sustainable and profitable model in Uganda and Rwanda financing watershed agricultural projects that contribute to employment creation in those countries.

Chris Low highlighted that in Rwanda and Uganda his company finances dairy farmers using different arrangements and packages such as resourcing farmers with complementary funds that improve their balance sheets in order for them to qualify for existing government subsidies. The CEO gave the example of their Rwanda agricultural pilot projects and pointed out that it the agriculture sector was crucial for Rwanda's growth and reduction of poverty.

He said agriculture has proved to be the backbone of the economy in Rwanda, noting that it accounts for 39 percent of Gross Domestic Product (GDP), 80 percent of employment, 63 percent of foreign exchange earnings, and 90 percent of the country's food needs.
This according to Chris Low made business sense to them with regards to profitable outputs. “The Agricultural Sector in East Africa is very profitable and as a matter of fact a major economic segment hence we began piloting our Agricultural Financing in that part of our Pan African market,” he said.

This week Letshego executives noted on the sidelines of their Shareholders General Meeting that the company recognizes the potential in Botswana’s Agricultural sector as a key sector for the county national economic diversification quest considering the fact that the economy is currently depended on mineral revenue.

Chris Low appreciated that agriculture creates jobs in large scale if it is operated commercially and profitably. However, he expressed the concern that financing the sector was highly risky and sometimes was very difficult to come up with sustainable models.  “We are currently working on setting up and commencing our Micro & Small Entrepreneurs Business (MSE) segment for Botswana. Our financing basket will encompass agriculture, housing and other non-major business streams,” Chris Low said.

He explained that the process is currently at the regulatory authorities such as the Non-Banking Financing Regulatory Authority (NBFIRA) and others. The Letshego CEO added that it was imperative for the setting up of this segment of the business to undergo all due diligence and market intelligence processes to ensure that his company comes with the best packages and products that are unique and complimentary to the existing services.

“One of our pillars just as enacted in our brand “ Letshego” is inclusive financing packages, we believe that inclusive finance requires the provision of simple, appropriate and affordable financial services to those who have historically been excluded from the formal financial sector.” Chris Low explained that through the MSE portfolio his company seeks to further support businesses that do not only contribute to the national economic development but directly cultivate potential and support communities and lives of the ordinary citizens.

“We know that agriculture is on the talks for potential substitution to mineral dependency but we will be selective to ensure that at the end of the day we get value for input at the same time impacting lives of our clientele positively.”  Chris Low also shared sentiments of other stakeholders and captains of industries that for financing institutions to go into agriculture in large volumes the regulations, ease of doing business and supportive initiatives have to be put in place by government and other major role players. “This sector is risky for lending thus to ensure and convince investors that their capital is safe infrastructure has to be in place and regulations must be loosened up,” he said.

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P230 million Phikwe revival project kicks off

19th October 2020
industrial hub

Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status.  The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.

This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago.  In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.

However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced.  Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.

The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.

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IMF projects deeper recession for 2020, slow recovery for 2021

19th October 2020

The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.

On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April.  For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.

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Botswana partly closed economy a further blow of 4.2 fall in revenue

19th October 2020

The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.

Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.

Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).

“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.

Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.

This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.

For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.

Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers.  “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.

‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’

According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.

Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.

“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.

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