After realizing that Botswana is tempting for real estate investors as it has a high percentage of listed property companies, Africa’s second most transparent property market, API Events' BotsReal Property & Infrastructure found it fit to organise a Forum to be held on the 30th of May 2018.
The forum will bring the country’s property market into sharp focus as it explores opportunities in the market through the theme, ‘The search for Growth’. API Events, Africa’s leading real estate conferencing company, notes that Botswana has been selected for this year‘s conference because there has been substantial realization that Botswana has potential for real estate investments.
API Events' Managing Director (MD) Kfir Rusin noted that the country is viewed as a mature market by property investors and developers. He said the country presents an increasingly compelling investment case for those searching for stable long-term returns more especially because the Gross Domestic Product (GDP) is expected to grow by 4.5 percent this year.
Despite these solid credentials and the country’s track record in investing its mineral wealth into development and infrastructure projects, the Rusin noted that Botswana has been buffeted by strong economic headwinds of late, which has resulted in a slowdown in development projects, and this has forced market players to innovate.
He further noted that while there has been a rush to push developments to smaller towns outside Gaborone, his advice would be that of caution. He sensitises that although there is substantial market, there are many precautions to take when selecting an area to invest in. he gave the example of Palapye; “Take Palapye for instance where there is quite a bit of economic activity with the power stations, but, after years of under supply, there are now four new shopping malls either completed, or under construction.”
Rusin explained that this has resulted in massive over supply with little to no chance of all the projects being successful, in his view only the best located and developed will survive. While apprehensive of the opportunities in Francistown and Selibi Phikwe, he is cautiously optimistic about recently tendered Botswana Railways mixed use scheme in the former.
API Events’s Rusin has cited that unlike its resource-heavy regional counterparts, Botswana’s upper Investment grade credit rating which is still best in Africa, and its political stability has enabled it to attract investment especially in its highly coveted real estate sector. He notes that this country must be among the best rated as one of the world’s most improved performing markets.
The API Events MD further explained that despite the sombre sentiment surrounding the industry over the last few years, the housing market has remained solid, and overall the real estate market has remained extremely resilient. Rusin noted that they feel there is an exceptional amount of value to be extracted and created across the market both here and in neighbouring markets, “as Prime Time has accomplished in Zambia."
In conclusion he stated that to drive investment and set the agenda for its stakeholders, the BotsReal Forum's strategic agenda is designed to unpack the local market with presentations by local and regional experts including but not limited to Sandy Kelly, MD of Prime Time Property Holdings Limited and Sethebe Manake CEO of Vantage Holdings.
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.
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.
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”