New African Properties Limited ("NAP") LTD a public variable rate loan stock company listed on the Botswana Stock Exchange (BSE) on 28 September 2011 has realized an improved percentage, with Selibe Phikwe making up more of the realized percentage.
The company headed by JT Myanhardt has in their unaudited interim results for the 6 months period ending January 31st 2018 explained that vacancies have improved during the period. The said vacancies have gone down to 2.5 percent of gross lettable area from the 3.2 percent which was last reported in the full year 2017 financial results. Even so, NAP highlights that Selibe Phikwe contributes tremendously to the 47 percent of total which saw a 36 percent increase in vacancies in this area over the period.
Excluding Selebi Phikwe, the vacancy level is reported to be 1.4 percent, a difference of 1.1 percent realized when the former copper mining town is added. Selibe Phikwe which continues to suffer the effects of the closure of the BCL Mine is according to the results contributing to the high registered number of the vacant properties. Even with plans to resuscitate the town through the Selibe-Phikwe Economic Development unit (SPEDU) region, a number of investors have not shown any major changes financially even after the zero (0) percent tax incentive introduced early this year.
According to the results, 31 percent of NAP leases for the non-vacant buildings are set to expire this financial year and some will expire in the first half. This though leaves the loan stock company’s current market capitalisation of P1.8 billion with some of its balances due in the second half and weighted towards year end.
The current demand for assets in Botswana has had an impact on the pricing and availability of assets for acquisition. Having noted in the past financial results restrictions in granting licenses to foreign controlled apparel retailers by the government is bound to increase their turn over this year, NAP noted in their past results.
Distributable income for the 6 months amounted to P74.1 million which equates to 12.25Thebe per linked unit. A 9.3 percent increase on the comparable period of 2017 which saw a registered 67 million amounting to P11. 21 thebe. The half year results highlights a growth in distributable income attributable to 10.4 percent increase in net rental income which is reported to have been reduced by the impact of lower net investment income and increased portfolio costs and tax.
The net rental income growth included an amount relating to a prior period following the finalization of a contractual rent review that was outstanding at last year end. Excluding the not yet finalized review, net rental income grew by 8.3 percent. The net value of these items is less than reported last year, which results in a P7.9 million decrease in profit.
The company owns a portfolio of strategically located retail properties in prime shopping nodes throughout Botswana as well as a portfolio of Namibian retail properties. The portfolio comprises 64 properties, predominantly retail and Botswana based, with a small exposure of 3 percent to the Namibian retail and 1 percent in Botswana industrial. Certain Botswana retail properties have a small office component but properties are categorized based on primary use.
The acquisition and development of the properties is reported to have been driven by the demand for retail property and as a result the majority of the properties are located in urban and semi-urban areas of Gaborone, Molepolole, Tlokweng, Maun, Kasane and Selebi Phikwe
There have been no further changes in the portfolio during the year and there are no material commitments or contingent liabilities at 31 July 2016. The top ten tenants contribute approximately 48 percent of total rental and occupy 51 percent of gross lettable area. These tenants are all well-known and established operators which include Pick 'n Pay, Spar, Choppies, Mr Price, Woolworths, Pepkor, Furnmart, Knockout, Payless and CB Stores.
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.
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.
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.