RDC properties, a developer and Property Investment company listed on the Botswana Stock Exchange (BSE) has in a challenging local market through its results projected a good year.
The management has reported results which show great progress in line with their effort to diversify their income stream. The audited financial results for the year ended 31 December 2017 reflect revenue growth of 9 percent and net income from operations before fair value adjustments which went up to 16 percent.
RDC says that the principal accounting policies are consistent in all material aspects with those adopted in the previous year. The financial results and highlights Revenue increased from P90.9 million in 2016 to P99.2 million in 2017, showing an increase of 9 percent. Profit after tax for the year went up 7 percent including P 86 million investment property valuation gains. Based on these results, it shows the company distribution per linked unit increased by 15 percent. The Adjusted Net Asset Value (NAV) stands at P3.13 per linked unit up 10 percent compared to the 2.84 per linked unit of 2016 and return on equity stands at 13 percent no change compared to 2016.
The strategic intent of this investment according to the company is to be able to grow a small portfolio in an exciting area of the USA and an opportunity to create a relatively small but important currency hedge to the Pula. In line with their strategy of providing a balance of yielding properties and carrying out developments, RDC cited that they have continued to seek opportunities with considerable value enhancing projects. “We are working on the details of a partnership that could see us involved in the development and joint ownership of a substantial number of lodges in Namibia.”
These projects, in addition to the convenient centres that RDC will soon be building would significantly increase the footprint in Namibia. The company further highlighted that the XaiXai Shopping development in Mozambique is progressing well with anchor tenant fit out to commence in Quarter (Q) 2 2018. Construction for the other new building development in Maputo (Zimpeto suburb) has commenced. Other opportunities are under review. The development of the new 45 residential apartments at the ICC Flats property in Gaborone is progressing well and should be completed in Q3 2018, on track and within budget.
“In line with our commitment to meaningfully contribute to the social upliftment of the communities within which we operate, we have been actively pursuing the vision of creating a retirement offering in Botswana. We are presently in an advance stage of design for such offering. We are looking forward to presenting this project in the 2018 year,”the company said in a statement.
The investment and property portfolio, it said, grew 31 percent to P1.6 billion. The largest contributor to the growth in the portfolio value relates to the successful acquisition of a controlling stake in Capitalgro (Proprietary) Limited (“Capitalgro”), South Africa. The RDC management has explained that their growth in revenue is largely due to the performance of Chobe Marina Lodge which improved performance of Standard Chartered house. The management has explained that ZAR (R) 50.9million was invested in Capitalgro to secure a 34.85 percent which qualified them for the controlling stake in the issued share capital of the South African company.
The RDC management has explained that their decision to acquire a stake in Capitalgro is an exciting opportunity to grow the Capitalgro portfolio and continue to cement RDC’s presence in South Africa with stable, predictable and low risk income streams. Ever since the acquisition, the management notes, Capitalgro managed to purchase “The Edge” building. The Edge is explained to be a state of the art nine-storey commercial building located in Tyger valley, Cape Town. RDC has explained that it further injected R120 million investments into Capitalgro, to facilitate for the Purchase of the Edge which resulted in a 63 percent stake of the company.
Capitalgro is managed by a team solely Mandated to grow the Capitalgro portfolio and the members are experienced property professionals with a broad knowledge of the local market. This aspect clearly broadens RDC’s ability to control and further grow in the region. The management asserted that their investment in Capitalgro has been fruitful since as they were offered the opportunity to secure a footstep in the Unites States of America (USA) market. RDC acquired shares in a development company in Nashville, Tennessee with an investment of $ 3 million.
The recent study on youth entrepreneurship in Botswana has identified difficult access to funding, land, machinery, lack of entrepreneurial mindset and proper training as serious challenges that continue to hamper youth entrepreneurship development in this country.
The study conducted by Alliance for African Partnership (AAP) in collaboration with University of Botswana has confirmed that despite the government and private sector multi-billion pula entrepreneurship development initiatives, many young people in Botswana continue to fail to grow their businesses into sustainable and successful companies that can help reduce unemployment.
University of Botswana researchers Gaofetege Ganamotse and Rudolph Boy who compiled findings in the 2022 study report for Botswana stated that as part of the study interviews were conducted with successful youth entrepreneurs to understand their critical success factors.
According to the researchers other participants were community leaders, business mentors, Ministry of Trade and Industry, Ministry of Youth, Gender, Sport and Culture, financial institutions, higher education institutions, non-governmental institutions, policymakers, private organizations, and support structures such as legal and technical experts and accountants who were interviewed to understand how they facilitate successful youth entrepreneurship.
The researchers said they found that although Botswana government is perceived as the most supportive to businesses when compared to other governments in sub-Saharan Africa, youth entrepreneurs still face challenges when accessing government funding. “Several finance-related challenges were identified by youth entrepreneurs. Some respondents lamented the lack of access to start-up finance, whereas others mentioned lack of access to infrastructure.”
The researchers stated that in Botswana entrepreneurship is not yet perceived as a field or career of choice by many youth “Participants in the study emphasized that the many youth are more of necessity entrepreneurs, seeing business venturing as a “fall back. Other facilitators mentioned that some youth do not display creativity, mind-blowing innovative solutions, and business management skills. Some youth entrepreneurs like to take shortcuts like selling sweets or muffins.”
According to the researchers, some of the youth do not display perseverance when they are faced with adversity in business. “Young people lack of an entrepreneurial mindset is a common challenge among youth in business. Some have a mindset focused on free services, handouts, and rapid gains. They want overnight success. As such, they give up easily when faced with challenges. On the other hand, some participants argue that they may opt for quick wins because they do not have access to any land, machinery, offices, and vehicles.”
The researchers stated that most youth involved in business ventures do not have the necessary training or skills to maintain a business. “Poor financial management has also been cited as one of the challenges for youth entrepreneurs, such as using profit for personal reasons rather than investing in the business. Also some are not being able to separate their livelihood from their businesses.
Lastly, youth entrepreneurs reported a lack of experience as one of the challenges. For example, the experience of running a business with projections, sticking to the projections, having an accounting system, maintaining a clean and clear billing system, and sound administration system.”
According to the researchers, the participants in the study emphasized that there is fragmentation within the entrepreneurial ecosystem, whereby there is replication of business activities without any differentiation. “There is no integration of the ecosystem players. As such, they end up with duplicate programs targeting the same objectives. The financial sector recommended that there is a need for an intermediary body that will bring all the ecosystem actors together and serve as a “one-stop shop” for entrepreneurs and build mentorship programs that accommodate the business lifecycle from inception to growth.”
Botswana Housing Corporation (BHC) is said to have recorded an operating surplus of P61 Million, an improvement compared to the previous year. The housing, office and other building needs giant met with stakeholders recently to share how the business has been.
The P61 million is a significant increase against the P6 million operating loss realized in the prior year. Profit before income tax also increased significantly from P2 million in the prior year to P72 million which resulted in an overall increase in surplus after tax from P1 million prior year to P64 million for the year under review.
Chief of Finance Officer, Diratsagae Kgamanyane disclosed; “This growth in surplus was driven mainly by rental revenue that increased by 15% from P209 million to P240 million and reduction in expenditure from P272 million to P214 million on the back of cost containment.” He further stated that sales of high margin investment properties also contributed significantly to the growth in surplus as well as impairment reversals on receivables amounting to P25 million.
It is said that the Corporation recorded a total revenue of P702 million, an 8% decrease when compared to the P760 million recorded in the prior year. “Sales revenue which is one of the major revenue streams returned impressive margins, contributing to the overall growth in the gross margin,” added Kgamanyane.
He further stated professional fees revenue line declined significantly by 64% to P5 million from P14 million in the prior year which attributed to suspension of planned projects by their clients due to Covid-19 pandemic. “Facilities Management revenue decreased by P 24 million from P69 million recorded in prior year to P45 million due to reduction in projects,” Kgamanyane said.
The Corporation’s strength is on its investment properties portfolio that stood at P1.4 billion at the end of the reporting period. “The Corporation continues its strategy to diversify revenue streams despite both facilities management income and professional fees being challenged by the prevailing economic conditions that have seen its major clients curtailing spending,” added the CEO.
On the one hand, the Corporation’s Strategic Performance which intended to build 12 300 houses by 2023 has so far managed to build 4 830 houses under their SHHA funding scheme, 1 240 houses for commercial or external use which includes use by government and 1 970 houses to rent to individuals.
BHC Acting CEO Pascaline Sefawe noted that; BHC’s planned projects are said to include building 336 flat units in Gaborone Block 7 at approximately P224 million, 100 units in Maun at approximately P78 million, 13 units in Phakalane at approximately P26 million, 212 units in Kazungula at approximately P160 million, 96 units at approximately P42 million in Francistown and 84 units at approximately P61 million in Letlhakane. Emphasing; “People tend to accuse us of only building houses in Gaborone, so here we are, including other areas in our planned projects.”
Researchers from some government owned regulatory institutions in the financial sector have projected that the banking sector’s profitability could increase, following Bank of Botswana Monetary Policy Committee recent decision to increase monetary policy rate.
In its bid to manage inflation, Bank of Botswana Monetary Policy Committee last month increased monetary policy rate by 0.50 percent from 1.65 percent to 2.15 percent, a development which resulted with commercial banking sector increasing interest rate in lending to household and companies. As a result of BoB adjustment of Monetary Policy Rate, from 1.65 percent to 2.15 percent commercial banks increased prime lending rate from 5.76 percent to 6.26 percent.
Researchers from Bank of Botswana, the Non-Bank Financial Institutions Regulatory Authority, the Financial Intelligence Agency and the Botswana Stock Exchange indicated that due to prospects of high inflation during the second half of 2022, there is a possibility that the Monetary Policy Committee could further increase monetary policy rate in the next meeting in August 25 2022.
Inflation rose from 9.6 percent in April 2022 to 11.9 percent in May 2022, remaining above the Bank of Botswana medium-term objective range of 3 – 6 percent. According to the researchers inflation could increase further and remain high due to factors that include: the potential increase in international commodity prices beyond current forecasts, logistical constraints due to lags in production, the economic and price effects of the ongoing Russia- Ukraine conflict, uncertain COVID-19 profile, domestic risk factors relating to possible regular annual administered price adjustments, short-term unintended consequences of import restrictions resulting with shortages in supplies leading to price increases, as well as second-round effects of the recent increases in administered prices “Furthermore, the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices could add upward pressure to inflation,” said the researchers.
The researchers indicated that Bank of Botswana could be forced to further increase monetary policy rate from the current 2.15 percent if inflation rises persistently. “Should inflation rise persistently this could necessitate an upward adjustment in the policy rate. It is against this background that the interest rate scenario assumes a 1.5 percentage points (moderate scenario) and 2.25 percentage points (severe scenario) upward adjustment in the policy rate,” said the researchers.
The researchers indicated that while any upward adjustment on BoB monetary policy rate and commercial banks prime lending rate result with increase in the cost of borrowing for household and compnies, it increase profitability for the banking sector. “Increases in the policy rate are associated with an overall increase in bank profitability, with resultant increases in the capital adequacy ratio of 0.1 percentage points and 0.2 percentage points for the moderate and severe scenarios, respectively,” said the researchers who added that upward adjustment in monetary policy rate would raise extra capital for the banking sector.
“The increase in profit generally reflects the banking industry’s positive interest rate gap, where interest earning assets exceed interest earning liabilities maturing in the next twelve months. Therefore, an increase of 1.5 percentage points in the policy rate would result in industry gains of P71.7 million (4.1 percent increase), while a 2.25 percentage points increase would lead to a gain of P173.9 million (6.1 percent increase), dominated by large banks,” said the researchers.