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.
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.