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Bona Life alive but wobbly

Insurance and pension funds continue to be important in people’s lives, but the tussle between Capital Management Botswana (CMB) and Bona Life alongside the largest pension fund Botswana Public Officers Pension Fund (BPOPF) has in the past months driven fear into the minds of investors and the public.

The three parties have been in and out of court battling over the misappropriation and or misuse as well as control of the funds. Accusations are flying thick and fast between some of the biggest players in this industry. This week, the Chief Executive Officer of Bona Life Regina Sikalesele- Vaka took to the podium to defend her company against “defamatory” attacks from CMB.

 In an effort to rise over the Rapula Okaile and Tim Marsland’s owned CMB’s 650 million claim against Bona Life, the Vaka’s company which has been reported to have zero life is said to be surviving – hence allegations of insolvency are not true. Resultant shortfalls that emanated after the Mauritius parent company was placed under curatorship, the Bona Life was able to build a brand and penetrate the market, Vaka said.

The Insurance Company Founded by the Sikalesele-Vaka has responded to the CMB legal claims – saying they are defamatory. The founding CEO has noted that the P 650 million claim has been made in bad faith and cannot be sustained in any court of law. CMB through its lawyer Gabriel Kanjabanga is demanding P650 million from Sikalesele-Vaka, personally.

Sikalesele-Vaka also noted that there is an engagement of correct bodies to take care of the situation. It has been widely reported that in their legal battle, Bona Life has been seeking additional funds over and above the P50 million which was initially invested by CMB through a Botswana Opportunities Partnership (BOP) fund, managed by CMB on behalf of BPOPF. The Bona Life CEO explained that CMB, which is under statutory management after making investment in companies including the insurance company and sold to the BOP after which there was a dismissal of BPOPF, has no grounds to stand on in its claim against her or Bona Life.

She noted that the statutory manager’s role continues to be the one that oversees that interests of clients and the non-banked institutions remain protected from loss and to ensure recommendations are made on how to be best protected. The CEO has distanced herself from the P 477 million which was managed by CMB but remains unaccounted for.

On the financial status of the company, Sikalesele-Vaka explained that Bona Life like all other start-ups is facing challenges financially that will not just be blown away. “A life insurance company is expected to make a loss 3 to 5 years so the financial position of Bona Life has not yet stabilized.”

She explained that a company’s solvency remains essential as insurance is not a 5 year long investment but a long term one which can take over 30 years with many liabilities piling up. “I cannot rule Bona Life out of financial strains as like other businesses it has no static financial stability, it remains volatile.”  

Sikalesele-Vaka has explained that the solvency issue has been addressed by the abrupt suspension of sale of annuity business. Also she notes there is a portfolio optimization which will see a comprehensive review of the business being conducted to make way for stakeholder engagements. The CEO explained that Bona Life decided to report CMB to Non-Bank Financial Institutions Regulatory Authority (NBFIRA) after it received inconsistent reports in regard to its investments with CMB.

Even though this may be the case, Sikalesele-Vaka emphasized that CMB is with 25 percent of Bona Life and under investigation by the Directorate on Corruption and Economic Crime (DCEC). The CEO said that 84 percent of the public funds are within Bona Life care. She added that the insurance has invested in secure Botswana Government bonds and fixed instruments. Sikalesele-Vaka further explained that due diligence had been conducted on all shareholders and were vetted by the regulator citing that the regulator’s position still remains important to their existence.

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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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