Botswana’s agriculture is constantly becoming a sunset industry, considering the sector’s stagnant budget allocation and overall performance over the years.
Despite its significant role in food security, rural development and poverty eradication, agriculture continues to receive the smallest share of Botswana’s National Budget compared to Ministries such as Defence, Justice and Security, Communication and Technology and Presidential Affairs, Governance and Public Administration.
This year’s allocation of 3 % or P1.34 billion of the Recurrent Budget to the Ministry of Agricultural Development and Food Security flouts the strategic thrust of this year’s national budget which is to promote growth, enhance economic diversification and create job opportunities.
The agricultural sector if prioritized, has the potential to be a major economic growth driver. Amid the potential that the sector has, it is worrisome that real agricultural expenditure has increased by merely 0.2 % from P1.10 billion in 2017 to P1.34 billion in 2018 after P1.07 billion in 2016.
Thus, a stagnant trend of agriculture expenditure as a proportion of total government expenditure over the years. This is despite the increase of agriculture gross value added to GDP in the third quarter of 2017 after declining from 2.8% in 2009 to 2.1% in 2016. The decline and stagnancy in total agricultural expenditure are causal factors to the fluctuating and insignificant agriculture gross value added to GDP.
This frustrates the country’s attainment of Sustainable Development Goals and nullifies the country’s commitment to Maputo Declaration on raising spending on agriculture to 10 % from the year 2008. Moreover, it sabotages the National Development Plan 11 and the country’s Vision 2036 which emphasis on agriculture as an area of consideration for sustainable economic growth.
The limited public expenditure on the sector also constrains the country’s ability to manage food prices volatility, unpredictable markets, the impact of climate change and other production hazards that are a constant threaten the country’s national security.
Botswana endures years of negative balance of agricultural trade, exposing the country to inflation of basic commodity prices of grains, oils and fresh produce. Adverse climatic conditions related to climate change (droughts and heatwaves) have not spared the agricultural sector, leading to poor yields and increased spending in subsidies of drought relief and programmes such Integrated Support Programme for Arable Agriculture Development (ISPAAD) and Livestock Management and Infrastructure Development (LIMID). Much of the allocated developmental budget will be spent in these programmes.
However, because of their neo-patrimonial nature, these programmes are evidently inefficient and unsustainable. Relative to this challenge is the perennial poor performance of agricultural State-Owned Enterprises, particularly National Development Bank which recorded a net loss of P168,2 million and Botswana Meat Commission with P229.7 million losses in 2017.
These programmes and enterprises have derailed the government investment in critical areas such as agricultural research and development (R&D), biosecurity and human capital. The Ministry of Agricultural Development and Food Security’s current expenditure on R&D is less than 2% of the total agricultural budget which is low compared other countries in the region.
This is despite that R&D is critical for high agricultural productivity and high returns on investment that will increase economic output (GDP output) and sustain the future of the sector. Biosecurity, particularly the protection of our national and internal borders from the spread of contagions such as foot and mouth, fruitful fly and evasive weeds and pests is strategically important as national security.
Our biotic economy is critical for other industries such trade and tourism (hotels and restaurants). In terms of human capital, the Ministry of Agriculture has a larger number of well-trained scientific officers who are unproductive due to a stressful work environment, limited resources and promotion and remuneration complaints which could be fully resolved by an increased budget share for the sector.
The stagnancy and declining of the recurrent and developmental budget allocation to agriculture limits the sector’s potential. Increased government spending in agriculture has proved elsewhere to have positive returns to economic growth, poverty reduction and sustainable development.
Therefore, the government needs to prioritize agricultural expenditure, closely monitor and ensure effective management of the allocated funds to improve the state of the sector. This can only be achieved from evidence-based policy supported by R&D, lobbying and participation by farmers through their organized associations. If agriculture continues to be neglected, it can have adverse effects on food security, which has implications for national security. Kgolagano Mpejane is a graduate of agribusiness and international development with interest in the Political Economy of Agriculture.
A squeaky and glittering metaphoric smile was the look reflected from the Pula against the greenback this week and money market researchers lean this on optimism following Monday’s announcement of another Covid-19 vaccine which is said to have boosted emerging market economies.
With other emerging market currencies, the Pula too reacted to optimism and fanfare on the new Covid-19 vaccine against the weakening US dollar which has been losing its shine since the uncertainty laden US elections.
After bouncing back into the Johannesburg Stock Exchange (JSE) last week Friday, following a year of being in the freezer, the Choppies stock started this week with much fluidity.
Choppies was suspended in both the Botswana Stock Exchange and its secondary listing at the JSE for failure to publish financial results. Choppies suspension on Botswana Stock Exchange was lifted on 27 July 2020. On Friday last week, when suspension was being lifted, Choppies explained that this came into fruition “following extensive engagement with the JSE.”
Choppies stock, prior to suspension, hit a mammoth decline in value of more than 60 percent, especially in September 2018. Waking from a 24 month freezer, last week the Choppies share price was at R0.64 and the stock did not make any movement.
However, Monday was the day when Choppies stock moved vibrantly, albeit volatile. Choppies’ value was on a high volatile mood on Monday, reaching highs of 200 percent. At noon, the same Monday, the Choppies share had reached R1.05. Before taking an uphill movement, Choppies stock slightly slipped by 2 cents. But the Choppies share rode up high and by lunch time the stock had reached the day’s summit of R2.00 and that was at 13:30 when investors were buying the stock for lunch.
The same eventful Monday saw gloom on the faces of Choppies rivals, when Choppies gained by 220.31 percent around lunch time its rivals in the JSE Food & Drug Retailers sector were licking wounds. Spar lost 2.94 percent, Pick Pay fell by 2.43 percent, Shoprite 7.52 percent and Dis-Chem 1.98 percent. The only gainer was Clicks by a paltry 0.51 percent.
In an interview with BusinessPost, Choppies sponsors at the JSE PSG Capital Managing Director Johan Holtzhausen explained that the retailer’s stock was in high demand after a long suspension. He said when a company list or a suspension is lifted the market needs to find itself on the pricing of the share.
“Initially when the suspension was lifted there were more buyers than sellers. As far as we could see this created a shortage of shares so to speak and resulted in the price at which the shares traded going to R1.20 and eventually R2.05 before finding its level around R0.80 sent from a JSE perspective.
This is marked dynamics and reflect that there are investors that are positive about the stock in the long run. This is a snapshot over a short period and one requires a longer period to draw further conclusions,” said Holtzhausen in an interview talking about the Choppies stock.
On Monday this week where the Choppies value grew by 200 percent, the stock took a turn looking down, closing the day at R0.87 from a high of R2.00. According to local stockbroker Motswedi Securities on Monday while there was no movement by Choppies in the local stock exchange as the retailer appeared on the board as 141,000 shares traded at P0.60 each.
However in Choppies’ secondary listing the stock price rallied to over 200 percent during intraday trading on Monday before losing steam and declining to around R0.87 share.
Before press yesterday Choppies opened the market with the stock starting the day at R0.80 then went flat for few hours before taking a slide downward, dropping 5 cents in 30 minutes. Choppies then went flat at R0.75 for 50 minutes yesterday before going up at 10:20 am where it nearly recovered the open day price of 80 cents, but was shy of 1 cent. From 79 cents the price went flat until noon.
Competition and Consumer Authority (CCA) has revealed that in its assessment of the Jet take over by Foschini, there were considerations on possible market rivalry and a clash in targeted classes.
According to a merger decision notice seen by this publication this week, high considerations were made to ensure that Foschini’s takeover of Jet is not anyhow an elimination of rivalry or competition or if the two entities; the targeted and the acquiring enterprise serves the same class of customers or offer the same products, to elude the anti-trust issues or a stretch of monopoly.
The two entities are South African retailers whose services stretched to Botswana shores. Last month local anti-trust body, CCA, received an acquisition proposal from South African clothing retailer, Foschini, stating their intentions to take-over Jet.
South African government’s Business Rescue Practitioners earlier this year after finding out that Jet’s mother company, Edcon, is falling apart, made a decision that Foschini can buy Jet for R480 million. This means that Foschini will add Jet to its portfolio of 30 retail brands that trade in clothing, footwear, jewellery, sportswear, homeware, cell phones, and technology products from value to upper market segments throughout more than 4085 outlets in 32 countries on five continents.
However the main headache for the CCA decision which was released this week, is distinguishing the targeted and the acquiring entity businesses and services.
When doing a ‘Competitive Analysis and Public Interest’ assessment, CCA is said to have discovered that Foschini is classified as a “standard retailer” which targets middle-to-upper income consumers and it competes with stores such as; Truworths and Woolworths. The targeted entity, Jet, is on the lower league when compared to its acquirer, it serves customers of lower classes and is regarded as a discount/value retailer targeting lower income consumers or a mass market. This makes Jet to be in direct competition with Ackermans, Pepkor, Cash Bazaar and Mr Price.
“Therefore, a narrower view of the market is that Foschini through its stores trading in Botswana is not a close competitor to Jet. Additionally, there exist other major rivals who will continue to exercise competitive constraints on the merged enterprise post-merger,” concluded CCA this month.
The anti-trust body continued to explain that in terms of the Acquisition of a Dominant Position, the analysis shows that the acquisition of the target business by Foschini Botswana will result in an insignificant combined market share in the relevant market.
This made CCA reach to a conclusion that there is no case of an acquisition of a dominant position in the market under consideration or any other market on the account of the proposed transaction.
What supports the merger according to CCA is that it is in compliance with regards to ‘Public Interest Considerations’ because the findings of the assessment revealed that the transaction is as a result of the need for a Business Rescue by the target enterprise. This is so because in the event that the proposed transaction fails, it will translate into the loss of the employment positions at the target business.
“On that note the Authority (CCA) found it necessary to ensure that the proposed merger does not result in any retrenchments or redundancies. In light of this, the assessment revealed the critical need to protect the employees of the merged entity from possible merger specific retrenchments/ redundancies,” said CCA.
Before making a determination that the recently proposed transaction is not likely to result in the prevention or substantial lessening of competition or endanger the continuity of the services offered in the relevant market, CCA said it then moved into a concern for public interest which is a protection enshrined in the Competition Act of 2018.
CCA’s concern was mostly loss of livelihood or employment by 126 Batswana workers at Jet stores, stating that possible retrenchments or redundancies may arise as a result of implementation of the proposed merger.
Much to the desire of trade union or labour movements in Botswana and across Southern Africa where the Jet stores are stemmed-who also raised concerns about the retail’s workers job security- CCA subjects Foschini to keep the target entity 126 workers.
“There shall be no merger specific retrenchments or redundancies that may affect the employees of the merged enterprises. For clarity, merger specific retrenchments or redundancies do not include (the list is not exhaustive): i. voluntary retrenchment and/or voluntary separation arrangements; ii. Voluntary early retirement packages; iii. Unreasonable refusals to be redeployed; iv. Resignations or retirements in the ordinary course of business; v. retrenchments lawfully effected for operational requirements unrelated to the Merger; and vi. Terminations in the ordinary course of business, including but not limited to, dismissals as a result of misconduct or poor performance,” said CCA.
CCA also orders that Foschini informs it about all the details of 126 Jet employees within thirty (30) days of the merger approval date. CCA should also know information of when Foschini is implementing the merger, within 30 days of the approval date.
Other conditions include Foschini sharing a copy of the conditions of approval to all employees of the Jet or their respective representatives within ten (10) days of the approval date.
“Should vacancies arise in the target, the merged enterprise shall consider previous employment at one of the non-transferring Jet stores to be a positive factor to be taken into account in the consideration of offering potential employment,” said CCA.
According to CCA, in cases of any job losses, for the Authority to assess whether the retrenchments or redundancies are merger specific, at least three months before (to the extent that this deadline can be practically achieved and in terms of the prevailing and legally required employment practices) any retrenchments or redundancies are to take place, inform the Authority of: i. The intended retrenchments; ii. The reasons for the retrenchments; iii. The number and categories of employees affected; iv. The expected date of the retrenchments.