Botswana Investment & Trade Center (BITC) has recorded a 16 % overall performance decline for their operational year 2016/17, the orghanisation’s annual report released last week has revealed.
According to the report, BITC, which operates as a parastatal under the Ministry of Investment Trade & Industry (MITI) registered an overall performance of 74 %, the assessment is predominantly reliant on corporate delivery and return on investment – which takes appreciation of the BITC mandate and purpose. The 74 percent reflects a 16 percent performance decline compared to the 90 % realized in the 2015/16 year.
BITC solicited an excess of 3 billon pula in capital investment for the period under review taking the total of investment capitalization to over P10 billion since inception as reported by President Lt Gen Dr Ian Khama in his State of the Nation Address(SONA) in November last year. “Our targeted investment promotion efforts resulted in a total capital investment of P3.08 billion,” reads the report.
According to the investment promotion arm the total capital investment achieved is attributed to Foreign Direct Investment (FDI) companies which contributed P1.5 billion, while business expansions injected P618 million; and a domestic investments of P964 million was realized. The Financial and Business Services sector, which is one of priority sectors under BITC investment promotion mandate delivered a whooping P901.5 million, accounting for 29.24% of the total capital investment realized.
Reaffirming President Khama’s SONA words ,BITC states that total employment of 3156 jobs resulted from these investments, which is an increment compared to 1709 jobs recorded in the 2015/16 operating year. “The majority of jobs were created through Domestic Investment and Expansions (2208), while FDI registered 948 jobs,” reveals the report.
To promote an export led economy, the BITC has established an export portfolio which is managed by the export promotion department. This is a very important segment of the BITC mandate as it facilitates and assists Botswana companies with reaching foreign markets which is vital for business growth considering the fact that Botswana only has a population of 2 million people. According to the BITC annual report the portfolio exceeded its target of P2.22 billion, reaching an export revenue totaling P2.23 billion.
“Existing local products were exported to new markets of Zambia, Angola, Zimbabwe, DRC, Malawi, Mozambique, South Africa, Namibia, USA, Hong Kong and the European Union. In addition six (6) newly produced products were added to the export portfolio including forma packs (Namibia), aluminum windows and designs (RSA), latex male condoms (RSA), vinyl floor tiles (RSA), food cans (RSA) and Cellular phones (Mozambique),” reads the Chief Executive officer‘s statement in the annual report.
One of the key milestones last year was the launch of the One Stop Service Center which facilitates all requirements of prospective investors and foreign professionals seeking to established serious businesses in Botswana. Under this year’s review the BITC reveals that there were 381 government authorizations, out of which a total of 307 were approved. “The rejection rate at the BITC One Stop Shop stood at 6.6% in 2016/2017; we have made proposals to Government to create a Business Immigration Selection Board to make our work and residence processes and outcomes more predictable and with greater certainty.”
“We continue to monitor and are alert to the competitiveness of competing African countries. Countries such as Mauritius and Rwanda lead the pack in providing a more conducive business climate and thus competitive environment for attracting investors. The Ministry of Investment, Trade and Industry, through the BITC’s advocacy is working on enacting a Business Facilitation Law, which will look to confer a higher degree of predictability and certainty to outcomes with respect to all government authorizations.”
The issue of immigration policies and work and residence permit rejection has been noted by stakeholders and investment as a possible deterrent and sabotaging factor to Botswana‘s FDI efforts. This is so as asserted by speakers in different platforms that Botswana has considerable good economic & political environment but still ranks behind poor governed countries such the DRC and Mozambique in attracting foreign investors.
Chairman of the BITC Board, seasoned investment executive, Victor Senye, now a business man shared that his organization adopted a move towards a new strategic direction to drive performance and efficiency in approach. “This would look towards linking our corporate structure and aligning it to the new strategy, reviewing our on the-ground personnel to ensure that we have the right people with the appropriate skills to engage with our varied investors, as well as considering appointment of specialist private sector advisory counsel to the Board,” he said. Senye revealed that BITC will continue to inspect the markets and review the investment requisites and make well informed recommendations to Government.
Parastatals and government agencies especially those that solely and/or heavily depend on government funding for operation are scrutinized time and again for lavish expenditures and less return on investment. Although the organization declined in performance, BITC has by far surpassed the annually monetary resources injected by taxpayers in the form of subvention funds as over P3 billion worth of business transaction was solicited.
However as of March 2017 BITC realized a deficit of P 20,784,835 which is largely contributed by Investment Property fair value loss amounting to P 29,314,072. According to the report the BITC Gaborone West Industrial factory shells alone realized a loss in value of P 8, 550,000 as a result of the subdued rental market.
“The overall subvention was yet again reduced by 1% during the financial year under review, which was geared towards alleviation of the financial meltdown of BCL. The more integrated approach to financing marketing and promotional activities contributed to the improvement in operational efficiencies and budget utilization was optimized at 95%, with a deficit of P 20,784,835 as at 31st March 2017.”
BITC is reliant on Government funding with an opportunity to generate a target of 15% of its budget requirement from internally generated sources such as the rental of factory shells and global expo income. For the year under review, the center managed to generate 16% from internal sources to meet its budgetary requirements. In the financial year ended March 2017, BITC was allocated a total subvention of P98, 830,560 which was reduced by 1% during the year by Government. BITC spent P52,362,408 on employees’ remuneration and over P8 million on the 2016 Global Expo amongst other expenses.
BITC was established by Government in 2012 as a merger of BEDIA and other business facilitation agencies, the organization is mandated and tasked with investment facilitation, promotion of private sector involvement as well as development of conducive environment for easy of doing business amongst others all in a bid to realize export led, diversified and significantly growing economy.
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.