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World Bank injects P1.5billion into water projects

The Ministry of Land Management, and Water & Sanitation Services has announced another remarkable water project – a loan facility from the World Bank Group to finance various water projects around the country.

The Botswana Emergency Water Security and Efficiency (BEWSE) project was officially launched this Tuesday by Minister Prince Maele at the Masa Square Hotel. When explaining the genesis of the project, Maele said that water was a driver of socio-economic developments anywhere in the world. “Its role in our livelihoods cannot be overemphasized because it provides for the basis of life, good health, hygiene, agriculture and physical infrastructure development,” he said.

Maele observed that the demand for water is growing; studies indicate that the global fresh water resources have, in recent years, been greatly affected by the effects of climate change, particularly in quantity and quality. Water supply systems and conservation strategies continue to experience a series of operational and structural problems, which has led to increasing challenges in coping with the increasing demands in water supply and sanitation services.

Botswana has not been spared from these global trends considering the fact that the latter is a naturally a dry country, relying on extremely limited sources of water, the Minister said. It is the response to these developments that has birthed the Botswana Emergency Water Security Project. In the recent years, 2014-2016 the country experienced serious water shortage which prompted the Government to seek external assistance to bring the situation under control.

“We approached the World Bank for a loan facility of One Hundred and Forty Five Point Five (US$145.5) million United States Dollars. The loan was approved by Parliament of Botswana during the winter session of 2017, specifically secured to address the emergency water security and efficiency,” he explained. The Minister reiterated that the loan will assist Botswana’s efforts to integrate and manage both surface and ground water resources.

It is estimated that the funds will enable Water Utilities Corporation (WUC) who are the technical implementers to conjure water supply systems which will benefit at least 460,000 people in 66 selected villages and towns while at the same time connecting at least 177,000 people to improved wastewater treatment and sludge management systems.

Thato Raphaka, Permanent Secretary in the Ministry of Land Management, Water and Sanitation Services highlighted that the projects will  be divided in three components – the first one being the improvement and availability of Water supply and efficiency of services. This first phase will need about P1.141 billion. Raphaka explained that the second component will be to improve wastewater and sludge management systems. This segment will cost around P216.5 million and will include projects such as the Letlhakane and Lobatse waste water treatment plants.

Another P207 million will be spent on Water Sector Reform and Institutional strengthening of which the permanent secretary said will entail case studies, reviews and development of new national water development strategies to ensure water security going forward. Raphaka said to ensure efficient and effective implementation of the project a Coordination Unit has been established comprising of all stakeholders as well as the monitoring & evaluation task team chaired by the Permanent Secretary’s office.

Representing the World Bank Group was Paul Um, SADC regional director who applauded Botswana’s commitment to ensuring that its people receive the basic need that is water. He said Botswana was heavily reliant on groundwater to service many communities. According to Paul the underlying challenges remain and will continue to threaten Botswana for many years to come.

“The World Bank is pleased to partner with the Government to address these priorities through this project worth $145.5 million to improve the availability of water supply in areas of Botswana vulnerable to drought, support the efficiency of the Water Utility Corporation, and strengthen waste water management systems,” he said. The World Bank representative said the project aims to benefit more than 550,000 beneficiaries (both men and women), contribute to jobs, as well as support longer-term sector reform and institutional strengthening.

“Planned activities are aligned to Botswana‘s National Development Plan as well as contributing to the overall World Bank strategy for Botswana agreed with the Government in 2015 as part of the NDP 11 planning process. Our strategy includes a pillar on ‘Improving Human and Physical Assets’ with an objective around ‘improving the efficiency and sustainability of water supply and sanitation services’. As such, we have a strong stake in ensuring that this new project is a success,” Paul Um said.

The project will support the Government’s efforts to address climate vulnerability, said Paul Um while emphasizing the importance of ensuring diligent attention to the environmental and social risks facing this project. He said ensuring high-quality attention to environmental and social safeguards is a priority for World Bank projects around the world. He advised that coordination amongst the various team members and across agencies will be essential to ensure that key elements, such as the Resettlement Action Plan, the Dam Safety Action Plan, the Vulnerable Communities Plan, and the Environmental and Social Management Plan receive the necessary attention.

“As we kick start this project, let me emphasize the critical importance of proactively identifying, addressing, and managing environmental and social risks. The Bank looks forward to supporting you in this regard, which is our joint priority,” he said
On his closing remarks, Mr Boniface Mphetlhe representing the Ministry of Finance & Economic Development said to get the return on investment from this loan all stakeholders needed to work together cordially.

He said from where they stand at the national treasury, implementing parties will have to put in place proper monitoring tools and frameworks to ensure no thebe is wasted as taxpayers will end up reimbursing the money borrowed from the Word Bank. The launch was followed by a two-day technical workshop attended by representatives from the Ministry of Land Management, Water and Sanitation Services, the Water Utilities Corporation, and the World Bank.

The purpose of the technical workshop is to ensure that all project stakeholders share a common understanding of the implementation arrangements, requirements, as well as the tools and support available from the World Bank to ensure the project is a success. These include discussions on social and environmental safeguards, financial management requirements, the results framework, as well as World Bank’s new procurement guidelines and framework.

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Business

New study reveals why youth entrepreneurs are failing

21st July 2022
Youth

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.”

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Business

BHC yearend financial results impressive

18th July 2022
BHC

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.”

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Business

Commercial banks to cash big on high interest rates on loans

18th July 2022
Commercial-banks

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.

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