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Lesotho Water Transfer scheme feasibility study commences

The much anticipated Lesotho Water Transfer scheme in which three countries, Botswana, Namibia and South Africa collaborate under the Orange –Senqu River Commission (ORASECOM) to draw water from the abundant Lesotho supply to feed their demands is finally taking shape.

Lesotho has surplus water owing to the mountains that easily trap terra cubic meters of water from the Senqu River, Vaal and Orange rivers amongst other water streams. The four countries represented by the ministers responsible for water supply recently met in Kasane to approve the commencement of a feasibility study that will guide the design, engineering and construction of one of Africa’s largest dams in Lesotho and a Pipeline running from the Kingdom of Lesotho through South Africa into Botswana.

Minister of Land Management, Water and Sanitation Services Prince Maele briefed members of the press this week that the four countries involved reached an agreement to source funds from the African Development Bank for the study. According to Maele the feasibility study will inform the size of the dam to be constructed considering the environmental assessment and the quantity of water to supply to countries in demand hence also informing the budget of the actual dam construction and the transfer pipeline.

“For now we can only say it will be a very large dam considering the demand of water we want to meet in both Namibia and Botswana” he said. The feasibility study is expected to cost around US$2.3 million (P23million) and is targeted to be complete within a period of 24 months. The detailed objective of the study is also to determine the viability of water resource development options for the entire water transfer by gathering and assessing engineering, costing, social, legal, environmental, economic and financial information.

The study findings will provide an important input in support of the broader assessment and analysis of potential impacts associated with climate change in the Orange-Senqu River basin. It links to the ongoing analytical work addressing the Climate Vulnerability of Africa’s Infrastructure’ that is focused on river basins across Africa using a climate lense to build on the Africa Infrastructure Country Diagnostic. “This will ensure that we develop a sustainable project with global standards taking into consideration all environmental and socio-economic aspects,” Maele further explained 

He said that Botswana wanted to source water that would not be expensive for the country. According to Maele, the implementation of the entire project will benefit inhabitants of the villages and settlements that the pipeline traversed. “The residents will benefit in terms of the water supply and employment creation during pipeline construction as well as maintenance and services of the mini monitoring facilities throughout the pipeline. The pipeline drawing water into Botswana will be just over 600 kilometres and will stream water into the greater Gaborone area and villages in the southern part of Botswana.

Once complete the entire water transfer undertaking which is expected to commence immediately after the feasibility study is also expected to alleviate shortage of water supply in Botswana. Minister Maele added that government would construct the North-South pipeline in the near future because the aging infrastructure was responsible for water shortages because of the leaks that consume about 40% of the water that is distributed in the country.

Government has been pumping money into developing an infrastructure and facilities to ensure efficient national water supply. The Masama East and Masama West wells are reported to be complete and would be pumping water into the North-South Water Carrier to supply the Greater Gaborone by next year. The Chobe-Zambezi Stampriet Aquifer which will supply the Kgalagadi North is expected to be complete by 2020.

The rational of the Lesotho water transfer scheme also goes beyond the need to augment local water supply, Minister Maele explained that Botswana had run out of space for construction of new large dams also because of exhausted water streams saying financial institutions now also prefer to provide funding for cross border projects instead of those carried out by individual countries. WeekendPost also established that the provision of engineering, procurement and construction as well as management will be awarded on the basis of benefiting companies from all the four countries.

Lesotho has abundant water and currently supplies South Africa with water under the The Lesotho Highlands Water Project (LHWP). The LHWP is an ongoing water supply project with a hydropower component, developed in partnership between the governments of   Lesotho and South Africa.

It comprises a system of several large dams and tunnels throughout Lesotho and delivers water to the Vaal River System in South Africa. In Lesotho, it involves the rivers Malibamatso, Matsoki, Sequnyane and Senqu. It is Africa's largest water transfer scheme. The Botswana Transfer Scheme will also be amongst the largest water tunnels in the continent.

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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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