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P10 billion in FDI, 9000 jobs created in 5 years

Botswana Investment & Trade Centre (BITC), the country’s business and investment facilitation and promotion agency has amassed a total of 10 billion pula worth of foreign & domestic capital investment since its inception in 2012. This was highlighted by President Lt Gen Dr Seretse Khama Ian Khama in his State of The Nation Address (SONA) on Monday.

Khamas said these transactions have resulted in the creation of 8,831 additional jobs. “The total business expansion investment level stood at P618.6 million in 2016-17 compared to P377 million reported in 2015/16.”  BITC was launched in 2012 as an organization established by an act of Parliament, to become an integrated Investment and Trade Promotion Authority (ITPA) with an encompassing mandate of investment promotion and attraction, export promotion, and development, including management of the Nation’s Brand.

BITC further encourages domestic investment and expansion, promotes locally manufactured goods to regional and international markets, contributes towards improvement of the investment climate through policy advocacy, increases citizen participation in the economy and creates sustainable job opportunities.

Khama also said government investment arm Botswana Development Corporation (BDC) has, despite two periods of recession, also experienced growth, with its total investment assets increasing from P1.2 billion to P2 billion over the past decade. This growth has supported over 5,000 jobs across various sectors of the economy. “Through its transformational programme the BDC has re-positioned itself for further growth, with over a thousand new jobs having been created since 2015 from new investments,” he said.

Meanwhile Leader of Opposition (LOO) Duma Boko says the figures are questionable, Boko quashed Khama’s speech saying it does not reflect the reality on the ground. “I don’t believe there is return of investment from these government agencies as our graduates still do not have jobs, which jobs, where?” he asked rhetorically.  

According to Boko during Khama’s tenure, formal employment grew at a slouchy 1.5 per cent per annum, with the highest annual job growth rates registered by public enterprises (4.6%) and Ipelegeng (3.4%). “From 2011 to 2015, enrolment in Ipelegeng rose by 28 percent! Public enterprises and Ipelegeng cannot be the primary sources of job growth for a country with ambition for its young people.”

“In the private sector, which accounts for 56 per cent of formal employment, the rate of job growth averaged 1.2 per cent per annum between 2011 and 2015. Yet, over this period, the labour force grew at an annual rate of 3.5%. Juxtapose labour force growth and the rate of job growth and you arrive at the terrifying conclusion that we have an annual job growth deficit of two percentage points! The message behind these figures is unambiguous. There are no jobs for the unemployed and the youth who leave colleges with diplomas and degrees hoping for a job. Workers cannot expect wage growth! Our collective wellbeing is eroding,” Boko said in his response to the SONA on Wednesday.

Advocate Boko urged the government to challenge the country’s economists in government, academia and the private sector to develop an alternative model for this economy, re-examine economic policies and strategies, and inject a measure of creativity into policy design.
“The current dispensation, in which we muddle along seeking to spend our way to success, and we throw money at problems, is not working and is not sustainable, because the days of rich mineral revenue yields belong to our past. Yet, this is exactly what successive BDP governments have been doing, all the while mouthing platitudes about economic diversification and transformation,” he said.

President Khama had also reported in his last SONA that the country’s balance of trade had positive trend for the past 12 months. He said according to Statistics Botswana, total imports for 2016 were valued at P66.9 billion, against P73.2 billion recorded in 2015, representing a decline of 8.6%. “Total exports for the same period were valued at P80.3 billion, an increase of 26.5%, compared to P63.5 billion recorded in 2015. As a result, our trade balance was in surplus of P13.5 billion in 2016, resulting in a balance of payments surplus of P2.8 billion, in contrast to the deficit of P0.57 billion that was recorded for 2015.”

Further, the president said that as of the end of August 2017, the country’s foreign exchange reserves were valued at P 76.6 billion, which is equivalent to 17 months of import cover. Of the total reserves, the Government Investment Account amounted to P32.1 billion. “Our exchange rate policy continues to support competitiveness of local industries in both domestic and international markets by maintaining the stability of the Pula against a basket of leading currencies,” he said.

BITC organizes the Global Expo which according to the president has generated over 500 million business transaction since inception 12 years ago. The centre recently launched an investment one stop shop which will shorten and simplify administrative procedures and guidelines for issuance of business approvals, permits and licenses, thereby removing bottlenecks faced by investors in establishing and running businesses in Botswana.

Officers from the Ministry of Nationality, Immigration and Gender Affairs, Minister of Employment, Labour Productivity and Skills Development and Ministry of Land Management, Water and Sanitation have been seconded to the centre offices whereas all other service providers will continue to facilitate investment from their respective offices. Amongst the services offered by the one stop shop are Company and Business Registration, Trade and Business license Applications, Entry visas, work and residence permits, Work Permit Exemptions  among others.

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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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