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Trade license farce led loss in revenue

The Managing Director of Turnstar holdings Gulaam Husain Abdoola has said trading licence issue for foreign retailers caused loss of revenue as the stores allocated could not be occupied.

On a positive spin the Managing Dircetor of one of the most diversified property companies indicated that the trading license issue has been resolved. Tenants are taking occupation of the stores for fit-out. The additional revenue from these extensions will be reflected in the coming year’s results, he said.

The Minister of Trade and Investment, Vincent Seretse had decreed that foreign owned retail shops be given trade licenses only on the condition that they have a citizen component in their ownership. Most of the retailers occupying Botswana’s big malls are from South Africa. Seretse’s protectionist policy had rubbed the retailers the wrong with some resisting the policy. But the intervention of Business Botswana and other players saw the two parties, Government and retailers strike a middle ground.

According to Abdoola, the Retail sector has performed well despite several challenges. He points out that the Government did not issue Trading Licenses to many large foreign chain stores, who wished to open additional stores in Botswana. But he is happy that the issue has now been resolved and our flagship property, Game City retail mall will have full occupation of its new section during the course of this year.

Challenges in the property market

The Turnstar Managing Director shares his frustrations with regard to the property market. He says the Botswana property market faced challenges during the year under review. “The economic slowdown affected property sales and rentals and property owners have been forced to negotiate lower rentals and selling prices.”

He says the different property sectors experienced varied challenges in the market with some sectors performing better than the others. “During the past year, the retail sector continued to be stronger than the other market segments”. He continues:  “the commercial office space was the most challenged with a number of commercial properties being introduced to the market especially in the Central Business District (CBD). This in turn caused tenant relocations to the CBD, and vacancies and lower rentals in the remainder of the market.”

Furthemore, Abdoola observes that there has also been a large supply of residential and multi residential property in the country by the Botswana Housing Corporation (BHC) and Private Developers. Another interesting point shared by Abdoola is that the economic slowdown and declining number of foreign nationals in the country has led to a decline in property sales and reduction in domestic rentals.

On a positive note he says Turnstar remained the most diversified property Company on the BSE with property assets valued at over P2.2 bn. The Group’s Tanzanian subsidiary, Mlimani Holdings Limited, generates US Dollar revenue. Turnstar is a fully intergraded internally managed property company, employing 133 staff.

Group revenue

Group revenue increased by 3% from the prior year, to P254.6M. The rental income from the Company’s Botswana portfolio decreased by 2% due to the sale of the Fairgrounds office park property and the displacing of tenants during the Game City construction. The rental income from the Tanzanian portfolio increased by 8%. Approx. 51% of the Group’s total rental income, is in US Dollars. The Group’s Operating Profit decreased by 26% from the prior year, to P141.1M. This is due to the Foreign Exchange conversion losses caused by the Botswana Pula appreciating against the US Dollar.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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