The new entrants into the hotel tourism sector in Botswana and especially in Gaborone has put unrelenting pressure on the Cresta Group’s market share. The Acting Managing Director of Cresta Hotels, Stutchbury, Glenn Charles says this has effect on volumes and room rates through increased room stock and discounting affected the resultant revenues.
According to the Annual Report, 2016, Cresta saw a moderate growth in revenue compared to the preceding year. On top of the ever present challenge of mounting competition, coupled with customers with access to instant information and ever increasing expectations, there were other challenges that Charles and his team had to grapple with.
The closure of the BCL and Tati mines generally reduced the levels of business activity in Selebi Phikwe and Francistown respectively. The three hotels operated by Cresta in these centres have consequently experienced lower occupancies than prior years, observes Charles in his report.
Changes in the Government procurement system are also hitting hard on the Cresta Group. “Policies introduced by the Government, the single biggest source of business for us, in the form of simplistic (i.e. not like-for-like) approach to tendering for hosting conferences, and the granting of per diems to travelling workers (as opposed to purchase orders), have also cost us significant conferencing business and drawn many guests away from us to smaller, lower rated lodges, against whom we cannot realistically compete based solely on price,” further observes Charles.
The challenges are not only being experienced in Botswana, Cresta Golfview in Lusaka, Zambia, experienced an unexpected three-month drop in occupancies around the time of the country’s general elections in August 2016. Overall volumes reduced by 4.8%.
MEETING THE CHALLENGES
But Charles and his team are not folding their arms as market dynamics call for innovation and creativity. He writes that: “despite the challenges the benefit of our Group is the balance we get from our size, geographical spread and combination of both leisure and corporate hotels. I am pleased that the exceptional performance in Cresta Mowana, outstanding performance in Cresta Jwaneng, Cresta Rileys and Cresta Mahalapye resulted in the Group achieving an increase in profit before tax of 32.5% over 2015.”
While accepting that challenges continue to mount for the Group business, Charles writes that he has no doubt that the company is ideally structured, sufficiently experienced and adequately resourced to compete in this ever changing industry, and continue to deliver satisfactory returns on its shareholders’ investment.
The Acting General Manager’s confidence is based on focusing on fundamentals – amidst all the challenges and developments in the hotel and tourism industry in which the Group operates, they are maintaining their steady and unmovable focus on the most valuable resource – the our employees. “Training and people development continues to be at the heart of our philosophy, tradition and strategy. This is central to how we intend to deliver on our brand promise of excellent service filled with African heart and soul.”
Charles points out that the constant stream of young indigenous Batswana coming up through the ranks and reaching the level of hotel General Manager. Information Technology is also key as the Group has also embarked on a complete upgrade of all major systems – property management, banqueting management, point of sale and stock control. “These will see our hotels controls improving on the one side and on the other an ability to integrate directly into the online opportunities for reservation delivery and we will see significant growth in this channel of delivery.”
The Cresta Group intends to do more aggressive and effective marketing and selling – in addition to continuing to recognise and to keep Cresta Hotels visible – by way of sales visits or calls, post-sales feedback and tendering – to our key customers in the local market, we will also continue to maintain a presence at relevant regional and international tourism and travel exhibitions. Cresta’s broad footprint across Botswana – a total of 11 hotels in 8 different major centres – is a significant advantage over many of our direct competitors, says Charles.
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.
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.
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”