SMMES integral to economic growth
Small, Micro, and Medium Enterprise (SMMEs) are the new economic language for developing countries. Encompassing small scale business, community cooperatives, hawkers, roadside traders and medium scale businesses, SMMEs give over 30 % of Botswana workforce the breadwinner status.
Currently contributing over 20% to Botswana‘s economy the SMME sector plays an integral role in Botswana’s economic path. This observations emerged at Botswana Institute of Chartered Accountants (BICA) dinner last week in Gaborone. The same observation has also been registered at different forums.
Renowned entrepreneur and well known former corporate executive Kate Mphage labeled SMEs as a pivotal sector towards moving Botswana ‘to a developed economy status. “There is great potential in SMMES as far as generating much needed employment and economic diversification is concerned” she said.
The former Mascom wireless executive is of the view that the nature of SMEs being businesses that are undertake by perceivably low income citizens and under privileged members of the society posse’s great ability to turn around economic status of the ordinary Batswana.
“Imagine Botswana without the braiding, water melon selling, the roadside cooking ladies, the sewing ladies and taxi drivers. Each country in Africa has these buzzing hubs that reflect ordinary people making a living outside the formal sector,” she said.
Mphage underscored the imperative need to develop and resource SMMEs to unleash the great economic potential of the sector. She however highlighted the business challenges that come with the nature of the sector itself: “it is very paramount to always emphasize the benefit that accrue to all other economic industries and sectors in the economy when the SMMEs sector thrives, yet the sector is faced with challenges in the area of finance, poor quality of products, access to bigger markets and simple book keeping,” she explained. Ms Mphage pointed out the need for all stakeholders from government, funders, financial advisors, among others to rally behind contributing to SMMEs flourish, noting that the country and every one stands to benefit from a booming SMME sector.
BICA’s ROLE IN ECONOMIC DEVELOPMENTS
Addressing an audience that was dominated by Botswana Institute Chartered of Accountants (BICA) members, Mphage said accountants could play a pivotal role in assisting SMMEs as they were located in important financial institutions and departments and had the necessary skills required in turning small-scale entrepreneurs’ ideas into flourishing businesses.
BICA President, Rudi Binedell said accountants have a big role to play in economic development in Botswana. He said BICA intends to be a reputable stakeholder in government’s efforts to advance economic diversification and sustainable growth. He said the accounting body increased its membership to 3 355 members by the end of December 2016, from 2 085 in 2015. Binedell said they had drawn up a new strategic plan for the years 2017 to 2021.
The plan aims among other objectives to increase the number of qualified, professional citizen chartered accountants. Nametso Latsheng, Head of Capacity Building at BICA observed that the current economic challenges faced by Botswana could be solved by rigorous engagement of the SMME sector. “It is very critical now to come up with innovative ways, strategic blueprints and policy crafts that can change the situation around. We need to fast track employment creation – SMMEs sector can do wonders for our economy,” he said.
SHARING THE EXPERIENCE
In previous likeminded interactive seminars and economic forums, SMMEs have also been underscored as a critical sector for the economy. They could be used to realize the much needed diversification and sustainable growth. Renowned businessman, Dr Tiro Mampane of Boitekanelo Group of Companies which includes Boitekanelo College, observed earlier this year at First National Bank (FNB) 2017/18 Budget review seminar that trade laws and setting up business regulations need to be reviewed to accommodate more SMMEs to enhance economic growth.
He noted that Botswana must introspect on its trade and business laws. He indicated that the ease of doing business locally needed to be improved by rooting out cumbersome procedures which might end up discouraging investors. According to Dr Mampane, SMMEs must be empowered to create wealth and ensure economic survival for rural and low income people. “If you look into other businesses you will realize that they don’t necessarily require, for example a physical office to operate, thus they should be exempted from some trade licenses requirement,” he said.
GOVERNMENT FACILITATION
In its quest to empower Batswana and realize economic diversification while also creating employment and sustainable growth the Government of Botswana has setup various business facilitation arms and also introduced a number of programs and initiatives. The Youth Development Fund under the Ministry of Youth Empowerment, Sports and Cultural Development intends to finance young people to start up medium enterprises in almost every sector from agriculture, manufacturing and ICT.
Gender Affairs Fund in the Ministry of Gender funds women in groups and partnerships to a tune of up to P350 000 to turn community cooperatives and indigenous small and medium businesses into profit making entities. The Local Enterprise Authority ( LEA) under the Ministry of Investment Trade & Industry is a co-ordinate and focused one-stop shop Authority operating as a parastatal that provides development and support services to the local industry needs of SMMEs. The Authority's key sectors are manufacturing, tourism, agriculture, and any services that support the three business sectors. In particular, LEA targets women, youth, and the unemployed.
LEA also endeavors to build competencies in quality and efficiency, and to encourage import substitution and export oriented products and services. In delivering their mandate and mainly supporting the Small Micro & Medium Enterprises LEA conduct entrepreneurship awareness workshops annually across the country to cultivate the spirit of entrepreneurship in youth and the unemployed. LEA provide capacity building incubation, training and facilitates funding and access to markets.
Adding to these efforts is the Citizen Entrepreneurship Development Agency (CEDA) which operates as an investment arm and financer to viable projects and feasible business ideas. CEDA funds various project to a tune of up to tens of millions, for SMMEs CEDA recently introduced a tailor made funding initiative for small and medium scale businesses called “Mabogo Dinku”.
Through the program, CEDA provides subsidized loans for various micro-entrepreneurs to enable citizen participation in enterprise development. Mabogo-Dinku loan offers micro-enterprises an opportunity and enables citizen participation in enterprise development.
The loan provides micro-enterprises with funds for their business needs ranging from working capital to small asset finance. Mabogo Dinku offers short term loans from P500.00 to a maximum of P150, 000.00 per person, payable in 3-12 months to citizens who are micro-entrepreneurs to assist in the growth of their business.
INTERNATIONAL VIEWS
Strive Masiyiwa, a Zimbabwean multimillionaire is of the view that education must be provided to small medium entrepreneurs. He writes that Entrepreneurship should be taught as a subject in all schools across Africa. “By far the biggest employer of people in Africa is what is generally called the "informal sector."
“Whilst most of the people in this sector are generally literate, having been to school, there's very little in our education system that actually prepares them for a life running their own business.” According to Masiyiwa, governments should publicly acknowledge that the "informal sector" is the central activity in their economies. “Whether people are smallholder farmers, street traders, or tradesmen and women, don't be ashamed to acknowledge them as real economic players. They are contributing to the economy just like the biggest businesses that you have in your country,” he says.
Masiyiwa who owns multinational businesses agrees with Mphage’s sentiments that SMMEs importance must be recognized with action. “Acknowledge the importance of this sector by putting in place policies that enable them to prosper. When they prosper, they will grow, employing more,” he says. He is of the view that governments should introduce entrepreneurship training into the formal education curriculum.”By the time someone has completed seven years of school, they should be able to put together a basic profit and loss statement, and a basic balance sheet. They should also be able to read financial statements.
Business
LLR transforms from Company to Group reporting
Botswana Stock Exchange listed diversified real estate company, Letlole La Rona Limited (“LLR” or “the Company” or “the Group”), posted its first set of group financial statements which comprise the Company and Group consolidated accounts, which show strong financial performance for the six months ended 31 December 2023, with improvements across all key metrics.
The Company commenced the financial year with the appointment of a Deputy Chairperson, Mr Mooketsi Maphane, in order to bolster its governance and enhance leadership continuity through the development of a Board and Executive Management Succession Plan.
At operational level, LLR increased its shareholding in Railpark Mall from 32.79% to 57.79% and proudly took over the management of this prime asset.
The CEO of LLR, Ms Kamogelo Mowaneng commented “During the period under review, our portfolio continued to perform strongly, with improvements across all key metrics as a result of our ongoing focus on portfolio growth and optimisation.
“We are pleased to report a successful first half of the 2024 financial year, where we managed to not only grow the portfolio through strategic acquisitions and value accretive refurbishments but also recycled capital through the disposal of Moedi House as well as the ongoing sale of section titles at Red Square Apartments. The acquisition of an additional 25% stake in JTTM Properties significantly uplifted the value of our investment portfolio to P2.0 billion at a Group level. Our investment portfolio was further differentiated by the quality of our tenant base, as demonstrated by above market occupancy levels of 99.15% and strong collections of above 100% for the period”.
The growth in contractual revenue of 9% from the prior year’s P48.0 million to the current year P52.2 million, increased income from Railpark Mall, coupled with high collection rates, has enabled the company to declare a distribution of 9.11 thebe per linked unit, which is in line with the prior year.
In line with its strategic pillars of ‘Streamlined and Expanded Botswana Portfolio’ as well as ‘Quality African Assets’, the Group continuously monitors the performance of its investments to ensure that they meet the targeted returns.
“The Group continues to explore yield accretive opportunities for balance sheet growth and funding options that can be deployed to finance that growth” further commented the CEO of LLR Ms Kamogelo Mowaneng.
Ms Mowaneng further thanked the Group’s stakeholders for their continued support and stated that they look forward to unlocking further value in the Group.
Business
Botswana’s Electricity Generation Dips 26.4%
The Botswana Power Corporation (BPC) has reported a significant decrease in electricity generation for the fourth quarter of 2023, with output plummeting by 26.4%. This decline is primarily attributed to operational difficulties at the Morupule B power plant, as per the latest Botswana Index of Electricity Generation (IEG) released recently.
Local electricity production saw a drastic reduction, falling from 889,535 MWH in the third quarter of 2023 to 654,312 MWH in the period under review. This substantial decrease is largely due to the operational challenges at the Morupule B power plant. Consequently, the need for imported electricity surged by 35.6% (136,243 MWH) from 382,426 MWH in the third quarter to 518,669 MWH in the fourth quarter. This increase was necessitated by the need to compensate for the shortfall in locally generated electricity.
Zambia Electricity Supply Corporation Limited (ZESCO) was the principal supplier of imported electricity, accounting for 43.1% of total electricity imports during the fourth quarter of 2023. Eskom followed with 21.8%, while the remaining 12.1, 10.3, 8.6, and 4.2% were sourced from Electricidade de Mozambique (EDM), Southern African Power Pool (SAPP), Nampower, and Cross-border electricity markets, respectively. Cross-border electricity markets involve the supply of electricity to towns and villages along the border from neighboring countries such as Namibia and Zambia.
Distributed electricity exhibited a decrease of 7.8% (98,980 MWH), dropping from 1,271,961 MWH in the third quarter of 2023 to 1,172,981 MWH in the review quarter.
Electricity generated locally contributed 55.8% to the electricity distributed during the fourth quarter of 2023, a decrease from the 74.5% contribution in the same quarter of the previous year. This signifies a decrease of 18.7 percentage points. The quarter-on-quarter comparison shows that the contribution of locally generated electricity to the distributed electricity fell by 14.2 percentage points, from 69.9% in the third quarter of 2023 to 55.8% in the fourth quarter. The Morupule A and B power stations accounted for 90.4% of the electricity generated during the fourth quarter of 2023, while Matshelagabedi and Orapa emergency power plants contributed the remaining 5.9 and 3.7% respectively.
The year-on-year analysis reveals some improvement in local electricity generation. The year-on-year perspective shows that the amount of distributed electricity increased by 8.2% (88,781 MWH), from 1,084,200 MWH in the fourth quarter of 2022 to 1,172,981 MWH in the current quarter. The trend of the Index of Electricity Generation from the first quarter of 2013 to the fourth quarter of 2023 indicates an improvement in local electricity generation, despite fluctuations.
The year-on-year analysis also reveals a downward trend in the physical volume of imported electricity. The trend in the physical volume of imported electricity from the first quarter of 2013 to the fourth quarter of 2023 shows a downward trend, indicating the country’s continued effort to generate adequate electricity to meet domestic demand, has led to the decreased reliance on electricity imports.
In response to the need to increase local generation and reduce power imports, the government has initiated a new National Energy Policy. This policy is aimed at guiding the management and development of Botswana’s energy sector and encouraging investment in new and renewable energy. In the policy document, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi stated that the policy aims to transform Botswana from being a net energy importer to a self-sufficient nation with surplus energy for export into the region. Moagi expressed confidence that Botswana has the potential to achieve self-sufficiency in electric power supply, given the country’s readily available energy resources such as coal and renewable sources.
Business
MMG acquires Khoemacau in a transaction valued at P23Bn
MMG Limited, the Hong Kong-based mining company specializing in base metals, has successfully concluded the acquisition of Khoemacau Copper Mine, a state-of-the-art, world-class copper asset nestled in the northwest of Botswana.
On Monday, MMG announced that the acquisition of Khoemacau Mine in Botswana was finalized on 22nd March 2024. “This acquisition enriches the company’s portfolio with a top-tier, transformative growth project and signifies a monumental milestone in the Company’s journey,” MMG communicated in an official statement published on the Hong Kong Stock Exchange.
Upon completion of the acquisition, MMG remitted to the Sellers an Aggregate Consideration of approximately US$1,734,657,000 (over P23 billion), a sum subject to potential adjustments post-Completion.
In addition to the Aggregate Consideration, MMG, in accordance with the Agreement, advanced an aggregate amount of approximately US$348,580,000 (over P4.5 billion) as the Aggregate Debt Settlement Amount, to settle certain debt balances of the Target Group (Cuprous Capital/Khoemacau).
On November 21, 2023, Khoemacau announced that the shareholders of its parent company [Cuprous Capital] had agreed to sell 100% of their interests to MMG Limited.
MMG is a global resources company that mines, explores, and develops copper and other base metals projects on four continents. The company is headquartered in Melbourne, Australia, and has a significant shareholder, China Minmetals Corporation, which is China’s largest metals and minerals group owned by the Government of the People’s Republic of China.
On December 22, 2023, Khoemacau Copper Mining (Pty) Ltd received the approval from the Minister of Minerals and Energy of Botswana regarding the transfer of a controlling interest in the Project Licenses and Prospecting Licenses associated with the Khoemacau Copper Mine, a result of the Acquisition.
The Botswana Competition & Consumer Authority (CCA) on January 29, 2024, notified the market that it had given its approval for the takeover of Khoemacau Copper Mining by MMG Limited.
On January 29, 2024, the CCA issued a merger decision to the market, stating that after conducting all necessary assessments, it was ready to proceed.
The Competition Authority affirmed that the structure of the relevant market would not significantly change upon implementation of the proposed merger as the proposed transaction is not likely to result in a substantial lessening of competition, nor endanger the continuity of service in the market of mining of copper and silver ores and the production, and sale or supply of copper concentrate in Botswana.
Furthermore, the CCA stated that the proposed merger would not have any negative impact on public interest matters in Botswana as per the provisions of section 52(2) of the Competition Act 2018.
Earlier this month, Minister of Minerals & Energy, Lefoko Maxwell Moagi, informed parliament that his Ministry was endorsing the Khoemacau acquisition by MMG Limited. He noted that not only was the company acquiring the existing operation but also committing to an expansion program that would cost over $700 million to double production, create more jobs for Batswana, and increase taxes and royalties paid to the Government.