The Botswana Gambling Authority (The Authority) has begun the process of selecting an operator for the Botswana National Lottery. The non-refundable one Million Pula applications are now open and the lucky applicant will use the same license for the period of ten years with annual licence fee of the same amount.
Gambling Authority Chief Executive Officer, Thulisizwe Johnson, announced at a media briefing earlier this week that each applicant will be charged the non- refundable fee. He further stated that even though an annual P1 Million licence fee will be charged for the next ten years, the regular tax will apply as well as the gambling levy. The Gambling Authority explained the National Lottery Request For Application (RFA) process, and further offered details on how the lottery can support economic diversification.
The Gambling Authority, a statutory body mandated with licensing and regulating the gambling industry in Botswana, recently started a search for the nation’s first Lottery operator. This comes three months after the Gambling Authority Board approved the issuing of licenses for Casinos, Lottery, Sports Betting and Bingo. The process towards selecting an operator for the Botswana National Lottery started earlier this month following the publication of a guiding document for the bidders.
The draft document has been made available up to mid-month to allow the public an opportunity to comment directly to the Gambling Authority before the final RFA is published. The RFA is the guide document which shall be used to provide information on the process and the information required from applicants to be assessed for the award to the successful operator.
The draft document sets out details of the National Lottery opportunity together with the process and requirements connected with submitting the application. The applicants will be required to provide a complete solution for the lottery, including: setting up and running the lottery; designing, building, financing and operating the requisite infrastructure and systems; designing, distributing and marketing lottery games and ensuring a smooth transition from award of licence to operations.
At the press briefing, Johnson, Gambling Authority’s CEO, said the search for the operator for the national lottery has begun and the licence will be for a period of ten years. He also said the main criteria to awarding the licence hinge on the investment required for operating the lottery and the knowledge and the systems. Mr. Johnson says the lottery will provide some form of entertainment for people while also adding to government revenues.
“Through the National Lottery Distribution Fund, money will be disbursed for good causes, mainly for sports, charities, the arts, and other good causes. Even winning the jackpot can change a person’s life although statistically it’s a rare occurrence,” the CEO said.
It was revealed that the assessment process for choosing the operator will involve due diligence, in-camera interviews, scheduled public hearings, site visits and presentations. The preferred operator will then be announced in September. The Authority says once the licence has been issued and the lottery is up and running, it is expected that it will result in increased revenues for the government and also support economic diversification. Furthermore, there is expectation of job creation and support for other businesses that will be outsourced.
Mr. Johnson emphasised that in preparation for Botswana’s first national lottery, they intend to make the process as transparent as possible, citing the anti-corruption policy and whistle blowing as some measures put in place to mitigate against corrupt practices. Moreover, auditors will be appointed to oversee the process and provide assurance of the process. The Gambling Authority CEO said that they are looking for experienced lottery operators with prior experience in penetrating and managing a new market. This move is done to ensure responsible gambling at all time, which includes crackdown on illegal gambling and protection of the weak and vulnerable that might fall prey to gambling addiction.
The chosen lottery operator is expected to impart skills to citizens through training and development, setting the stage for possible succession by a local operator in later years. Apart from acquiring new industry skills, newly started businesses owned by young people will be given priority during local procurement tenders. The Authority says a well run lottery system can help the country reduce its dependence on diamonds revenue and charter a new path to economic diversification.
While it will be Botswana’s first national lottery, the practice has been growing with popularity in Africa. According to World Game, a site that provides lottery fans with a global overview of how that game has taken root worldwide, Lottery games aren’t quite as numerous in Africa as they are elsewhere, but there are certainly enough of them to give players the chance to win huge sums of money for the cost of a single ticket. Part of the reason why the number of games is lower in Africa than it is in Europe or Asia relates to geography and population. Simply put, there are vast regions in Africa that are populated by a relatively small number of people, and it is therefore not as necessary for every region to have its own range of lottery games.
In Africa there are several countries with a national lottery; Algeria, Ghana, Kenya, Mauritius, Morocco, South Africa and South Sudan. South Africa has two of the most popular – the Lotto and the Powerball. Lotteries in Africa are most often viewed as games that are to be played primarily for entertainment purposes, with the excitement of having a chance of winning a jackpot being its own reward.
This seems to be the predominant view to lottery games the world over, although of course some players take their participation much more seriously than others. It is widely predicted that lottery games in Africa will continue to grow in popularity, not only among African players themselves but also with lottery players around the world now that it is possible for them to buy African lottery tickets online.
Despite its growing popularity, there is little consensus amongst experts on the true economic benefits of the game on a large scale. Many experts, particularly economists, argue that the economy would get more boost if consumers bought goods and services instead of lottery tickets. They further argue that spending money on businesses helps spur much more economic activity than gambling on the lottery.
Lotteries run for or by governments are used to support public programs such as infrastructure development, public safety, public health and education. The principal argument used to support lotteries has focused on their value as a source of "painless" revenue, contributed by players voluntarily spending their money.
Lottery tickets have become a significant source of funds for governments, and the winners obviously benefit greatly. But lotteries for the most part have a regressive impact. Studies have found that the burden falls disproportionately on people with lower incomes, who typically spend a greater portion of their income on lotteries than those with higher incomes. It is a burden because the odds are worse than other forms of gambling.
The usual presumption is that people know what’s good for them, and that they’re better off if you allow them to spend their money on whatever they personally value the most. For many people, gambling may be just another form of entertainment. But for others it is a very destructive compulsion.
THE RFA EXPLAINED
The draft RFA has already been published in the Authority’s website for public comments. The RFA is the guide document which shall be used to provide information on the process and the information required from applicants to be assessed for the award. The purpose of the publication is to give the public an opportunity to comment directly to the Authority before the final RFA is published. In that regard, the Authority has invited the public to provide comments on the DRAFT National Lottery RFA document which has been made available for download on their website. March 28, 2017, will mark the opening period for enquiries.
Once the one million pula application fee has been paid, the applicant will receive a detailed RFA. Bidders will be invited for a conference to take place on the 18th April and the final date for receiving applications is June 30th 2017. Completion of proposal evaluation, site visits and presentations to the Authority will be on 25th August and announcement of the award is scheduled to take place on November 17th, 2017. Johnson said there will be an open tender for a credible and reputable auditor who shall be the overseer of the project. As many people view this as an exclusive opportunity for the rich, the Authority CEO; Johnson sees it differently, “Contrary to popular belief, it is very cheap!”
According to Johnson, the investment required for operating the lottery and the knowledge and system are important criteria for award. He advised interested parties to form business consortiums and or seek technical partners or look for experienced operators to bid with. “We want the lottery to be run by Batswana and we will train them,” said Johnson.
He added that lotteries are done for good causes because they provide government with tax revenue and energies people as they seek to guess the numbers that will come out of the draw. Through the national lottery distribution fund, money for good causes, mainly sports, charities and the arts are disbursed. “Lotteries can change one’s life. Winning the jackpot can change one’s life even though statistically this is a rare occasion,” Johnson pointed out.
Government has made some adjustments0 in fiscal policy, as some taxes and levies are to be imposed from the beginning of March this year. It is expected that effective 1st March 2021, government will announce an increase on fuel levy followed by increases in tax items including VAT and tax on sugar-sweetened beverages.
FILL UP AND PAY CAESAR TOO AMID FUEL CRISIS
Ministry of Mineral Resources, Green Technology and Energy Security in 2017 approved 17.5 thebe per litre which will be in addition to the already existing fuel levy of 13.5 thebe per litre. Apparently Botswana consumes 1.2 billion litres of petroleum products and the levy could raise P210 million per annum which could be used to; purchase of stocks for Botswana Oil Limited, meet insurance premiums for government oil storage facilities and construction of other strategic storage facilities around the country.
According to investment manager Kgori Capital, the new tax might not immediately lead to an increase in fuel pump prices as the National Petroleum Fund (NPF) might be able to cushion the effect of the tax in the short term. Kgori Capital said this however could see increased outflows from the fund which could be unsustainable over the long term.
Recently government released a ‘National Fuel Supply Update’ announcing that the shutdown of three refineries in South Africa, making Botswana look elsewhere to increase sourcing from alternative suppliers. As assurance government stated that it is currently able to meet fuel demand, that back-up is available, it would only be deployed if the situation deteriorates.
Other determinants of fuel price dynamics could be the Rand vs US Dollar. This week on Thursday the Rand rallied for another day, retaining gains from the previous day, as risk appetite stayed high on hints that the new US administration would be in support of a huge stimulus to uplift the economy.
On Thursday commodity news oil prices were supported for yet another day on Wednesday, climbing above US$56 per barrel in mid-afternoon trading, supported by expectations that the incoming US administration would approve a large stimulus package to boost the economy and in turn support oil demand.
According to stockbroker Motswedi Securities, also supporting the commodity’s pricing were ongoing supply cuts by the Organization of Petroleum Exporting Countries as well as expectations that US crude inventories are forecast to decline for the week ended 15 January 2021.
Last week the FNBB researchers said they expect a possibility of a rebound in oil prices as economic activity recovers this year. FNBB said it is probable that fuel prices will be increased to mimic international oil price movements.
First National Bank of Botswana Quantitative Analyst, Gomolemo Basele, in his recent analysis of December inflation, said over the course of this year inflation should receive some upward pressure from volatile items, particularly the transport group index as the fuel levy is anticipated to increase from P0.12 to P1.12, effective 1st March 2021.“We also expect further pressures on the administered prices of water and electricity, as well as increases in tax items,” said Basele on behalf of his FNBB economy research team.
VAT TO GO UP SOONER THAN EXPECTED, JOB LOSSES
Amid being met with a lot of opposition, FNBB expect an increase in VAT from 12 percent to 14 percent, effective 1st April 2021. Last year permanent secretary in the Ministry of Finance and Economic Development, Wilfred Mandlebe told Parliamentary Committee on Government Assurances (PCGA) that as part of economic recovery from Covid-19 shocks, VAT will be increased from 12 percent to 14 percent in the next financial year.
This is despite Basele in his December inflation report warning that the demand side will remain muted this year as the bulk of Botswana’s labour force will be faced with unemployment challenges as well as pressures on disposable income levels due to diminished economic activity.
State of Emergency which bars employers to lay off employees might end the same time when government imposes an increase in VAT, this is why FNBB expects inflation to average 2.8 percent in 2021 and anticipate that the Bank of Botswana will remain accommodative this year and cut the bank rate by 25 basis point.
INTRODUCTION OF SUGAR LEVY
The beginning of the next financial year will see tax on sugar-sweetened beverages be 2 thebe per gram over and above 4 grams per 100 millilitres. This tax will be implemented by a Statutory Instrument to be issued by Ministry of Trade and Investment.
According to World Bank last year September, sugar-sweetened beverages (SSBs) are non-alcoholic beverages that contain caloric sweeteners, such as sucrose (sugar) or high-fructose corn syrup (HFCS). SSBs include carbonated soft drinks (carbonates), energy drinks, concentrates or syrups, sports drinks, less than 100 percent fruit or vegetable juices such as juice drinks or nectars, ready-to-drink teas and coffees, sweetened waters, and milk-based drinks.
SSBs are said to be the main factors of overweight and obesity which leads to a number of chronic non-communicable diseases (NCDs), including coronary heart disease (CHD), stroke, diabetes, and at least 12 cancers (cancer of the mouth, pharynx and larynx, oesophagus, stomach, pancreas, gallbladder, liver, kidney, prostate, colorectal, endometrium, ovaries, and post-menopausal breast).
In his first State of the Nation Address (SONA) in 2018, President Mokgweetsi Masisi blamed the increasing incidence of people who are overweight and obese amongst the Botswana population on the increased consumption of sugar sweetened products, especially beverages.
HOUSING INFLATION TO SOAR INTO THE NEXT FINANCIAL YEAR
Botswana Housing Corporation is expected to rise to the occasion this year by taking more from Batswana pockets in the coming financial year. The housing utility will adjust rentals by more than 100 percent margin effective 1st April 2021.
This could further spike future inflation into the housing and utilities group index which in December registered a rise of 0.3% m/m owing to higher costs associated with materials for the maintenance and repair of dwellings (0.9% m/m).
INFLATION TO REMAIN SUBDUED AND UNDER THE OBJECTIVE RANGE
The December 2020 inflation remained unchanged at 2.2%, bringing the 2020 inflation average to 1.9%. While Basele believes the 2021 inflation should receive some upward pressure from volatile items, particularly the transport group index as the fuel levy is anticipated to increase from, he said the demand side will remain muted this year as the bulk of Botswana’s labour force will be faced with unemployment challenges as well as pressures on disposable income levels due to diminished economic activity.
This moves FNBB to expect inflation to be just below the 3-6 objective range and be lower at 2.8 percent, the bank’s researchers further anticipate that the Bank of Botswana will remain accommodative this year and cut the bank rate by 25bp.
Botswana Government through Ministry of Mineral Resources, Green Technology & Energy Security (MMGE) has underscored its intention to support power generation through Coal-Bed- Methane (CBM).
This week Tlou Energy, one of the publicly listed companies exploring CBM power generation revealed in a circular to shareholders that the Ministry’s commitment to support the industry was a significant push to its ambitions.
Tlou Energy is focused on delivering power solutions to Botswana and southern Africa to alleviate some of the chronic power shortage in the region. The company is currently developing projects using gas and plans to add solar power projects to provide a cleaner power source. Botswana has a significant energy shortage and generally relies on imported power and diesel generation to fulfill its power requirements.
Last year Tlou Energy and state owned Botswana Power Corporation (BPC) singed a Pilot Power Purchase Agreement (PPA) for the first 2 Mega Watts of power from the Lesedi project. A grid connection agreement was also signed which enables the injection of power into the BPC grid.
These according to Tlou are key agreements that will facilitate development of the power project and the sale of first power. The company says things are promising for a larger power purchase agreement. The BSE listed energy outfit revealed that, “Botswana’s Ministry of Mineral Resources Green Technology and Energy Security (MMGE) has provided confirmation that negotiations on a larger PPA are due to commence in February.”
Tlou’s Managing Director, Mr Tony Gilby commented, “It is great to see that Botswana is open for business and the Government is motivated to get the gas industry up and running.” Gilby revealed that his company plans to start development of the Lesedi project as soon as possible noting that “confirmation of the Government’s enthusiasm to provide the necessary support to ensure commercial development of CBM is very well received.”
“In addition, we have also recommenced negotiations with Botswana based project financiers this month as we aim to close a deal for funding as soon as possible. After what was an extremely challenging year the Company is already making progress in 2021 and anticipate further advancement on all fronts in the coming term. We look forward to updating the market with further developments in due course,” he said.
Tlou said it has received written confirmation from MMGE of the “intention of MMGE to fast track the development of Coal Bed Methane (CBM) in Botswana.” MMGE also stated that it is “happy to provide the necessary support to ensure commercial development of CBM.”
In relation to the current tender to implement up to 100MW of CBM fired power plants MMGE has stated that negotiations with preferred bidders are due to commence in February 2021. The letter also acknowledged that the “Government is fully committed to seeing this project coming to fruition, as it will promote the gas industry, contribute toward import substitution, as well as to improve the livelihood of Batswana.”
“We welcome this update and look forward to negotiation and finalization of the tender process in the near term,” Tlou Energy Directors said.In 2018, MMGE issued a Request for Proposal for Development of up to 100 Mega Watts of CBM fueled power plants in Botswana.
Tlou submitted a comprehensive response to the tender including a plan to develop the project in stages, as well as outlining project feasibility, proposed field development, installation of power generation facilities and supply of power into the grid in Botswana.
Kgalagadi Breweries Limited (KBL) has suspended its operations indefinitely owing to the tough trading conditions occasioned Government decision to ban the sale of alcohol at the beginning of this month.
The brewer announced the decision today (Wednesday). KBL Corporate Affairs Manager Madisa said from the 25th January 2021 only a minimal number of critical roles will continue to be staffed and all other operational activity will stop.
KBL also acknowledged the impact this will have on the overall supply chain and those whose livelihoods depend on the beer industry and requests their understanding.
The current ban is expected to end on 31st January 2021, KBL said should the ban be extended past this date, suspension of its operations will continue.
KBL explained that its Tuesday meeting with suppliers was to align with them that due to the current situation, the brewer will suspend payments as of 6th February 2021, up for review pending the outcome of the current alcohol ban.
“However, it is regrettable that this latest total ban on alcohol sales has resulted in the suspension of KBL’s operations, which will remain in place for as long as the alcohol ban persists. KBL continues its efforts to engage government on this critical issue, which is having an enormous impact on the industry and its extensive value chain,” said Madisa.
On Tuesday afternoon, KBL conducted an ‘emergency meeting’ with its suppliers addressing some business decisions the company has made amid the current alcohol ban. Botswana has several alcohol bans since the first lockdown of March.
Mostly alcohol has been banned as a measure of curtailing the spread of Covid-19 and government then lived with putting stringiest operating hours for alcohol sales and distribution for a long time. Next week Monday KBL will be shutting down its operations, after a two weeks ban on liquor.
Sources say ever since the 4th of January 2021 when the December curfew regulations were extended, KBL has been brewing stacks of liquor for stockpiling. This is solely the reason why the brewer decided to close shop and stop manufacturing alcohol, because KBL’s depots no longer needed supply. On Tuesday suppliers were told to stop supplying KBL as next week the plant will be closing.
Air of uncertainty was hovering in the KBL plant premises on Tuesday as many workers feared mostly for their jobs. No one knows when alcohol ban will be lifted or if Botswana is going for a hard lockdown following the recent surge of Covid-19 infections. Botswana has 18,630 coronavirus cases, with 88 deaths and 14,624 recoveries.
KBL owner Botswana Stock Exchange (BSE) listed Sechaba Holdings came into contact with response to Covid-19 in March when Botswana recorded its first cases and that was the time when the company was doing well for years since the shedding of alcohol levy.
Sechaba associates, KBL and Coca Cola Beverages Botswana (CCBB), that time according to the holding company in its abridged financial results for the year ended 31 December 2019, continued to forecast growth in 2020 notwithstanding the challenges related to COVID-19.
Sechaba that time saw the business environment has been generally positive including relationship with stakeholders and the associates continue to manage the performance and business continuity risks.
Ten months ago the brewer underestimated the damage that can come with the pandemic and expected Covid-19 disruptions to be “temporary and the business will survive.”
That time Sechaba’s sole associate, KBL operates traditional beer breweries, alcoholic fruit beverages and a clear beer brewery.
In the period that just ended in December 2019, KBL contributed 72 percent to Sechaba’s revenues while CCBB contributed 28 percent. KBL also performed high in contribution to profit after tax with a share of 74 percent while CCBB contributed 26 percent.
Sechaba holds 49.9 percent in the local headline alcohol brewer KBL and 49.9 percent in the non-alcoholic drinks associate, CCBB. Sechaba holds 60 percent of the shares of KBL while SABMiller Botswana B.V. holds 40 percent. SABMiller Plc has management control in the operating company. The Botswana Development Corporation has a 25.6 percent shareholding in Sechaba Breweries Holdings Limited.
The glitter on the glass of KBL or Sechaba, is of December 2019 financial results which was downplayed and turned into a bearish affair in the financial results for the half year ended 30 June 2020. For those results, there was a spill in profit by Sechaba cash cow KBL by 72 percent while CCBB recorded a decline in profit by 15 percent, both and respectively in correspondence with the same period in 2019. All this downfall comes down to a loss of 60 percent of profit by the parent company. That was more than the 60 percent fall expected before the release of results.
In September during the release of the June 2020 results, Sechaba admitted that the intervention put by government since April, to fight the Covid-19 pandemic, negatively impacted its business performance and its associates, KBL and CCBB bore the full brunt. Revenue collected for KBL was lower by 37 percent while for its sister associate; CCBB, the numbers were down by 7.1 percent. This is the time when sale of alcohol was banned and manufacturing of soft drinks was not part of essential services.
Sechaba Chairman, Bafana Molomo last year said even though Covid-19 interventions would have an impact on the associates, this impact is expected to be temporary and the businesses will survive.
“However, it is advised that the situation is changing constantly and that it will be monitored closely. The Group’s associates continue to forecast growth in 2020 notwithstanding the challenges relating to Covid-19. The business environment has been generally positive, and the Group continues to enhance relationships with all stakeholders. The associates continue to manage the performance and business continuity risks,” he said.