Chobe Holdings Limited has delivered impressive results, suggesting that the tourist outfit will end the year on a high. The group’s interim results for the six months ended 31 August 2016 was met by a 0.4% uptick in share price, extending the group’s good run in the stock market.
The group’s revenue increased to P158.6 million from P119.1 million, representing an increase of 33% from the corresponding period. This was on the back of increased occupancy levels which shot up by 5%, a marked improvement from the 2% decline recorded in the previous year end financial results.
“A significant increase in revenue was recorded as a result of the aforementioned increase in bednights sold, favourable exchange rates, and a marginal increase in achieved bed rates in US Dollar terms and contribution from the newly acquired wholly owned aircraft maintenance organisation,” the group said.
The group’s financials show that the operating costs were contained in line with inflationary levels. The operating costs shot up by 15% to P82.2 million. Chobe says an operating cost increase of 15% is considered satisfactory in light of the volume of business and current inflation levels. Profits before tax increased from P44.4 million to this year’s P64.4 million, an impressive increase of 45%. Basic earnings per share increased from 52.8 thebe to 38 thebe, a 39% jump that will delight shareholders as the company is more efficient at using its capital for generating profits.
For the period under review, the tourism operator parted with P22.1 million, financed from internally generated cash flows, on significantly improving existing equipment, buildings, as well as the purchase of additional equipment. A further P7.7 million was used to purchase buildings and equipment for North West Air (Pty) Ltd, a wholly owned aircraft maintenance operation. This complements the company’s previous P41.5 million splurge on major projects undertaken which included the complete rebuild of Camp Okavango and refurbishing of rooms at Chobe Game Lodge.
The group has also reiterated that the leases they were awarded are still yet to be signed. In December 2013, two of the Company’s subsidiaries submitted tenders for the lease, utilisation and management of Camp Okavango and Shinde Camp for non-consumptive tourism purposes. “After considerable delay both leases have been awarded to the Group for an initial period of fifteen years. The formal leases have not yet been signed owing to certain clauses that are not consistent with the invitation to tender documents.”
Chobe is bullish about the future prospects as they feel the scales will tilt in the favour. “It is anticipated that tourist numbers to Southern Africa in general and Botswana in particular will rise in the short to medium term. The Group is well positioned to benefit from this increase through its ever improving product offering coupled with the prime location of the Group’s camps and lodges,” the group revealed in their note to investors.
However, the group warned that initiatives by government such as the planned introduction of a tourism levy for every visitor entering Botswana, if implemented, may have a negative impact on the growth trend. Through its wholly owned subsidiaries, Chobe Holdings Limited owns and operates ten eco-tourism lodges and camps on leased land in Northern Botswana and the Caprivi Strip in Namibia with a combined capacity of 290 beds under the brands Desert & Delta Safaris and Ker & Downey Botswana. Safari Air, a wholly owned air charter operator, provides air transport services to the group's camps and lodges.
Desert and Delta Safaris (SA) (Pty) Ltd, another wholly owned subsidiary operating in South Africa, provides reservation services to the group. Just recently this year, the group, through its wholly owned subsidiary North West Air (Pty) Ltd, acquired Air Charter Botswana (Pty) Ltd’s aircraft maintenance operation at Maun International Airport for a cash consideration of P19.5 million financed using the group’s internal cash resources.
“This subsidiary has made a positive contribution to the group’s bottom line for the reporting period. It is anticipated that the financial contribution from this subsidiary will be fully realised in the forthcoming financial year once the entity has been fully integrated into the Group,” the group said. Chobe Holdings, the second largest listed tourism and leisure group on the Botswana Stock Exchange (BSE), has kept to its trend of not paying interim dividend in favour of a final year end declaration.
In the previous year end results, the company declared a final dividend of 40 thebe per share. Chobe which has a market capitalisation of P679.7 million has been a star performer in the main domestic board, delivering a return of 11.7% in the past 11 months.
Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status. The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.
This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago. In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.
However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced. Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.
The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.
The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.
On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.
The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.
Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.
Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).
“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.
Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.
This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.
For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.
Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers. “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.
‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’
According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.
Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.
“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.