The Botswana Stock Exchange’s domestic Company Index (DCI) is at a one year low after contradicting by 10% since the beginning of the year. The DCI comprises of 22 listed local companies on the domestic counter and it is a market weighted index. The DCI is dragged down by losses in the financial and retail stocks that make up majority of the domestic listed companies.
However, the six listed property stocks have been resilient in what appears to be a bearish market, delivering capital gains above the DCI. We take a look at the top four property companies that are delighting their shareholders, especially the Botswana Public Pension Fund which has stakes in both companies.
New African Properties
New African Properties(NAP) is not only the best performing property stock but at 11% year-to-date(YTD) returns, it is the overall second best performing stock in the DCI, coming second to Botswana Insurance Holding Limited(BIHL).
This is a reversal of fortunes from last year when the group’s ranked third amongst property companies after delivering 22% in share price increase. The company broke records in June in what was the single biggest day trade in the history of the BSE after the company traded 26% of its issued capital worth P457.3 million.
NAP was listed on the BSE in 2011, with a total of 604 397 124 issued units. According to NAP’s 2015 annual report, the majority of the units are owned by body corporate/trusts at 80 percent, followed by insurance companies, pension/equity funds at 13.6 percent while individuals hold 6.4 percent of issued units.
Of all issued units, the public accounts for 20.1 percent and the rest lies solidly with directors’ interests. The largest unit holder is Cash Bazaar Holdings (Pty) Ltd with 79.3 percent stake. In 2015, the company’s traded units were at 1.98 percent of the total issued units, making the June trade the biggest of the company since its existence.
NAP owns properties such as Riverwalk Mall, Riverwalk Plaza and Kagiso Mall in Gaborone, Mafenyatlala Mall in Molepolole, Kasane Mall and Mokoro Centre in Maun. The portfolio comprises primarily of prime retail sites with a strong tenant base, including Pick ‘n Pay, Spar, Choppies, Mr Price, Woolworths, Pep, Cashbuild, Furnmat, CB Stores, Ackermans, Cape Union Mart, Exclusive Books, FNB, Hi-Fi Corporation, Home Corp, Incredible Connection, Jet, KFC, Nando's, New Capitol Cinema, Mugg & Bean, JB Sports, Truworths and many others.
The second best performing property stock belongs to RDC properties after its share price appreciated by 6% since the beginning of the year. The Share price is currently trading at P2.65. In the previous year the share price surged by 27%, making it the second best performing property stock.
RDC Properties is the first variable rate loan stock company to list on the Botswana Stock Exchange in 1996. The company selectively develops and invests in modern commercial, industrial and residential buildings in prominent locations in Botswana and Madagascar.
RDCP’s property portfolio value surpassed the P1 billion mark in 2015, and the portfolio includes Masa Centre, Chobe Marina Lodge, Standard Chartered House in main mall, Isalo Rock Lodge in Madagascar and RDC flats. The company plans to expand to Namibia and Mozambique with plans in Namibia progressing well after the group reserved a holding company name that will carry out developments after land has been allocated.
The group’s 2015 annual report lists the top unit holders as Realestate Financiere SA, the controlling shareholder at 31.47%, Botswana Public Officers Pension Fund (BPOPF) at 31.6% (the units are held through various nominees), while Chobe Financial Corporation, Aspera Holdings Limited and Motor Vehicle Accident Fund (MVA) each hold 16.62%, 3.74% and 3.70% respectively.
The Gulaam Abdoola led property giant continues to impress its shareholders as the market correctly prices the value of the stock which has spiked by 5.5% in the last 8 months to trade at P3.24. The gains extend the group’s spectacular performance as it ended the previous year as the fourth best performing stock in the domestic board after returning 47% in capital gains.
The group’s property portfolio is valued at P1.7 billion, a portfolio that includes Game City, the largest indoor mall in Botswana and Mlimani City, the largest purpose built indoor shopping centre in Tanzania. The group also owns Nzano Shopping Centre in Francistown, Mogoditshane Supa Save mall, Turnstar House in Mall, Fairgrounds Office Park, Tapologa Estates and other residential and retail properties.
Turnstar Holdings is in the last stages of Game City expansion which when complete will modernise the existing common areas, toilets, entrances and shop fronts of the centre. An additional 9,000 sq.m exhibition hall comprising of restaurants, a food court, multi-function entertainment area, exhibition hall and playground is being constructed on the upper level with a view of the Kgale Hill.
The group is also extending its Mlimani city through additions of two office blocks, a new ticket parking system and refurbishment of the conference centre. The ongoing works are expected to improve the group’s revenue. The Group’s top ten linked unitholders include BPOPF, GH Group, Associated Investment and Development Corporation, Botswana Insurance Fund Management, Debswana Pension Fund and Motor Vehicle Accident Fund.
The group’s property value which is in the north of P750 million and spans the office, retail and industrial sectors with the bulk of revenues coming from the highly competitive and saturated office sector. The group was the fourth best performing property stock in 2015 at 12% share price appreciation. The stock which is now trading at P3.05 is up by 4.8% since the beginning of the year.
The group owns a stellar portfolio comprising of Prime Plaza Buildings in the CBD, Sebele Centre Mall, Letshego Place, South Africa High Commission Building, DHL Building, and G4S headquarters. In Francistown, they own Nswazi Mall and Mantlo House after disposing of Barclays Plaza and Blue Jacket Square Mall to BPOPF. Other properties include Hillside Mall in Lobatse, Boiteko Mall in Serowe, Ramotswa Shopping Centre, Ghanzi Shopping Centre. In the region, the group operates two buildings in Lusaka and Kitwe which houses G4s offices.
Primetime which is set to open its new Pilane Crossing Mall is currently locked in an impasse with the Ministry of Trade and Investment over trade licenses concerning South African companies that are leased as tenants. The Ministry is refusing to grant trade licenses since the Trade act stipulates that such licenses are reserved for citizens. However the silver lining is that the licenses will be approved if the involved retailers cede 51% of shareholding to citizens.
The top major linked unitholders list is led by Linwood Services Limited with 25.99% shareholding, BPOPF has a stake of 16.88% through its nominee, Tati Company Limited holds 14.23%, Metropolitan Life Botswana has 7.51%, while Debswana Pension Fund and D.P Training both hold 3.41% and 3.34% respectively.
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”