Connect with us

BSE’s DCI losses spark

The Botswana Stock Exchange’s Domestic Company Index (DCI) lost 95 points during the last three months to end the second quarter at 10,107.12 points, reflecting a decline of 0.93%. The decline in the second quarter follows the 3.8% decline experienced in the first quarter, therefore in the past 6 months the DCI has lost 4.74% and 5.45% in the last 12 months. In this quarter, as in the first quarter, the rally was led by property and tourism stocks while retail and the financial stocks have been most hit.  

It has been a rough start for global equities worldwide following a global markets rout that wiped trillions worth of equities valuation early in 2016 as the world’s largest economy fumbled. The precipitous fall in the Chinese equities led to a global contagion resulting in major markets taking a hit and sparking fresh concerns that a financial crisis is looming.

While the global markets were still reeling from the shock, the United Kingdom voted to leave the European Union, the aftermath was a shakeup in the financial markets that saw leading indices shedding off points. The turmoil in the financial markets has sparked fears that another financial crisis similar to the one experienced in 2008 is looming large in the horizon.

The BSE’s DCI opened the year at 10,610.14 points and from there on the DCI has been in decline. The first quarter ended at 10,2o2.64, representing a decline of 3.8%. The losses were extended in the second quarter with the DCI failing to find a footing, causing concerns amongst investors that their investments this year might be lower than the previous year. The index has been put under pressure by retail and financial stocks which are seen as being more risky given the prevailing market conditions.

The second quarter picks up from the first quarter with both sides of the coin, the gainers and losers, comprising mostly of the same companies that featured in the previous quarter. The trend further continues with property stocks outperforming the DCI index, with the exception of Letlole La Rona.

The travel and leisure (tourism) stocks maintained their favourability amongst investors as they continue to appreciate in value. The financial stocks continue to struggle, with only the exception of Botswana Insurance Holdings Limited and Barclays, as the two financial giants managed to post gains in both quarters. Big retailers also suffered losses signalling that investors are worried about the companies’ profitability given the stubbornly low inflation.

The top 5 gainers in the second quarter of the year were led by Cresta, the leading hotel operator in the country. Its share price has appreciated by 6.5% in the second quarter, bringing its yearly gains to 13%. New African Properties which broke records two weeks back after a single day trading of 26% of its issued shares worth P457.3 million has impressed with year to date returns of 10.6% after gaining 6.2% in the last three months. The Botswana Insurance Holdings Limited remained in the top five performers after a good showing in the first quarter. It retained third position in the second quarter after advancing by 3.8%, totalling its yearly returns to 9%. Chobe, a tourism outfit which operates luxurious lodges saw its share price jump by 5.28% in the quarter under review while its year to date gains is at 8.4%. Turnstar Holdings wrapped up our top five gainers as the real estate developer managed an impressive 6.2% increase in share price, bringing its yearly returns to 5.9%.

Other notable positive movements in the second quarter include RDC properties which brought in 3.13% while its year to date returns stand at 5.20%. Wilderness Holdings gained 5.2%, extending its yearly gains to 3.1%. Primetime moved by 1.3% resulting in 3.8% of year to date returns. Meanwhile Barclays remains the only bank so far this year to deliver share price gains as it locked in 2.9% in yearly returns.  

Botswana Telecommunications Corporation Limited listed in April. The company on the first day of trading closed atP1.30, an incredible 30% surge from P1. However, it the shares quickly retreated and briefly traded for around P1.20 until settling for the current P1.10 price, which is still a win to the shareholders as it represent a 10% premium on the initial P1 they paid during the Initial Public Offering(IPO).

On the losing side, Standard Chartered Bank which is the oldest bank to operate in Botswana was the biggest loser as its share price plunged to new lows as it lost 19% and bringing the yearly losses to 24%. The embattled bank is having a bad year in the stock market after it posted profit which was 85% lower than the previous period. Letshego, the pan-African financial services provider continues to struggle despite its highly liquid stock. Letshego has seen its share price plummet by as much as 2.4% in the second quarter, bringing the yearly losses to 14%. The financial stocks continued the downward trend as First National Bank Botswana dropped 5% resulting in year to date loss of 11%. Choppies Enterprises had its share price tank by 2.4% in the last 3 months, extending its yearly losses to 9%. The furniture shop giant, Furnmart, lost 3% in the second quarter, delivering year to date loss of 4.4%.

The oldest companies in the stock market in terms of listing, Sefalana and Sechaba have had subdued share movements, in the end the two giants are still yet to post positive gains, with Sefalana down by 3.62% in yearly returns while Sechaba is trailing behind by yearly losses of about 1.7%.

The usually inactive Foreign Domestic Index has been on a winning streak as the index recorded positive growth of about 1.1%, pushing the FCI year to date gains by 1.5%.

The index was rallied by Botswana Diamonds which delivered 143% returns in the second quarter, while its yearly gains are at an impressive 162%. Lucara Diamond Corporation has not only impressed so far with its exceptional diamonds as its share price has been soaring since the discovery of Lesedi La Rona. The yearly returns stand at 70% after gaining about 45% in the second quarter. While companies trading under the foreign counter remained largely flat, Shumba Energy share price slid down by 9%, bringing its yearly losses to 10%.

With the first half of the year dusted, the question on many investors’ minds is whether the stock markets will improve without any further shocks or go through another crisis. In Botswana’s case, the probability of the DCI turning around to deliver good returns remains shaky. According to analysts at Trading Economics, they estimate it to trade at 9980.00 points in the third quarter, a further 1.3% decline.

“Botswana Stock Market (BSI DCI) Forecasts are projected using an autoregressive integrated moving average (ARIMA) model calibrated using our analysts’ expectations. We model the past behaviour of Botswana Stock Market (BSI DCI) using vast amounts of historical data and we adjust the coefficients of the econometric model by taking into account our analysts assessments and future expectations. The forecast for – Botswana Stock Market (BSI DCI) – was last predicted on Thursday, June 30, 2016,” they revealed in a research note.

Continue Reading


New study reveals why youth entrepreneurs are failing

21st July 2022

The recent study on youth entrepreneurship in Botswana has identified difficult access to funding, land, machinery, lack of entrepreneurial mindset and proper training as serious challenges that continue to hamper youth entrepreneurship development in this country.

The study conducted by Alliance for African Partnership (AAP) in collaboration with University of Botswana has confirmed that despite the government and private sector multi-billion pula entrepreneurship development initiatives, many young people in Botswana continue to fail to grow their businesses into sustainable and successful companies that can help reduce unemployment.

University of Botswana researchers Gaofetege Ganamotse and Rudolph Boy who compiled findings in the 2022 study report for Botswana stated that as part of the study interviews were conducted with successful youth entrepreneurs to understand their critical success factors.

According to the researchers other participants were community leaders, business mentors, Ministry of Trade and Industry, Ministry of Youth, Gender, Sport and Culture, financial institutions, higher education institutions, non-governmental institutions, policymakers, private organizations, and support structures such as legal and technical experts and accountants who were interviewed to understand how they facilitate successful youth entrepreneurship.

The researchers said they found that although Botswana government is perceived as the most supportive to businesses when compared to other governments in sub-Saharan Africa, youth entrepreneurs still face challenges when accessing government funding. “Several finance-related challenges were identified by youth entrepreneurs. Some respondents lamented the lack of access to start-up finance, whereas others mentioned lack of access to infrastructure.”

The researchers stated that in Botswana entrepreneurship is not yet perceived as a field or career of choice by many youth “Participants in the study emphasized that the many youth are more of necessity entrepreneurs, seeing business venturing as a “fall back. Other facilitators mentioned that some youth do not display creativity, mind-blowing innovative solutions, and business management skills. Some youth entrepreneurs like to take shortcuts like selling sweets or muffins.”

According to the researchers, some of the youth do not display perseverance when they are faced with adversity in business. “Young people lack of an entrepreneurial mindset is a common challenge among youth in business. Some have a mindset focused on free services, handouts, and rapid gains. They want overnight success. As such, they give up easily when faced with challenges. On the other hand, some participants argue that they may opt for quick wins because they do not have access to any land, machinery, offices, and vehicles.”

The researchers stated that most youth involved in business ventures do not have the necessary training or skills to maintain a business. “Poor financial management has also been cited as one of the challenges for youth entrepreneurs, such as using profit for personal reasons rather than investing in the business. Also some are not being able to separate their livelihood from their businesses.

Lastly, youth entrepreneurs reported a lack of experience as one of the challenges. For example, the experience of running a business with projections, sticking to the projections, having an accounting system, maintaining a clean and clear billing system, and sound administration system.”

According to the researchers, the participants in the study emphasized that there is fragmentation within the entrepreneurial ecosystem, whereby there is replication of business activities without any differentiation. “There is no integration of the ecosystem players. As such, they end up with duplicate programs targeting the same objectives. The financial sector recommended that there is a need for an intermediary body that will bring all the ecosystem actors together and serve as a “one-stop shop” for entrepreneurs and build mentorship programs that accommodate the business lifecycle from inception to growth.”

Continue Reading


BHC yearend financial results impressive

18th July 2022

Botswana Housing Corporation (BHC) is said to have recorded an operating surplus of P61 Million, an improvement compared to the previous year. The housing, office and other building needs giant met with stakeholders recently to share how the business has been.

The P61 million is a significant increase against the P6 million operating loss realized in the prior year. Profit before income tax also increased significantly from P2 million in the prior year to P72 million which resulted in an overall increase in surplus after tax from P1 million prior year to P64 million for the year under review.

Chief of Finance Officer, Diratsagae Kgamanyane disclosed; “This growth in surplus was driven mainly by rental revenue that increased by 15% from P209 million to P240 million and reduction in expenditure from P272 million to P214 million on the back of cost containment.”
He further stated that sales of high margin investment properties also contributed significantly to the growth in surplus as well as impairment reversals on receivables amounting to P25 million.

It is said that the Corporation recorded a total revenue of P702 million, an 8% decrease when compared to the P760 million recorded in the prior year. “Sales revenue which is one of the major revenue streams returned impressive margins, contributing to the overall growth in the gross margin,” added Kgamanyane.

He further stated professional fees revenue line declined significantly by 64% to P5 million from P14 million in the prior year which attributed to suspension of planned projects by their clients due to Covid-19 pandemic. “Facilities Management revenue decreased by P 24 million from P69 million recorded in prior year to P45 million due to reduction in projects,” Kgamanyane said.

The Corporation’s strength is on its investment properties portfolio that stood at P1.4 billion at the end of the reporting period. “The Corporation continues its strategy to diversify revenue streams despite both facilities management income and professional fees being challenged by the prevailing economic conditions that have seen its major clients curtailing spending,” added the CEO.

On the one hand, the Corporation’s Strategic Performance which intended to build 12 300 houses by 2023 has so far managed to build 4 830 houses under their SHHA funding scheme, 1 240 houses for commercial or external use which includes use by government and 1 970 houses to rent to individuals.

BHC Acting CEO Pascaline Sefawe noted that; BHC’s planned projects are said to include building 336 flat units in Gaborone Block 7 at approximately P224 million, 100 units in Maun at approximately P78 million, 13 units in Phakalane at approximately P26 million, 212 units in Kazungula at approximately P160 million, 96 units at approximately P42 million in Francistown and 84 units at approximately P61 million in Letlhakane. Emphasing; “People tend to accuse us of only building houses in Gaborone, so here we are, including other areas in our planned projects.”

Continue Reading


Commercial banks to cash big on high interest rates on loans

18th July 2022

Researchers from some government owned regulatory institutions in the financial sector have projected that the banking sector’s profitability could increase, following Bank of Botswana Monetary Policy Committee recent decision to increase monetary policy rate.

In its bid to manage inflation, Bank of Botswana Monetary Policy Committee last month increased monetary policy rate by 0.50 percent from 1.65 percent to 2.15 percent, a development which resulted with commercial banking sector increasing interest rate in lending to household and companies. As a result of BoB adjustment of Monetary Policy Rate, from 1.65 percent to 2.15 percent commercial banks increased prime lending rate from 5.76 percent to 6.26 percent.

Researchers from Bank of Botswana, the Non-Bank Financial Institutions Regulatory Authority, the Financial Intelligence Agency and the Botswana Stock Exchange indicated that due to prospects of high inflation during the second half of 2022, there is a possibility that the Monetary Policy Committee could further increase monetary policy rate in the next meeting in August 25 2022.

Inflation rose from 9.6 percent in April 2022 to 11.9 percent in May 2022, remaining above the Bank of Botswana medium-term objective range of 3 – 6 percent. According to the researchers inflation could increase further and remain high due to factors that include: the potential increase in international commodity prices beyond current forecasts, logistical constraints due to lags in production, the economic and price effects of the ongoing Russia- Ukraine conflict, uncertain COVID-19 profile, domestic risk factors relating to possible regular annual administered price adjustments, short-term unintended consequences of import restrictions resulting with shortages in supplies leading to price increases, as well as second-round effects of the recent increases in administered prices “Furthermore, the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices could add upward pressure to inflation,” said the researchers.

The researchers indicated that Bank of Botswana could be forced to further increase monetary policy rate from the current 2.15 percent if inflation rises persistently. “Should inflation rise persistently this could necessitate an upward adjustment in the policy rate. It is against this background that the interest rate scenario assumes a 1.5 percentage points (moderate scenario) and 2.25 percentage points (severe scenario) upward adjustment in the policy rate,” said the researchers.

The researchers indicated that while any upward adjustment on BoB monetary policy rate and commercial banks prime lending rate result with increase in the cost of borrowing for household and compnies, it increase profitability for the banking sector. “Increases in the policy rate are associated with an overall increase in bank profitability, with resultant increases in the capital adequacy ratio of 0.1 percentage points and 0.2 percentage points for the moderate and severe scenarios, respectively,” said the researchers who added that upward adjustment in monetary policy rate would raise extra capital for the banking sector.

“The increase in profit generally reflects the banking industry’s positive interest rate gap, where interest earning assets exceed interest earning liabilities maturing in the next twelve months. Therefore, an increase of 1.5 percentage points in the policy rate would result in industry gains of P71.7 million (4.1 percent increase), while a 2.25 percentage points increase would lead to a gain of P173.9 million (6.1 percent increase), dominated by large banks,” said the researchers.

Continue Reading
Weekend Post