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Depressed economy slows property market

The chairman of PrimeTime, Petronella Matumo and her Managing Director,  Alexander Kelly have said despite numerous challenges in both of the countries in which they operate, the company achieved a substantial year-on-year increase in revenues and operating profit.

The Prime Time annual report for the year ending 31st August 2015 actually gives a sneak preview of Botswana’s property market. Matumo and Kelly are of the view that the property investment landscape has changed significantly in the 12 months that have passed.

“Economic growth in Botswana has been meagre in comparison to the long-term average, which has been evidenced by weaker demand from tenants. Furthermore, the well documented liquidity constraints that hit the market in late 2014, coupled with the depressed economic conditions will have checked the pace of growth of our portfolio’s capital value,” they write in their annual statement.

 However, Matumo and Kelly note that despite no acquisitions, the portfolio stood at P764 million (including assets classified as held for sale) at the end of August, an increase of 4% over the course of the year meant real growth was still achieved in a period where inflation has been running at close to 3%.

The value of the Prime Time portfolio is underpinned by the strength of our occupier base and the relationships we have established with our tenants.

“At the end of August 2015, vacancies stood at just 1%, a phenomenal achievement when one considers conditions in the occupier market. Our space at Prime Plaza is now 100% occupied. We were pleased to welcome Botswana Life to the complex during the course of the year and Barclays absorbed the remainder of the space in Building 4, giving them a standalone facility.”

CHALLENGES

Petronella Matumo and Alexander Kelly note that adding to the existing challenges in the domestic market – primarily the limitation of its size, supply issues and the intensity of competition for good quality investments – has been the difficulty in securing funding. The Prime Time officials note that the terms on offer from the commercial banks are stifling activity with some lenders raising interest rates on existing facilities when the opportunity has arisen.

What does this mean for PrimeTime and how are we responding?

“With our traditional route of funding now proving prohibitively expensive, we are looking at alternative means of raising debt which will offer greater flexibility to enable the growth of the company while at the same time offering us better value. This may include raising a bond in the local market,” they wrote.

Work in progress and opportunities

As part of the intended plan to grow and diversify PrimeTime’s asset base, Matumo and Kelly say they are busy with a number of projects. “As we write this, the sales of Blue Jacket Square and Barclays Plaza in Francistown to the BPOPF are close to completion. While these properties have proved to be ‘cash cows’, which is good for the likes of a pension fund, they are likely to show limited growth going forward. The combined sale price of P71 million, represented an excellent return on our initial investment and will enable us to redeploy the proceeds into projects that we believe offer far greater growth potential in the long-term.”

Amongst these is the development of the Pilane Crossing Shopping Centre, a circa P100 million project we entered into following shareholder approval in June 2015.
With completion not due until the middle of next year, we have agreed heads of terms or signed leases on 90% of the first phase. The Mochudi/Pilane area has long been in need of a well-designed retail centre, as this demand led project has demonstrated. Amongst the tenant mix to already agree terms are our anchor Choppies, FNB, Puma, Clicks, Jet, Mr Price, Beaver Canoe, Style and Bata, as well as Cashbuild for the second phase. Pilane Crossing will add 9,247 sqm of retail to our offering.

According to Matumo and Kelly, there are still opportunities to be found in Botswana, but we will have to work harder to find them. They note that in the CBD office market, with Prime Plaza fully let, “we may have appetite for more offices, despite the abundance of new space to be delivered in the coming year and a number of existing schemes laying empty or only partially occupied.  We have found there is still demand out there and believe we have identified a niche which works well for a variety of occupiers.”

Prime Time also wants to expand into Zambia. “Our expressed intention of expanding our footprint in Zambia, and potentially elsewhere in the region, is gaining traction. At the year-end we had agreed terms to acquire an office park in Lusaka. Despite current negativity surrounding the Zambian economy, with the downward trajectory of the copper price and in mid to late 2015 the subsequent depreciation of the Kwacha, our long-term view remains positive. As an investor driven by long-term wealth creation, the present trepidation in Zambia may give us openings that previously didn’t exist, while at the same time offering an opportunity to cultivate a US$ based income stream for PrimeTime.”

They add: “Further investments, both in terms of standing assets and developments, continue to be analysed, which with our increased understanding of the market there and strengthening relationships with the local market players we are now in a position to proceed at greater speed than has previously been the case. Our investments into Zambia are being structured through a Mauritian subsidiary primarily for tax efficiencies.”

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Business

Gambling Authority tender dangles as a jittery lottery quandary

30th November 2020
SEFALANA MD: CHANDRA CHAUHAN

Lucrative and highly anticipated national lottery tender that saw several Batswana businessmen partnering to form a gambling consortium to pit against their South African counterparts, culminates into a big power gamble.

WeekendPost has had a chance to watch lottery showcase even before the anticipated and impending national lottery set-up launches. A lot has been a big gamble from the bidding process which is now set for the courts next year January following a marathon legal brawl involving the interest of the gambling fraternity in Botswana and South Africa.

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The uncertainty of getting the next meal in Botswana

30th November 2020
uncertainty of getting the next meal

Households representing more than half of Botswana’s population-mostly residing in rural areas- do not know where their next meal will come from, but neither do they take into consideration the quality and/or quantity of the food they consume.

This is according to the latest Prevalence of Food Insecurity in Botswana report which was done for the 2018/19 period and represents the state of food insecurity data even to this time.
The Prevalence of Food Insecurity was released by Statistics Botswana and it released results with findings that the results show that at national level 50.8 percent of the population in Botswana was affected by moderate to severe food insecurity in 2018/19, while 22.2 percent of the population was affected by severe food insecurity only.

According to the report, this translates to 27 percent of the population being food secure that is to say having adequate access to food in both quality and quantity. According to Statistician General, Burton Mguni, when explaining how the food data was compiled, Food and Agriculture Organization of the United Nations (FAO), is custodian of the “Prevalence of Undernourishment (PoU)” and “Prevalence of moderate or severe food insecurity in the population based on the Food Insecurity Experience Scale (FIES)” SDG indicators, for leading FIES data analysis and the resultant capacity building.

“The FIES measures the extent of food insecurity at the household or individual level. The indicator provides internationally comparable estimates of the proportion of the population facing moderate to severe difficulties in accessing food. The FIES consists of eight brief questions regarding access to adequate food, and the questions are answered directly with a yes/no response. It (FIES) complements the existing food and nutrition security indicators such as Prevalence of Undernourishment.

According to the FIES, with increasing severity, the quantity of food consumed decreases as portion sizes are reduced and meals are skipped. At its most severe level, people are forced to go without eating for a day or more. The scale further reveals that the household’s experience of food insecurity may be characterized by uncertainty and anxiety regarding food access and compromising the quality of the diet and having a less balanced and more monotonous diet,” says Mguni.

The 50.8 percent of the population in Botswana which was affected by moderate to severe food insecurity are characterized as people experiencing moderate food insecurity and face uncertainties about their ability to obtain food. These people have been forced to compromise on the quality and/or quantity of the food they consume according to the report on food insecurity.

Those who experience severe food insecurity, the 22.2 percent of the population, are people who have typically run out of food and, at worst, gone a day (or days) without eating. According to the statistics, rural area population experienced moderate to severe food insecurity at 65 percent while urban villages were at 46.60 percent and cities/town were at 31.70 percent. Those experiencing the most extreme and severe insecurity were at rural areas making 33.10 percent while urban villages and towns were at 11.90 percent and 17.50 respectively.

According to a paper compiled by Sirak Bahta, Francis Wanyoike, Hikuepi Katjiuongua and Davis Marumo and published in December 2017, titled ‘Characterization of food security and consumption patterns among smallholder livestock farmers in Botswana,’ over 70 percent of Botswana’s population reside in rural areas, and majority (70%) relies on traditional/subsistence agriculture for their livelihoods.

The study set out to characterize the food security situation and food consumption patterns among livestock keepers in Botswana. “Despite the policy change, challenges still remain in ensuring that all persons and households have access to food at all times. For example, during an analysis of the impacts of rising international food prices for Botswana, BIDPA reported that food prices tended to be highest in the rural areas already disadvantaged by relatively low levels of income and high rates of unemployment,” said the study.

According to the paper, about 9 percent of households were found to be food insecure and this category of households included 6 percent of households that ranked poorly and 3 percent that were on the borderline according to the World Food Programme’s (WFP) definition of food security.

Media reports state that the World Bank has warned that disruption to production and supply chains could ‘spark a food security crisis’ in Africa, forecasting a fall in farm production of up to 7 percent, if there are restrictions to trade, and a 25 percent decline in food imports.

Food security in Botswana or food production was also attacked by the locust pandemic which swept out this country’s vegetation and plants. The locust is said to have contributed to 25 percent loss in production.

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Business

Solid demand for diamonds towards the ‘gift’ season

30th November 2020
Diamonds

Global lockdown have been a thorn in diamonds having shiny sales, but a lot of optimism shows with the easing of Covid-19 restrictions, the precious stones will be bought with high volumes towards festive season. The diamond market is however warned of the resurgence of Covid-19 in key markets presents ongoing risks amid the presence and optimist about the new Covid-29 vaccines.

The latest findings published as De Beers Group’s latest Diamond Insight ‘Flash’ Report, which looks at the impact of the pandemic on relationships and engagements, has revealed that in the US that more couples than ever are buying diamond engagement rings. Bridal sales is mostly the primary source of diamond jewellery demand in recent months, De Beers said.

According to De Beers, interviews with independent jewellers around the US revealed that the rate of couples getting engaged has increased compared with the period when Covid-19 first had an impact in the US in the spring.

“In addition, despite challenging economic times, consumers were spending more than ever on diamond engagement rings – often upgrading in colour, cut and clarity, rather than size. Several jewellers speculated that with consumers spending less on elaborate weddings and/or honeymoons in the current environment, they had more to spend on choosing the perfect ring,” said De Beers.

According to De Beers, a national survey of 360 US women in serious relationships, undertaken in late October in collaboration with engagement and wedding website, The Knot. This survey is said to have found that the majority of respondents (54%) were thinking more about their engagement ring than the wedding itself (32%) or the honeymoon (15%), supporting jewellers’ hypothesis that engagement ring sales were benefiting from reduced wedding and travel budgets in light of Covid-19 restrictions.

When it came to researching engagement rings, online was by far the predominant channel for gaining ideas/inspiration at 86% of consumers surveyed, with 85% saying they had saved examples of styles they liked, according to De Beers. According to the survey, only a uarter of respondents said they had looked in-store at a physical location for design inspiration.

“For many couples, the pandemic has brought them even closer together, in some instances speeding up the path to engagement after forming a deeper connection while experiencing lockdown and its associated ups and downs as a partnership. Engagement rings are taking on even greater symbolism in this environment, with retailers reporting couples are prepared to invest more than usual, particularly due to budget reductions in other areas,” De Beers CEO Cleaver said.

According to De Beers Group, its Diamond Insight Flash Report series is focused on understanding the US consumer perspective in light of Covid-19 and monitoring how it evolves as the crisis evolves. Also, the company said, it is augmenting its existing research programme with additional consumer, retailer and supply chain touch-basis to understand the pain points and the opportunities for stakeholders across the diamond pipeline.

Demand for diamonds is as hard and resilient as the precious stone itself. De Beers pocketed US$ 450 million in its recently held ninth rough diamond sales cycle, and the company says it is more flexible approach to rough diamond sales during the ninth sales cycle of 2020, with the Sight event extended beyond its normal week-long duration.

“Steady demand for De Beers Group’s rough diamonds continued in the ninth sales cycle of the year, reflecting stable consumer demand for diamond jewellery at the retail level in the US and China, and expectations for reasonable demand to continue throughout the holiday season. However, the resurgence of Covid-19 infections in several consumer markets presents ongoing risks,” said De Beers CEO Bruce Cleaver recently.

High expectations are on diamonds being a sentimental gift for holiday season or as the most fetished gift. However the ninth cycle was lower than the eighth which registered US$ 467 million. For the last year period which corresponds with the current one, De Beers managed to raise US$ 400.

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