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Another rate cut expected amid low inflation

Botswana inflation dived to a new low in August, helped by falling global commodity prices, bolstering prospects of an interest rate cut by the central bank.

Inflation which the central bank tracks eased to 3.0 percent in August from 3.1 percent a month ago, data from Statistics Botswana has revealed. Annual inflation in August 2015 was lower than the 4.6 percent recorded during the same month in 2014. On a month-on-month basis, prices also grew at a slower rate, by 0.2 percent in August after quickening by 0.1 percent previously.

Investment Analyst with Motswedi Securities Garry Juma said if inflation continues on this downward trajectory especially below the 3% point mark, there are high chances for another rate cut.

“We cannot rule out another interest rate cut by the BOB during Q4 2015 if the inflation rate continues on this downward trajectory,” said Juma.

The bank of Botswana has already cut the bank rate twice this year citing that the current state of the economy as well as the domestic and external economic outlook, including the inflation forecast, suggest that easing monetary policy is a step in the right direction.

Statistics Botswana says the reduction in inflation is due to positive spinoffs following two reductions in fuel prices in December2014 and February 2015.  The transport component carries a weight of 19% and is the second largest contributor towards the CPI basket.

Juma said the red flag is on the food & non-alcoholic beverages which gained momentum, rising from 1.0%y/y in July to 1.1%y/y in August. “This is a cause of concern given that it constitutes the largest weight of the CPI basket (22%) and most households devout a huge proportion of their income towards food items,” he said.

“Our forecast is that the Sept inflation reading will come out even lower, just below 3% following the downward review of fuel prices early this month,” he said.

According to the release, inflation rates for regions between July 2015 and August 2015 indicated that Cities & Towns went down to 2.8 percent from 3.1 percent, Rural Villages’dropped to 3.4 percent from 3.5 percent and Urban Villages remained unchanged at 3.0 percent.

The August national Consumer Price Index registered an increase of 0.2 percent, moving from 182.5 in July to 182.8 in August. The Urban Villages’ index realized an increase of 0.3 percent, moving from 181.1 to 181.6.The Rural Villages’ index went up by 0.3 percent, from 188.5 to 188.9, while the Cities & Towns’ index rose by0.1 percent, moving from 181.1 to 181.3 between the two months.

Group indices were generally stable between July 2015 and August 2015, recording changes of less than 1.0 percent. The Clothing and Footwear index group went up from 174.0 to 175.4, registering an increase of 0.8 percent between July and August. The increase was attributed to the general rise in the section indices.The Restaurants & Hotels index group rose by 0.4 percent, moving from 239.6 in July to 240.4 in August. The rise was due to the general increase in the section indices.

The All-Tradable inflation rate was 1.4 percent in August, a decline of 0.1 of a percentage point on the July 2015 rate of 1.5 percent. The Imported Tradable inflation rate recorded a drop of 0.1 of a percentage point,from 0.7 percent in July to 0.6 percent in August. The Non-Tradable inflation rate declined from 6.9 percent to 6.8 percent between July and August. The Domestic Tradable inflation rate remained the same at 2.9 percent between July and August 2015.

The All-Tradable index moved from 187.3 in July to 187.7 in August, registering a rise of 0.2 percent. The Imported Tradable index moved from 176.8 to 177.3, recording an increase of 0.3 percent between the two months. The Non-Tradable index registered an upturn of 0.1 percent, moving from 170.9 to 171.0, while the Domestic Tradable index went up by 0.1 percent, moving from 207.5 in July to 207.7 in August.

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CA SALES revenues rose to R9.5 billion

27th March 2023

The Botswana and Johannesburg Stock Exchange listed distributor of fast-moving consumer goods

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Grit divests from Letlole La Rona

22nd March 2023

Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.

The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.

Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.

This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.

In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.

Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.

The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.

“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said

In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.

The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.

Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.

Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.

Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.

Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.

“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.

LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.

The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.

An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.

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Stargems Group establishes Training Center in BW

20th March 2023

Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.

The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.

“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.

In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices.  Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.

“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.

Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy,  Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.

“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.

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