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The war against financial exclusion

While the world, not in the least, Botswana, battles unemployment of up to 20 percent, the question of how to create jobs and sustainable livelihoods, has for most become a rhetorical question whose answer is yet to be seen on the ground.


However, Government technocrats, economists and finance professionals present various ideas with mixed results. Several institutions provide training on business linkages and others provide finance such as the Citizen Entrepreneurial Development Agency.


However, though not quantified authoritatively, the informal sector provides a livelihood for a majority of the population that is involved in economic activity. The Small to medium sized sector has access to service propositions from various commercial banks. However, access to funding for capital needs remains elusive for this segment, particularly the ‘small’ section of the SME complement.


In the face of bleak prospects for the indigent, unbanked and financially excluded women, who are identified as the majority heads of families in the country, the Women’s Finance House of Botswana has emerged as a trailblazer in answering the question of how to mobilise funds to make a reality of small business potential.    


WFHB gives micro finance to groups of women who then make repayments, all the while ensuring that nobody gets left behind in repayments as this will mean the group cannot access further funding.  “We have zero defaults on repayments because of that reason,” said Veronica Masenya, executive chair of the WFHB.


“We have not been going all out to market ourselves because of lack of financial resources, we have operated only in the central and southern districts but with more strategic partners we can cover the whole country.”
“Currently, we have 9,000 clients who are mandated to save P5 per day to also encourage the saving culture,” said Masenya.


“We have extension officers who are resident in these villages,” said Masenya.


 “We a have a special Bank of Botswana license that that allows us to take deposits but w are not allowed to engage in speculative activities because we do not have the necessary reserve requirements,” Veronica Masenya, executive chair of the WFHB. “We have zero defaults on repayments.”


“Our micro loans start from P750 to P20 000 and these are cyclical because people first have to be taught how to use money; by the fourth cycle the groups can now access the P20 000.”


Standard Chartered Bank Botswana and WFBH this week, held its annual Client Day and Business Forum under the theme Strategic Alliances: Drive Towards Financial Inclusion.


Health Minister Dorcas Makgatho, a guest at the forum, urged women to diversify their business lines and not all venture into one business that seems lucrative, ultimately saturating it to a point where it is not lucrative anymore. Mmasekgowa Masire Mwamba and various institutions like the Local Enterprise Authority gave lectures on marketing, branding and the fundamentals of business.


Women’s Finance House, an NGO, was established in 1989 to help alleviate poverty and provide access to financial services to low income women entrepreneurs, with special emphasis on those who do not have access to conventional financial institutions.

The NGO provides micro loans, basic business training and business support services. The organisation’s loan fund has suffered the departure of donor funding to Botswana over the years, when the country attained a middle income status and has struggled to reach the corners of the country due to the resource shortage. However, in 2014, Standard Chartered injected P1 million into the organisation’s loan fund.


Botswana’s growth rate slowed from an average of around 7 percent for several years to 4.5 percent in 2015, making the creation of jobs, particularly for the youth, a major challenge. Analysts have put the unofficial overall unemployment rate in the country as high as 40 percent extending far beyond just the immediate crisis of individuals lacking a livelihood but longer-term national threats that include political stability, the viability of the country's fiscal and social security systems, and the social integration of a non-productive generation.

SOME CASE STUDIES

Nana Daisy Tsheko, a single parent, joined the organisation in 2008 and her Gaborone based tailoring business has grown over the years, employing 3 people. Ms Tsheko found a lucrative market in protective clothing and is planning to diversify in that direction, having secured contracts with mining companies. Her son, a recent graduate now does the public relations functions for her business.


Kefilwe Lobelo, an award winning fashion designer, joined WFHB in 2002 and resigned from formal employment to take up business. Though she started with no finance, the working capital boost that she acquired from WFHB allowed her to meet the demands of her growing business. Lobelo is planning to expand her clothing line into an all African clothing outlet with a presence in high end shopping malls across Botswana.


Mrs Motie Ntsholeng , a Mochudi based poultry farmer, joined WFHB in 2002, operating a tuckshop. She since diversified her business lines and currently plays in the property market where she earns income from 12 rooms she has built within her homestead. In addition she has established a poultry business where she started off with 100 chicks to the current 300. She intends to access more funds to meet the growing demand for chickens.


WHFB clients engage in various business activities including, preschools, events management, soap manufacturing, catering, just to name a few.
 

PROFESSIONAL VIEWS
Thabelo Nemaorani of eConsult, a private economics consultancy, told BusinessPost that the Women’s Finance House group lending method is the answer to small business financing that suffers under the risk averse environment of the commercial banking sector, who would under normal circumstances not give funding to start ups and small business.


Afena Capital managing director, Bakang Seretse, believes that the key to employment creation, and sustainable livelihoods, along with greater political will, is national blueprint for cooperative models of business in every sector.


“The cooperative movement would contribute towards shifting the conception and programmes around SMMEs away from focusing on individual ntrepreneurial activity to collective community production. These cooperatives will be versatile economic enterprises and will be established across every sector of the economy such as public works, farms, bakeries, financials services, mines, just to name a few,” said Seretse earlier this year at a seminar.

“Cooperatives have been used in many countries such as South Africa, Zimbabwe, the United States and Spain; Cooperatives don’t challenge capitalism but are a part of a wider strategic response to transcending capitalism.”

A statement by the United Nations Economic Commission for Africa, issued in early 2015, stated that: “Some good practices have emerged in different countries to enhance conditions in the informal  sector and increase the productivity of operators.

In Kenya, the development of a fledging  innovation ecosystem, iLab Africa, links universities and entrepreneurship, providing business  solutions for informal firms through mobile technology, thus improving access to ICTs and  overall productivity.

This is forward – integrated with venture capital firms to create formal employment opportunities for youth (Blohm 2008). In Botswana the forward linkages in raw diamond production created 21 firms in cutting and polishing and 3,000 jobs (Grynberg 2013).” However most of the gains for Botswana have been reversed by the same number of job losses in the same sector due to company closures.

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Business

Investors inject capital into Tsodilo Resources Company

25th January 2023

Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.

According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.

The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.

Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.

Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.

Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana.  The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.

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Business

Global CEOs Back Plan to Unlock $3.4 Trillion Potential of Africa Free Trade Area

23rd January 2023

African heads of state and global CEOs at the World Economic Forum Annual Meeting backed the launch of the first of its kind report on how public-private partnerships can support the implementation of the African Continental Free Trade Area (AfCFTA).

AfCFTA: A New Era for Global Business and Investment in Africa outlines high-potential sectors, initiatives to support business and investment, operational tools to facilitate the AfCFTA, and illustrative examples from successful businesses in Africa to guide businesses in entering and expanding in this area.

The report aims to provide a pathway for global businesses and investors to understand the biggest trends, opportunities and strategies to successfully invest and achieve high returns in Africa, developing local, sub-regional and continental value chains and accelerating industrialization, all of which go hand in hand with the success of the AfCFTA.

The AfCFTA is the largest free trade area in the world, by area and number of participating countries. Once fully implemented, it will be the fifth-largest economy in the world, with the potential to have a combined GDP of more than $3.4 trillion. Conceived in 2018, it now has 54 national economies in Africa, could attract billions in foreign investment, and boost overseas exports by a third, double intra-continental trade, raise incomes by 8% and lift 50 million people out of poverty.

To ease the pain of transition to its new single market, Africa has learned from trade liberalization in North America and Europe. “Our wide range of partners and experience can help anticipate and mitigate potential disruptions in business and production dynamics,” said Børge Brende, President, and World Economic Forum. “The Forum’s initiatives will help to ease physical, capital and digital flows in Africa through stakeholder collaboration, private-public collaboration and information-sharing.”

Given the continent’s historically low foreign direct investment relative to other regions, the report highlights the sense of excitement as the AfCFTA lowers or removes barriers to trade and competitiveness. “The promising gains from an integrated African market should be a signal to investors around the world that the continent is ripe for business creation, integration and expansion,” said Chido Munyati, Head of Regional Agenda, Africa, World Economic Forum.

The report focuses on four key sectors that have a combined worth of $130 billion and represent high-potential opportunities for companies looking to invest in Africa: automotive; agriculture and agroprocessing; pharmaceuticals; and transport and logistics.

“Macro trends in the four key sectors and across Africa’s growth potential reveal tremendous opportunities for business expansion as population, income and connectivity are on the rise,” said Wamkele Mene, Secretary-General, AfCFTA Secretariat.

“These projections reveal an unprecedented opportunity for local and global businesses to invest in African countries and play a vital role in the development of crucial local and regional value chains on the continent,” said Landry Signé, Executive Director and Professor, Thunderbird School of Global Management and Co-Chair, World Economic Forum Regional Action Group for Africa.

The Forum is actively working towards implementing trade and investment tools through initiatives, such as Friends of the Africa Continental Free Trade Area, to align with the negotiation process of the AfCFTA. It identifies areas where public-private collaboration can help reduce barriers and facilitate investment from international firms.

About the World Economic Forum Annual Meeting 2023

The World Economic Forum Annual Meeting 2023 convenes the world’s foremost leaders under the theme, Cooperation in a Fragmented World. It calls on world leaders to address immediate economic, energy and food crises while laying the groundwork for a more sustainable, resilient world. For further information,

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Business

Electricity generation down 15.8%

9th January 2023

Electricity generation in Botswana during the third quarter of 2022 declined by 15.8%, following operational challenges at Botswana Power Corporation’ Morupule B power plant, according to Statistics Botswana Index of Electricity Generation (IEG) released last week.

The index shows that local electricity generation decreased by 148,243 MWH from 937,597 MWH during the second quarter of 2022 to 789,354 MWH during the third of quarter of 2022.

This decrease, according to the index, was mainly attributed to a decline in power supply realized at Morupule B power station. The index shows that as a result of low power supply from the plant, imported electricity during the third quarter of 2022 increased by 76.3 percent (123,831 MWH), from 162,340 MWH during the second quarter of 2022 to 286,171 MWH during the current quarter and Statistics Botswana added that the increase was necessitated by the need to augment the shortfall in generated electricity.

In the index Statistics Botswana stated that Eskom was the main source of imported electricity at 42.0 percent of total electricity imports. “The Southern African Power Pool (SAPP) accounted for 38.4 percent, while the remaining 10.1, 9.1 and 0.5 percent were sourced from Electricidade de Mozambique (EDM), Cross-border electricity markets and the Zambia Electricity Supply Corporation Limited (ZESCO), respectively. Cross-border electricity markets are arrangements whereby towns and villages along the border are supplied with electricity from neighbouring countries such as Namibia and Zambia.”

The government owned statistics entity stated that distributed electricity decreased by 2.2 percent (24,412 MWH), from 1,099,937 MWH during the second quarter of 2022 to 1,075,525 MWH during the third quarter of 2022. The entity noted that electricity generated locally contributed 73.4 percent to electricity distributed during the third quarter of 2022, compared to a contribution of 85.2 percent during the third quarter in 2022 and added that this gives a decline of 11.8 percentage points. “The quarter-on-quarter comparison shows that the contribution of electricity generated to electricity distributed decreased by 11.8 percentage points compared to the 85.2 percent contribution during the second quarter of 2022.”

Statistics Botswana meanwhile stated that the year-on-year analysis shows some improvement in local electricity generation. Recent figures from entity show that the physical volume of electricity generated increased by 36.3 percent (210,319 MWH), from 579, 036 MWH during the third quarter of 2021 to 789,354 MWH during the current quarter. According to Statistics Botswana electricity generated locally contributed 73.4 percent to electricity distributed during the third quarter of 2022, compared to a contribution of 57.7 percent during the same quarter in 2021. This gives an increase of 15.7 percentage points.

 

The entity noted that trends also show an increase in physical volume of electricity distributed from 2013 to the third quarter of 2022, thereby indicating that there are ongoing efforts to meet the domestic demand for power. “There has been a gradual increase of distributed electricity from the first quarter of 2013 to the third quarter of 2022, even though there are fluctuations. The year-on-year perspective shows that the amount of distributed electricity increased by 7.2 percent (71,787 MHW), from 1,003,738 MWH during the third quarter of 2021 to 1,075,525 MWH during the current quarter.”

The statistics entity noted that year-on-year analysis show that during the third quarter of 2022, the physical volume of imported electricity decreased by 32.6 percent (138,532 MWH), from 424,703 MWH during the third quarter of 2021 to 286,171 MWH during the third quarter of 2022. “There is a downward trend in the physical volume of imported electricity from the first quarter of 2013 to the third quarter of 2022. The downward trend indicates the country’s continued effort to generate adequate electricity to meet domestic demand, hence the decreased reliance on electricity imports.”

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