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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

BITC assisted companies rake in P2.96 billion in export earnings

21st June 2022
BITC-CEO-Keletsositse-Olebile

Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.

In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.

The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.

With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.

Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.

BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.

During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.

BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.

As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.

In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.

BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.

Another tool used for export development by BITC is the Botswana Trade Portal, which has experienced some growth in terms of user acceptance and utilisation globally. The portal provides among others a catalogue of information on international, regional and bilateral trade agreements to which Botswana is a party, including the applicable Rules, Regulations and Requirements and the Opportunities for Botswana Businesses on a product by product basis.

The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.

BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.

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Business

Inflation up 2.3 percent in May

21st June 2022
Inflation

Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.

According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).

With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.

In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.

Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.

The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.

The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.

The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.

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Business

Global high inflation, slow growth bad news for Botswana

21st June 2022
World Bank President: David Malpass

In the latest June 2022 global economic prospects, released last week the World Bank has warned that low global economic growth and economic activity in global commodity markets such as China and Europe could negatively affect export revenues for Botswana and other Sub Saharan countries.

Recent data from Statistics Botswana show that Botswana’s exports destined to the global markets such as Asia and the European Union (EU) on monthly basis accounts for around 60.1 percent and 20.1 percent respectively.

The World Bank last week lowered its 2022 projections of global economic growth and indicated that the new forecasts could be bad news for countries like Botswana who are dependent on export mineral revenues. The Bank noted that just over two years after COVID-19 caused the deepest global recession since World War II, the world economy is again in danger and stated that this time it is facing high inflation and slow growth at the same time.

In the recent June projections, the bank lowered its forecast of global economic growth from the January 4.1 percent to 2.1 percent. “Our June forecasts reflect a sizable downgrade to the outlook: global growth is expected to slow sharply from 5.7 percent in 2021 to 2.9 percent this year. This also reflects a nearly one-third cut to our January 2022 forecast for this year of 4.1 percent,” a team of World Bank economists noted in the June 2022 Global Economic Prospects.

The World Bank indicated that exports from Botswana and other Sub Saharan countries could suffer from a substantial deceleration of activity in China and Europe. The Bank noted that exporters of industrial metals, crude oil, and ores such as Angola, Democratic Republic of Congo, Republic of Congo, South Africa, and Zambia could suffer from a substantial deceleration of activity in China.

On the other hand a sharp contraction of growth in the euro area could hurt exporters of agricultural products such as beef, coffee, tea, tobacco, cotton, and textiles from Botswana, Ethiopia, Madagascar and Malawi. “The faster-than-expected deceleration of the global economy and increased volatility of commodity prices could hurt many SSA commodity exporters,” said World Bank President David Malpass.

Malpass indicated that subdued growth in the global markets for Botswana and other Sub Saharan exports will likely persist throughout the decade because of weak investment in most of the world.

He noted that with inflation now running at multi-decade highs in many countries and supply expected to grow slowly, inflation could remain higher for longer than currently anticipated. “Even if a global recession is averted, the pain of stagflation could persist for several years— unless major supply increases are set in motion. Amid the war in Ukraine, surging inflation, and rising interest rates, global economic growth is expected to slump in 2022. Several years of above-average inflation and below-average growth are now likely,” said Malpass.

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