One of the major property portfolio holders in the country, PrimeTime is shifting focus of the retail market growth opportunities away from the capital city. The property developing company now targets towns and villages due to saturation within the city.
This week, the Company announced that is has acquired land in Pilane, Kgatleng district, where it intends to build a retail property valued at P96 million.
“The Mochudi/Pilane area is one that has for the longest time been an unsatisfied market for retail,” PrimeTime managing director Sandy Kelly, told BusinessPost in a brief interview. Kelly said that Company is eyeing Palapye for possible expansion.
The sum of P6 million in respect of the Pilane plot has been paid to the sellers. The sum of P10.8 million with respect to the servicing of the Pilane Land, payable to various professional parties not related to the Company and P80 million with respect to the Centre Development, of which P75.2m will be payable to Time Projects in terms of a turnkey development contract that includes tenanting and a two year rental guarantee at a net yield of 9.25 percent.
The consideration will be financed from debt and secured over existing properties. An independent valuation, performed by Riberry (Pty) Limited, places an open market value of P96 million on the completed development.
The past decade has seen an explosion of shopping malls around Gaborone such as Riverwalk Shopping Mall, Gamecity, Molapo Crossing, South Ring Mall, Sebele Centre and Airport Junction, just to name some of them, causing saturation in the Gaborone area. The company’s investment property value stands at P702 million, with the land acquisition transaction adjusting the figure upwards by 3 percent.
However, Primetime’s properties have performed well during the interim period ending, despite economic conditions having worsened over the last year. The current illiquidity in the banking sector has also posed a challenge to the property sector as a whole.
“The illiquidity at the bank’s has been a challenge, not only for us but for the whole business community,” said Kelly, adding that, “it means that the we have difficulty raising finance from the commercial banks for our developments, not because they don’t want to lend to us but because they have no money give out.”
“However, the work we have put into refurbishing and re-gearing many of our properties in recent years has stood Primetime in good stead to weather this,” read a statement from the company that accompanied its interim financial results for the period ended 28 February, 2015.
The company has, within the period, completed refurbishments to the South African High Commission as well as Sebele Centre where it will provide a larger space for Woolworths. The retail giant will get an increased space of 1,600 metre squared with a 7 year lease.
Two buildings – Marula House and Barclays’ head office, are the main contributors to the 23 percent increase in contractual rental income during the 6 months ended 28 February 2015 when compared to the corresponding prior period.
Marula House, also known as Prime Plaza Phase II, has seen Arup Botswana and Botswana Life taking up tenancies this period, and is now fully let. The Company is also pleased with Barclays Bank’s occupation of its new Head Office in Prime Plaza during August 2014, which has made a contribution to turnover for the full 6 months to 28 February 2015.
Primetime’s share price continues to be strong and has risen from P2.31 at 28 February 2014 to P2.70 at 28 February 2015 – an increase of some 17 percent, reflecting good investor confidence. Currently, the share price stands at P2,71.
PrimeTime currently owns the Sebele and South Ring shopping malls in Gaborone, Nswazwi mall in Francistown as well as shopping centres in Ghanzi, Lobatse, Serowe and Ramotswa. PrimeTime now owns three buildings within Prime Plaza in the CBD comprised of Barclays House, Marula House and CEDA House.
Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status. The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.
This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago. In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.
However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced. Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.
The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.
The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.
On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.
The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.
Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.
Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).
“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.
Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.
This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.
For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.
Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers. “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.
‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’
According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.
Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.
“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.