Trading on the Botswana stock market in the first quarter of 2015 grew in volume and aggressiveness, owing mostly to the financial and retail markets which posted sterling results.
Turnover value reached P557.9 million in the first three months of the year, a leap from P35million posted in the corresponding period a year ago excluding the exchange traded fund.
Statistics show that the Domestic Company’s Index (DCI) went up by 2, 02 percent while the Foreign Companies Index went down by 0,41percent. The first quarter for 2015 was very active.
This positive momentum was on the back of profits in selected heavy weights in the retail and financial counters.
Sefalana was the best performing stock during the quarter, up by 19.18% to trade at 1100 thebe. Sefalana is now trading at its highest price in 52 weeks. Analysts are of the view that strong performance in the stock was largely on the back of strong demand for the stock on the market.
Investors are bullish on Sefalana following solid interim results which showed that revenue jumped by 32% and PAT grew by 23%. Investors are also bullish on the group’s regional expansion. Sefalana expanded into Namibia in 2013, acquiring 12 stores. The group further intends to expand into other markets within the Southern Africa.
Imara and Barclays gained 17.62% and 15.94% apiece during the first quarter of the year.
“Much of the growths in these stocks were driven by bargain hunters who wanted to buy the stocks at depressed prices. Following series of disappointing financial results both Imara and Barclays were trading at depressed prices, with Barclays trading at its lowest in 52 weeks. Following recent strong financial results for Barclays and Imara, there was strong demand for the stocks resulting in prices increasing,” Karabo Tladi an investment analyst with Black thread Capital said.
On the other hand G4S was the worst performing stock on the market, down more than 9%. Since the acquisition of FMG, G4S have been struggling as indicated by declined profitability. Tladi added that Investors are still skeptical on the groups turnaround strategy.
“However following recent strong results I expect demand to build up as management turnaround strategy appears to be working,” he said.
The First National Bank despite the challenging environment, the balance sheet grew by 11% to P17.9 billion from P16.2 billion in December 2013. Advances to customers grew by 16%, reaching a new high of P12.6 billion.
The retail giant Choppies group reported a 25 per cent increase in interim revenue, as well as a 31 per cent rise in profit. Choppies looks quite expensive at current PER and some investors who bought the stock during the IPO two years ago are starting to book in profits.
The Botswana Insurance Holdings Limited (BIHL) group registered profits after tax of P 5.1 billion.
Investment analyst with local brokerage Motswedi Securities Garry Juma said this was one of the best quarters adding that they don’t expect anything better than this for the other quarters.
“It’s impressive to note that banks are now thinking outside the box as they no longer rely on money interest income and were able to grow interest income despite moratorium,” said Juma.
He added that this growth can also be attributed to more participation by fund managers in portfolio rebalancing.
Juma said it is difficult to gauge the performance for the coming quarters as most of the stocks are already trading at fair value.
“With the tough trading environment, low interest rates and low levels of inflation we don’t expect much change,” he said.
In the same tone Tladi said not much is expected in the second quarter of the year, but BTC IPO is one of the main things expected to breathe life into the market.
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.