GARRY JUMA AND TLOTLO RAMALEPA MOTSWEDI SECURITIES ANALYSTS
The Minister of Finance and Development Planning, Kenneth Matambo presented a fairly ‘neutral’ Budget for the 2015/16 financial year. Total Revenues and grants are forecasted at P55.38bn, a 10% increase from the revised FY14: P50.18bn. Mineral revenue is forecast to contribute 34.4% of the total revenue, Customs & Excise, 29.5%; Non Mineral 17.5%.
Mineral revenue continues to be the main contributor towards total revenue and this is a cause of concern as any negative developments on the global economic landscape may impact negatively on our mineral exports and hence reduce revenue. This brings to the fore the need to speed up the diversification of the country’s economy. Total expenditure and net lending is projected at P54.1bn, a 6% increase from the revised FY14: P51.26bn.
Accordingly, a budget surplus of P1.23bn (0.8% of GDP) is projected, an increase from the revised FY14: P280mn. The recurrent budget was allocated P36.7bn (68% of total expenditure), with the education ministry taking the biggest share of 33% (5% increase from 2014).
The education ministry has been enjoying the largest share of the recurrent budget in recent years but we are of the view that more emphasis should be placed on improving the quality of the education system. The government should also prioritise the alignment of the education system especially at tertiary level so as to meet the changing and dynamic needs of the private sector.
The development budget stood at P12.93bn. (23% of total expenditure), with the Ministry of Minerals, Energy & Water taking the biggest share of 28% in line with our expectations. Major projects that will be funded includes; the North-South Water Carrier ii (P500mn) and Morupule A refurbishment (P100mn).
The North-South Water Carrier project will go a long way in the provision of adequate water supplies especially towards the southern parts of the country following the almost drying up of Gaborone dame. Water is one of the key resources needed by the business sector and its availability will go a long way in creating a conducive and enabling environment for the business sector. The allocation towards the refurbishment of Morupule A is also vital as it will ensure the provision of adequate energy supplies which is vital for the business sector and the growth of the economy.
One of the major highlight that came out of the budget is the extent to which some of the major projects are not properly implemented. Between 2011/12 – 2013/14, around 17.3% of the development budget was under spent. This is an area of concern as it compromises the growth of the economy.
In some cases, the government has had to allocate more funds towards the refurbishment of some projects which becomes too costly to the economy, whereas the funds could have been used for other key projects. Going forward it is our view that more attention should be given toward the implementation of the projects to ensure that the funds are utilised more effectively and efficiently. We are still to see how the newly established implementation unit will be effective in ensuring that projects are implemented and completed on time.
The Minister also announced the setting up of the Cluster and Value chain in selected sectors ie; Diamonds, Tourism, Cattle, and Mining comprising of coal and other minerals except diamonds. The idea is to encourage private sector participation in the growth of the economy while at the same time diversifying the economy.
In China this concept has a long history and has been a huge success, with significant contribution towards its growth and economic transformation. It is estimated that these Clusters in China (including all types of industrial parks and zones) accounted for about 22% of national GDP, about 46% of FDI, and about 60% of exports and generated in excess of 30 million jobs in 2007.
It is vital to note that the success of these Clusters is based in among others; availability of economies of scale, funding, supplies of inputs, ready market for finished products, good infrastructure, productivity advantages, presence of anchor firms etc.
It is our firm believe that the ‘Cluster’ and Value Chain approach will go a long way in supporting the private sector contribution to the country’s economy as well as create employment provided the concept is adequately financed and conducive. However, we note that the budget was silent on the budget allocation for this noble project.
Going forward, we are of the view that more focus should be channelled towards the agriculture sector given its importance in the economic diversification and the development of the rural economy and ultimately poverty eradication. Adequate resources are needed to mechanise the sector and provide adequate farmer training to increase productivity and hence food security. We can take a leaf from Israel, which is predominantly a desert country with more than half of the land area a desert while the climate and lack of water do not favour farming.
Its agriculture sector is mechanised, highly developed and produce 95% of its own food requirements, while contributing 3.5% towards total exports. The agricultural sector is based almost entirely on Research & Development, while diversification and growth in types of plant crops and livestock breeding has increased over time. Methods of cultivation have also improved, and Israel continues to develop more efficient forms of irrigation, greenhouses, and mechanical equipment for processing and harvesting crops.
Newly established wholly indigenous citizen owned retail chain Payless Retail (PTY) Ltd is set to partake in the first session of Botswana Stock Exchange (BSE)’s Tshipidi Mentorship Program (TMP) on Monday June 29th.
The TMP aims to train and capacitate SMEs so they can operate as corporates and eventually list on the local bourse. According to local bourse, BSE, the program aims to provide practical training to potential issuers through a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.
Payless Retail is a newly established supermarket chain whose mission is to become a convenient one-stop shopping destination as it is one of the Botswana oldest retailing brands. It started off as Corner Supermarket in January 1976, and to date boasts of nine stores in, among others, Gaborone, Mochudi, Molepolole and Tlokweng. Payless was recently acquired by Ellis Retail Group, which is led by businessman Elliot Moshoke.
The takeover catapulted Ellis Retail to the envious position of being the first wholly indigenous owned major retail chain. “We jumped at this opportunity because it gave us a chance to prove to Batswana that the retail business is open and lucrative.”
The objective is to create a proudly Botswana retail chain that fully supports our national Vision, economic development and citizen economic empowerment ambitions,” Moshoke told BusinessPost.
He further emphasized that Batswana are capable and able to run large scale businesses hence they need to accept invite foreign investors who will come in to support us not take the business. “Our win as Payless in the Fast Moving Consumer goods (FMCG) industry is a win for Batswana. We need their support in this difficult and challenging journey.
As you are aware, Payless is the only retail chain in the hands of Batswana ba Sekei. We need to take advantage of this to generate employment and create small businesses in retail and Agri businesses,” he explained.
The retailer has also partnered with Botswana Investment & Trade Center (BITC) on their #PushaBW campaign with a view to initiating earnest engagement with local producers to iron out bottlenecks and ensure seamless trading.
“Local producers have to be part of the phenomenal growth of the Payless brand. This will in turn facilitate employment creation and economic growth. We did this because we have the utmost respect for local manufacturers and producers,” he mentioned.
Payless is currently restocking all of its stores; a development that Moshoke says is testament to the retailer’s commitment to growing the brand and ensuring continuity of business. He further revealed that renowned retail suppliers like PST and CA Sales have reignited their trust in Payless, opening their doors for Payless as they have faith in the retailer’s new owners.
The takeover has reportedly saved more than 200 jobs and gave a new lease of life to the previously fledging Payless brand. According to a press release from the management team, the Payless work forces are also extremely excited about what the future holds. The TMP is a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.
The program is administered by experts within the listing ecosystem and seeks to bring the potential issuers closer to the listings advisers, investors and leaders of already listed companies. “As a strategic initiative, the BSE decided to set up this mentorship program in a bid to assist SMEs to strategize, corporatize and acclimatize in order to list to access equity finance and expand operations,” said the BSE.
The TMP will avail to SMEs practical insights, knowledge and feedback from institutional investors, increased awareness of the BSE listing requirements as well as an intimate network of advisors and CEOs of listed companies. After training, Payless will graduate with improve governance structures and better knowledge of articulating its business strategy. The retailer will also gain increased visibility through BSE marketing platforms.
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.
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.
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.