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Budget 2015: The expectations

Budget surplus is important – BIDPA

The opening of Parliamentary business for 2015, on Monday next week will as is customary start with the presentation of the budget for the 2015/16 financial year by the Minister of Finance and Development Planning.

Minister Kenneth Matambo is expected to deliver a budget that is geared towards the developmental challenges that the country faces as well as a recurrent budget in the same 70:30 ratio.

In the face of an economy that is still recovering after the economic recession of 2008, it has been said that “things are better.” But the country is yet to reach pre-recession growth levels of over 7 percent and the foreign reserves have not gone back to the pre recession levels.

This week, Grace Tabengwa, a senior researcher at Government policy advisor, Botswana Institute for Development Policy Analysis (BIDPA) gave her expectations of the budget, from a policy perspective.

Recurrent Budget Allocation of P33.32 billion, an increase of P2.79 billion or 9.1 percent increase over the 2013/14 budget. Ministry of Education and Skills Development (MoESD) is expected to get the lion share of the recurrent budget which might stand at P9.26 billion or 27.8 percent of the Ministerial recurrent budget.

BusinessPost was made to understand that budget surpluses are important in the macroeconomic level as it determines credit ratings among other things. “The fundamentals do not allow reserves to run out, we need to have a buffer,” said Tabengwa.

Tabengwa also alluded to a need to step up monitoring and evaluation of budget goals, saying efforts are being done and it’s a process.

The BIDPA researcher estimates that the Development Budget Allocation and Outlined Project Activities will stand at P12.24 billion, a marginal increase of 0.99 percent over the 2013/14 revised budget of P12.12 billion.

Ministry of Minerals, Energy and Water Resources (MMEWR) is expected to get the largest share of the development budget with the expected figure of P3.55 billion or 29.0 percent. Major projects constituting 97.4 percent of the budget are: Botswana Power Corporation (BPC) Finances at P2.05 billion to cover BPC operational and maintenance cost at P1.5 billion; North-West Power Transmission line at P200 million, Emergency power supply at P140 million; Rakola substation at P100 million, Morupule A and B at P60 million, ZIZABONA at P50 million; North-South Water Carrier II from Dikgatlhong Dam to Palapye, as well as from Palapye to Gaborone at P600 million; completion of Dikgatlhong and Thune Dams at P200 million and P100 million, respectively; emergency water projects at various locations at P200 million; Kanye-Molepolole connection to North South Water Carrier at P100 million; construction of sewerage systems for Kanye and Molepolole at P80 million as well as the Oil Storage project amounting to P50 million.

Key for Prioritization Process Consistency with Key prevailing economic Challenges; Synergies with National Development Plan 10 and 11 long term development objectives; More work should be on specific programmes, projects, strategies to support the; realisation of objectives; Result Oriented Budget Outcomes will benefit from; Target Specific relevant well defined delivered initiatives to realize growth and development, sustainability.

The existing economic challenges that the country still faces, are: Prevailing poverty dynamics; High Unemployment, youth;  Power, Water, Infrastructure Challenges; Limited Diversification; Private Sector Development; Human Capital Development, quality and adequacy of Skills; Competitiveness, Promoting Investment and Business Environment; Limited Diversification and Revenues; Botswana Still on Recovery Path, fiscal reforms, tight Fiscal stance an binding constraints; Implementation of the NDP 10 – its conclusion and finally, it is a critical time for implementing Vision 2016 objectives

Total expenditure and net lending is projected at P51.46 billion in 2015/16 from the estimated P49.3 billion recorded in 2014/15. Of the total, recurrent expenditure is expected to increase slightly to P38.995 billion, once again accounted for by the increase in personal emoluments; while development expenditure is estimated to reach P12.6 billion; Despite the projected budget surplus in 2015/16, the net financial assets position remains negative, as a result of accumulated budget deficits from the financial crisis period. The share of the proposed budget for the 2015/16 financial year to GDP stands at 31.4 percent, which is close to the limit of 30 percent that Government committed to achieve in NDP 10.

The 2015/16 budget unfolds in a low growth environment with global risks for slow recovery in major economies-USA as well as a global growth forecast revised downward lately with Botswana’s growth trajectory being low at about 5 percent.

There are expectations that strategies for boosting growth: such as Economic Diversification Drive (EDD), Private Sector Growth, Investment and business reforms to continue being supported across sectors and policy reforms. Budget resources should be focused on attaining sustainable growth and spearhead the growth momentum under a fiscal binding constraint. Places Emphasis on diversification of growth and revenue sources and aims to alternative sources of growth, support business environment, to stimulate private sector growth; Addressing constraints to Foreign Direct Investment and competitiveness through a focus on advancing human capital development. The budget is also expected to provide for requisite infrastructure and its continued maintenance and a total factor productivity and supportive environment for non-mining sector growth.

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Grit divests from Letlole La Rona

22nd March 2023

Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.

The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.

Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.

This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.

In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.

Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.

The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.

“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said

In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.

The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.

Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.

Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.

Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.

Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.

“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.

LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.

The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.

An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.

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Stargems Group establishes Training Center in BW

20th March 2023

Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.

The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.

“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.

In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices.  Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.

“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.

Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy,  Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.

“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.

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Food import bill slightly declines

20th March 2023

The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.

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