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SMEs in Botswana: Challenges and opportunities

It has long been established that Small and Medium Enterprises (SMEs) serve as one of the key engines of growth within the Botswana economy. Employing a considerable number Batswana across the country, SMEs continue to grow and evolve with the nation’s economy. Unfortunately, as with any growth, there comes a certain amount of challenges as well as opportunities. Here, we explore some of these in a bit more detail.

Amongst some of the key challenges faced by SMEs today are a lack of finance, as the average SME does not have sufficient security or, as it is more often termed, “collateral.” Collateral is any asset that you own and promise to give to the lender if you cannot pay them back.

This can be a house, a building, investments, savings or any other asset. In addition, poor financial knowledge, for example, on basic finance management, proves a real obstacle to a small business owner.  This includes insight and skill on what to do when a payment is received, how to manage that money, and even how to invest to grow the business further.

With the evolution of Botswana’s SME landscape, particularly in the last 5 years, there has been noticeable growth, with an increasing number of SMEs as well as stronger existing SMEs. More opportunities have arisen in time, largely in the form of tenders or purchase orders.

Indeed, there are greater supplier and purchase order opportunities allowing SMEs to increase the scale of their business, as well as their returns. Fortunately, financial institutions and other lenders have supported this in the way of greater access to finance, financing these opportunities through such platforms as purchase order financing and supplier financing.

Of course, economic factors play an integral, and often crippling role, in many cases. In some ways a positive thing, Botswana’s SMEs often depend a little too much on Government jobs / tenders. It all boils down to the proverbial eggs in one basket, and there appears to be more room for diversification to avoid high risk. Another factor to take into account sees the fact that there has been reduced spending and fewer jobs this year. Indeed, we have seen pressure on customers not being able to honour obligations to banks.

Though the situation may often appear somewhat dire, the truth remains that opportunity for growth and success for SMEs also abounds. This is, of course, dependent on any number of factors – from local economic climate to financial management, the business strategy and even leadership.

With that in mind, some of the key tips Botswana’s SMEs and entrepreneurs include bearing in mind that revenue earned from a single contract or job does not constitute profit; one needs to think of long term and sustainable business performance, and this requires constantly investing in the business itself.

SMEs and entrepreneurs also need to ensure strong and open relationships with their banks, as this will prove useful in both positive and negative situations. Your financial partner of choice is there to assist you, and, often times, banks have a relationship model that enables customers to have a single point of contact with bank to facilitate this kind of supportive and open relationship. As a customer, you need to be truthful to your bank – let them know every cycle you go through so that you can be advised and or assisted accordingly.

Every business faces challenges and opportunities to varying degrees, The key is to negotiate these accordingly to allow your business the greatest potential for growth and success.  As an engine room of growth and a key driver in the economy, Botswana’s SMEs are certainly poised to be able to excel. The key it to ensure SMEs empower themselves with the knowledge and tools to be able to make that happen.

Mr. Onkabetse Morapedi is Stanbic Bank Botswana’s Head of SME
 

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Matsheka seeks raise bond program ceiling to P30 billion

14th September 2020
Dr Matsheka

This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.

“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.

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Lucara sits clutching onto its gigantic stones with bear claws in a dark pit

14th September 2020
Lesedi La Rona

Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.

A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.

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Botswana Diamonds issues 50 000 000 shares to raise capital

14th September 2020
Diamonds

Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.

A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.

Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.

In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.

The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.

In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.

Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.

The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”

In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.

Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.

The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.

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