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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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China’s GDP expands 3% in 2022 despite various pressures

2nd February 2023
China’s Gross Domestic Product (GDP) expanded by 3% year-on-year to 121.02 trillion yuan ($17.93 trillion) in 2022 despite being mired in various growth pressures, according to data from the National Bureau Statistics.

The annual growth rate beat a median economist forecast of 2.8% as polled by Reuters. The country’s fourth-quarter GDP growth of 2.9% also surpassed expectations for a 1.8% increase.

In 2022, the Chinese economy encountered more difficulties and challenges than was expected amid a complex domestic and international situation. However, NBS said economic growth stabilized after various measures were taken to shore up growth.

Industrial output rose 3.6% in 2022 over the previous year, while retail sales slightly shrank by 0.2% data show that fixed-asset investment increased 5.1% over 2021, with a 9.1% hike in manufacturing investment but a 10% fall in property investment.

China created 12.06 million new jobs in urban regions throughout the year, surpassing its annual target of 11 million, and officials have stressed the importance of continuing an employment-first policy in 2023.

Meanwhile, China tourism market is a step closer to robust recovery. Tourism operators are in high spirits because the market saw a good chance of a robust recovery during the Spring Festival holiday amid relaxed COVID-19 travel policies.

On January 27, the last day of the seven-day break, the Ministry of Culture and Tourism published an encouraging performance report of the tourism market. It said that domestic destinations and attractions received 308 million visits, up 23.1% year-on-year. The number is roughly 88.6% of that in 2019, they year before the pandemic hit.

According to the report, tourism-related revenue generated during the seven-day period was about 375.8 billion yuan ($55.41 billion), a year-on-year rise of 30%. The revenue was about 73% of that in 2019, the Ministry said.

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Jewellery manufacturing plant to create over 100 jobs

30th January 2023

The state of the art jewellery manufacturing plant that has been set up by international diamond and cutting company, KGK Diamonds Botswana will create over 100 jobs, of which 89 percent will be localized.

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Investors inject capital into Tsodilo Resources Company

25th January 2023

Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.

According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.

The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.

Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.

Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.

Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana.  The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.

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