Botswana’s economy catches flu from corona heavily hit markets
Business
Corona Virus which broke out in China, in the city of Wuhan in December 2019 has spread globally; killing thousands of people every day, restricting international travel, shaking global financial markets and eroding business sentiments across world economies.
The World Health Organization (WHO) has since declared the virus a global pandemic. This week the organisation announced that COVID19 is now a serious threat to humanity. Reports from Europe indicate British junior Minister of Health, Nadine Dorries has tested positive for the virus. As part of remedies to contain the virus, countries have redistricted travels to China, the world‘s second largest economy, with heavily hit city, Wuhan itself put on lockdown by Chinese authorities.
Ever since the spread of the virus intensified in February, global financial markets have been on fluctuating plummet and surge, responding to various business and investor sentiments. In Africa the virus has hit the continent‘s largest economies, including Botswana‘s neighbour and the country’s largest trading partner, South Africa, the region’s most industrialised economy.
Whereas the virus has not arrived in Botswana , with only suspected cases at play, the country is already catching flu from the fast spreading pandemic in the areas of trade and business. Two of the Botswana‘s largest economic sectors and biggest industries by both contribution to GDP and foreign exchange earnings are feeling the pinch.
DIAMOND INDUSTRY
Some of the largest consumers of rough diamonds being the United States and India have been heavily affected by the virus; Chinese market is the second largest buyer of Botswana rough diamonds after the US, while India is home to some of the largest diamond cutting and polishing operations in the world. Reports from Mumbai, India indicate that the corona virus coupled with sluggish global demands have badly hit the second biggest cutting and polishing country in the world.
The Indian cutting and polishing industry is yet to fully recover from the 2019 US-China Trade war. About 40 per cent of the country's diamond sales are to Hong Kong, where imports were halted on 15 January and have yet to resume. Speaking to Indian media Subodh Rai, Senior Director, Crisil Ratings said Exports would continue to fall in the closing quarter of the 2020 fiscal year which typically accounts for roughly a third of India's exports to the South-East Asian region.
"Given extended holidays in the region and shutdown of markets in the aftermath of the COVID19, exports worth over $1 billion may be lost in this quarter alone," he said. During the month of February alone as COVID19 spread intensified, in Antwerp Belgium, home to one of the world’s largest polished diamond industry, business slowed down significantly. Reports from Antwerp say the closure of eastern markets due to the virus has caused great uncertainty across the global diamond trade subsequently depressing manufacturing in Antwerp
According to Antwerp World Diamond Centre (AWDC), the hardest hit is its category of polished-diamond exports, the year-over-year value of which was halved due to the postponement of the Hong Kong International Diamond, Gem & Pearl Show and the Hong Kong International Jewellery Show, which are the key selling events at the beginning of the year. However, this year the stocks of diamonds were not sold, as trade with Hong Kong – Antwerp’s second largest market for polished goods, fell by nearly 94 percent.
During the first two months of the year, Antwerp’s exports of rough goods fell by 7 percent to 16.7 million carats, while their value has declined 12 percent to $1.4 billion. However, the trade still expresses concern about the impact the new coronavirus may have on the industry. Rough purchases from miners may be postponed and deferred further in the coming sale cycles as slowdown is anticipated in manufacturing in India as consumer sentiment continues to crash in China and other key markets, Creating havoc to public life and economic markets across the globe, COVID19 rapid growth in Iran has countries across the Gulf region becoming increasingly concerned.
From United Arab Emirate (UAE), one of significant markets for Botswana diamonds especially rare finds reports indicate that authorities have called on residents to avoid cross-border travel and has imposed quarantine restrictions to limit the spread of the deadly virus.
This has been observed by the Financial Times as “a blow to the state’s position as a global business hub.” The Dubai Health Authority recently released a travel advisory, while several diamond traders in Antwerp with interests in Dubai restricted their travel to the UAE,
DE BEERS CYCLE 2 SALES DROWNED BY 36%
De Beers Botswana’s partner in diamond mining has during its second sales cycle received significant blow in rough-diamond sales, crashing January optimistic positive year start. Sales reported by De Beers Global Sightholder Sales which happened by in large in Botswana declined 28 percent year on year to $355 million in February as the COVID19 hit demand. Many Sightholders took up the mining behemoth‘s offer to delay buying goods destined for China, sources in the rough diamond market reveals.
According to Rapaport News, De Beers allowed its clients to reject certain 1- to 2-carat rough diamonds and reschedule those purchases for later in the year. According to rough diamonds global reports the Virus has shut down retail in China, leaving manufacturers reluctant to buy goods they can’t sell. Proceeds from the second sales cycle of the year were 36 percent lower than January’s $551 million, which was the highest tally since April 2019. The total includes the February sight in Botswana, as well as the company’s auction sales.
“Following an improvement in demand for rough diamonds during the first sales cycle of 2020, we recognized the impact of COVID-19 coronavirus on customers focused on supplying the Chinese market, and put in place additional targeted flexibility to enable customers to defer allocations of the relevant rough diamonds,” said De Beers CEO Bruce Cleaver last week
TOURISM
After the diamond industry, Botswana’s economy is also pivoted by the tourism industry with the sector contributing meaningfully to the country’s Gross Domestic Product , hiring over 25 000 people , supporting other value chain industries and bringing the country a lot of money in foreign income earnings. However since the outbreak of COVID 19, sentiment has slowly gone down in the tourism industry especially the safari and wilderness business. Most tourists who visit Botswana are from South Africa.
The country has confirmed 8 cases of corona virus infections this week, with the likelihood of more during the month. Other key consumers of Botswana tourism sector are United States, Germany and the United Kingdom, all of which are world’s major economies and some of the highest hit countries after China, Italy and Iran.
Last week SafariBookings.com, an elites booking site servicing Africa’s key tourists attraction places including Botswana, conducted a survey among 361 safari tour operators and after a careful analysis of the findings have concluded that more than 86% of operators are experiencing a significant decline in bookings due to fears of the COVID19 outbreak. Common amongst the comments from safari operators was “Coronavirus is affecting our safari business. We are experiencing fewer bookings as some clients are putting their bookings on hold while others have cancelled” said SafariBookings.com
Business
Gambling Authority expects bumper attendance at IAGR conference
With just four weeks to go, the Gambling Authority of Botswana has revealed that it is expecting a record attendance at the much anticipated International Association of Gambling Regulators (IAGR) Conference, which will be held in Botswana from 16 – 19 October 2023.
According to a communique from the IAGR, the Gambling Authority will most probably break the record in the number of accredited countries that will attend the conference in Botswana.
“We are on track to match and potentially exceed the incredible delegate turnout we saw in Melbourne last year,” read a statement from IAGR’s.
In its global reach alert, IAGR revealed a glimpse of jurisdictions that will be represented at the conference, among them Australia, Canada, Denmark, Japan, Jersey, Mauritius, United Kingdom, United States and Netherlands. African countries that have so far confirmed attendance include Zimbabwe, South Africa, Nigeria, Tanzania, Kenya and Burundi.
Commenting on the expected bumper attendance, IAGR said the amazing diversity elevates the conference to a whole new level, which will enrich discussions with a tapestry of regulatory perspectives and insights.
Botswana won the bid to host this year’s conference last year in Melbourne, Australia. The IAGR consists of representatives from gaming and gambling regulatory organizations from around the world; with a common mission to advance the effectiveness and efficiency of gaming regulation.
According to Gambling Authority Chief Executive Officer (CEO) Peter Kesitilwe, the Authority is a member of the IAGR by dictates of the Gambling Act; which compels it to align with international organizations whose objectives are to regulate gambling, and build collaboration among regulators.
“The IAGR conference is held annually and hosted by different member jurisdictions. It provides opportunities for gambling and gaming regulators from around the world to engage, learn and network with industry peers through events, workshops, research, information sharing, and the development of best practices,” explained Kesitilwe.
Funding requirements for the conference are shared between IAGR, the host country and conference participants. The government of Botswana has reaffirmed its commitment to supporting the Gambling Authority to host IAGR; as it is in line with its objectives of promoting the country as a Meetings, Incentives, Conferences, and Exhibitions (MICE) tourism destination.
According to Kesitilwe, the conference is coordinated by a Technical Committee of IAGR; together with a Local Organizing Committee (LOC) that comprises of representatives from the Ministries of Trade, Tourism, Foreign Affairs, Botswana Police Service and other stakeholders.
“We promise to deliver this hugely important event and showcase the best that Botswana has to offer. In addition to the exchange of ideas and culture capital, the Organizing Committee will also ensure maximum benefits for the tourism, hotel and hospitality industry, entertainment, transport, telecommunications, vendors, hawkers of cultural artifacts,” said Kesitilwe.
As part of preparations to host IAGR2023, the Gambling Authority recently went on a benchmarking mission to Great Britain.
“What we learnt there can assist the Gambling Authority as we enter a new era of growth and expansion. The meeting also provided a timely opportunity to catch up on preparations for IAGR2023. We are ready to host the conference and we look forward to meeting other regulators from across the world to share best practice, discuss common challenges and tackle illegal gambling,” concluded Kesitilwe.
Business
BDC on Diversity and Inclusion in the Corporate Sector and Workplace
In recent years, diversity and inclusion have emerged as crucial aspects of the corporate sector. Recognising the importance of inclusivity, the Botswana Development Corporation (BDC) has taken significant steps to signal its commitment to the inclusion of all regardless of age, gender, background. By implementing a comprehensive Diversity and Inclusion policy, BDC aims to create an environment that fosters equality, attracts top talent, and promotes creativity and innovation.
BDC has demonstrated its commitment to inclusion by crafting and implementing a bespoke Diversity and Inclusion policy. This policy recognises and values the differences within its workforce, striving to create a culture of equality. By fostering an environment where all employees feel respected and supported, BDC aims to attract and retain top talent, which in turn contributes to the organisation’s overall success.
The Corporation has implemented policies and strategies that promote diversity and inclusivity in the workplace. The Diversity and Inclusion policy emphasises the value and respect for employees from diverse backgrounds, creating an inclusive environment where everyone can thrive. By having this policy in place, BDC ensures that all employees are treated fairly and have equal opportunities for growth and development within the organisation.
In the realm of inclusivity, leading firms and companies have emerged as trailblazers, championing diversity and equity by implementing progressive policies and initiatives. These organisations have made significant strides in demonstrating their commitment to inclusivity through actions that support individuals with disabilities and foster work-life balance for all employees.
Microsoft actively recruits individuals with disabilities and fosters an inclusive workplace through accommodations and a dedicated resource group. Netflix offers generous paternity leave, Unilever supports surrogate parenthood and gender-neutral caregiver benefits, while IBM provides comprehensive adoption support. Companies like Google, Apple, and Facebook establish employee resource groups to amplify underrepresented voices. Adobe prioritises inclusive workplace design, and Accenture and Deloitte focus on diverse leadership representation. These companies set a powerful example, demonstrating the value of diversity and fostering a more inclusive corporate landscape.
Rising to the challenge, BDC has also taken several measures to respond to the different needs of its work force. These measures include fostering open and respectful communication, encouraging the formation of employee resource groups or affinity networks, and promoting diverse perspectives and contributions. The Corporation has also shown its commitment to inclusivity by recruiting persons with disabilities, providing paternity leave benefits, and recognising and supporting surrogate parenthood, primary caregiver benefits regardless of gender, as well as the adoption of children. These efforts demonstrate BDC’s progressive approach to embracing diversity and supporting employees in all aspects of their lives.
By so doing, The Corporation exemplifies the essence of progressiveness, embracing inclusivity as a core value. By championing diverse talent, providing supportive benefits, and fostering inclusive cultures, BDC is part of a movement that is shaping a future where every individual is valued and empowered.
Inclusion and diversity are not only moral imperatives but also strategic investments for success. BDC’s commitment to fostering diversity and inclusion, sets an example for other organisations in Botswana and beyond. By implementing policies and strategies that create an inclusive environment, celebrating diversity, and supporting employees from all walks of life, BDC paves the way for a more equitable and inclusive corporate sector in Botswana. Embracing diversity is not only the right thing to do; it also drives innovation, boosts employee morale, and contributes to the overall success of organisations.
Business
Sales, Profit up as Choppies new strategy pays off
Choppies Enterprises Limited, a supermarket chain led by Botswana businessman Ramachandran Ottapathu, reported an increase in profit after tax which is up 3.4%, hence improving from P145 million realized in 2022, to P150 million in 2023.
The results demonstrate sustained increases in consumer demand, improved operational flexibility, efficiency, cost-effectiveness and despite stiff competition, the Group managed reduce its debt levels by paying off P263 million debt from the previous fiscal year.
The chain supermarket realized growth in Group retail sales which went up 6.5% to BWP6 433 million compared to P6 042 recorded in 2022. The growth is attributed to a broad presence across Botswana and a growing footprint in three other African countries, being South Africa, Zambia and Zimbabwe, according to a recently financial results statement.
In Pula terms, gross profit grew by 4.0% to BWP 1 359 million (2022: BWP 1 307 million) despite the challenging economic environment. Botswana and Namibia marginally grew gross profit rates while rates in Zambia and Zimbabwe declined.
During the period under review, the group’s Group net cash generated from operating activities rose by 4.5% to P484 million, this is a significant improvement when compared to P463 million recorded in 2022. This segment was boosted by strong showing from Botswana and Namibia, which performed exceptionally despite the challenging trading conditions. Furthermore, it was driven by sixteen new stores coupled with price growth of 6.8%.
As a result of the robust financial performance, the group’s total assets increased from P1 886 million to P2 177 million, while retained losses decreased from P811 million to P664 million.
Meanwhile, the Group faced a demanding economic environment characterised by stubbornly high inflation, higher interest rates and unemployment, all of which continue to constrain consumer spending and the consumer’s ability to digest higher prices. Sales volumes were lower in many categories, exacerbated by competitor discounting, with cost pressures only partly recovered through price increases.
According to the audited results, the gross profit margin accordingly reduced to 21.1% from last year’s 21.6% due to higher supply chain costs, including fuel and managing prices in response to higher cost inflation and competitor discounting.
Furthermore, while expenses increased 5.1% excluding the depreciation restatement, expenses grew 9.8% partly due to new stores and inflation. Foreign exchange losses on lease liabilities of P31 million (against a gain of P28 million last year) were partly offset by foreign exchange gains on Zimbabwean legacy debt receipts of P18 million (2022: BWP15 million).
Operating profit (EBIT) reduced by 1.8% from BWP 279 million to BWP 274 million whilst Adjusted EBIT, which excludes foreign exchange gains and losses on lease liabilities, movements in credit loss allowances, Zimbabwean legacy debt receipts and the reassessment of depreciation, reduced by 7.5% as costs grew faster than gross profit.
CASH MANAGEMENT
According to the Choppies Enterprises financial statement commentary, the Group continues to manage its cash resources and liquidity prudently with a reduction of P132 million in debt with P87 million paid out of internally generated funds and the balance of P45 million paid out of the proceeds of the rights issue.
In addition, capital expenditure increased to P185 million when compared to 2022 fiscal year which had recorded P122 million. This was a result of the Group strategy to invest in new stores and maintaining the distribution fleet.
Choppies Enterprises raised BWP50 million from leases to fund the fleet, an improvement because in 2022 only P36 million was raised.
Despite the growth in sales, inflation and new stores, Choppies Enterprises inventory reduced by P20 million helped by more stable global supply and the benefits of implementing an inventory optimisation system.
Finally, commentary from the Choppies Enterprises Group observes that as the economies in which the Group operates recover and the new stores reach full potential, an improvement in margins is expected. “With a value proposition that resonates with customers and with the cost of everyday items still stubbornly high in too many categories, more customers are choosing Choppies for the value and assortment we are known for. While we have strong and resilient brands, affordability is a growing constraint for consumers, limiting their ability to digest higher prices,” reads a commentary on the Group’s Financial statement.
Choppies Enterprises Limited (“the Company”) is a Botswana-based investment holding company operating in the retail sector in Southern Africa. Dual-listed on the Botswana Stock Exchange (“BSE”) and Johannesburg Stock Exchange (“JSE”), its are food and general merchandise retailing as well as financial service transactions supported by centralised distribution channels through distribution and logistical support centres. Each week, approximately 2.0 million customers visit 177 stores under five formats in four countries. With annual revenue of more than BWP6 billion, Choppies employs 10 000 people and is the largest grocery retailer in Southern Africa, outside of South Africa.
EVENTS AFTER REPORTING DATE
On 19 July 2023, Choppies acquired 76% (seventy-six percent) of the Kamoso Group for BWP2.00 (two Pula) and took cession of shareholders’ loans to the value of BWP22 million. The Botswana Development Corporation (BDC) will retain its 24% stake.
This acquisition will take Choppies to become a P8 billion business in revenue with 11 000 employees and 274 retail stores.
SNEAK VIEW: COUNTRY PERFORMANCESÂ
According to the financial results, Botswana experienced sales growth to BWP4 459 million an improvement from P4 209 million recorded in 2022. This was supported by volume growth from new stores and double-digit price inflation. Sales from Botswana increased by 5.9% and like-for-like sales growth was 2.2%, as the business continued to show strong resilience in an increasingly challenging economic environment. The Botswana economy continues to experience elevated inflation, high unemployment, and low economic growth.
EBITDA grew 5.8% and adjusted EBITDA was flat on last year. The performance for the second half was much stronger than in the first half as our strategies, leadership and inventory optimisation system have started to come to fruition.
As for the Rest of Africa being Namibia, Zambia and Zimbabwe sales increased by 7.7% to P 1 974 million, yet another improvement from 2022, which had realized P1 833 million sales. The increase was driven by the addition of nine new stores, inflationary increases in Zimbabwe and Zambia and volume growth in Namibia and Zambia. “However, this was offset by a very weak Zimbabwean Dollar resulting in Zimbabwe’s Pula sales declining by 48.3%.”
Meanwhile Namibia has successfully turned around with sales growth of 60.0% and like-for-like sales growth of 14.4%. Five new stores were opened during the year. EBITDA grew 140% with EBIT loss reducing from BWP9 million to BWP2 million. Adjusted EBIT, excluding the depreciation reassessment, reduced from BWP9 million to BWP6 million.
Connectedly, Zambia continues to grow with sales up 44.7% and like-for-like sales growth of 33.3%. Three new stores were opened during the year. While EBITDA declined by 26.4% due to the foreign exchange loss on the lease liability, adjusted EBITDA grew 27.1%. Adjusted EBIT declined marginally at 2.6%. Choppies Enterprises Directors are confident that Zambia will generate taxable profits in the foreseeable future.
Lastly in Zimbabwe, the Zimbabwean Dollar (ZWL) has significantly weakened especially in the last two months of the financial year. As a result of the above mentioned factors, Pula sales declined by 48.3%. EBIT and EBITDA declined by 151.6% and 125.5% respectively as cost inflation reduced margins. Adjusted EBIT and adjusted EBITDA declined 133.3% and 108.1% respectively.