Botswana Stock Exchange (BSE) listed property group, Turnstar Holdings Limited will in the year 2020 focus on domestic growth plans as opposed to further global expansion aspirations which were initially planned for the year.
In their abridged audited Group financial results for the year ended January 2020, Turnstar Managing Director, G H Abdoola said COVID19 will affect lives and businesses in every form until it is brought under control.
“My mission for 2020 was to make Turnstar the largest and most profitable property company on the Botswana Stock Exchange. We have done a lot of work on our growth strategy in the countries we operate in, and identified new opportunities in other countries.”
Abdoola says Coronavirus has brought with it, lessons that will change the way of thinking permanently. He said, “The crisis must not make us panic and helpless. It must make us strong and focused. Each business needs to do the best it can in these circumstances, and rise to the challenge.”
He explained that Turnstar wil continue to strive to achieve its goal of being the largest listed Property Company, by the end of 2020. “We had plans with regards to growth in Botswana, Tanzania, Dubai & Europe, specifically Portugal. At present, this year, we will focus on Botswana until the Corona Virus pandemic has been brought under control,” he said.
Abdoola added, “Only then can we make informed decisions on our future plans. I will keep updating the public and our partners about our plans.” According to the Turnstar Managing Director, unprecedented times such as these require Companies to plan to stay resilient and strong. He revealed that there are various approaches and instruments available to Turnstar management to cushion revenue drop in the business.
The first being “self-help” – what Companies are doing to “help themselves”. The second being restructuring of finances and loans with Banks to suit the revised cash flows. The third being accessing any Government stimulus relief that is being offered.
Abdoola shared that Turnstar is implementing all the self-help steps that are available to keep the Company liquid and strong. The company has paid interim dividend of 9t per linked unit, for the first half of the financial year 31 January 2020.
Turnstar will not pay a final dividend, as has been traditionally done since the inception of the Company. The Managing Director said, “We have prepared cash flow projections based on best case and worst case scenarios, and we are very comfortable that the Group has the financial strength to survive even the worst case scenario.”
He however added that the situation will require management to be prudent and retain cash within the Company, to tide over these difficult times, when trading conditions are almost impossible to forecast.
Abdoola explained that the Company is looking into all areas to try and save costs wherever possible noting that Management will waive their bonuses in the current financial year.
For the financial year ended January 2020, Turnstar has posted satisfactory results, according to company management. The Botswana rental revenues have increased by P 7.7m (5.5%) whilst operational expenses only increased by 3.3%.
The Group operational expenses have been contained. The vacancies in the Commercial Office space in Dar es Salaam, has affected the Group results. The refurbished conference center performed well during the year.
The retail mall is performing to its optimum capacity. The Dubai property continues to perform well. Turnstar is continuously seeking opportunities to expand its property portfolio. Due to the vacancies in the Commercial Office space, Mlimani Holdings has reported a Fair Value loss for the year.
“It should be noted that Fair Values are calculated on current rentals, projected into the future on a discounted cash flow basis. It does not reflect the actual cost of the buildings, and may change from year to year, depending on occupancy levels” explained Turnstar Boss.
The Botswana properties recorded Fair Value Gains. However, due to the Mlimani fair value loss, the Group recorded an overall fair value loss for the year.
Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status. The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.
This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago. In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.
However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced. Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.
The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.
The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.
On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.
The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.
Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.
Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).
“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.
Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.
This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.
For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.
Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers. “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.
‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’
According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.
Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.
“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.