A lot of economic dynamics explain that Botswana households during lockdown had less choices and options and found comfort in food despite its costs going up. The cost of food in Botswana increased by 3.60 percent in June of 2020 over the same month in the previous year, mirroring high prices from food import production.
Research shows that Botswana’s economy would bear the cost of being reliant on food imports when demand calls supply out. With the increase of food consumer price index when lockdown started in April to June (1.3) and Food & Non-Alcoholic Beverages group being dominant in contributions of groups to annual inflation rate during the time of stay at homes, investment shifted on consumables goods or foodstuffs.
Investment or risk appetite of owners of food suppliers and retailers remain resilient and confident in the financial markets. This could be because consumers’ sentiment on food prices cannot change the appetite for food amidst the chaotic economic environment of Covid-19.
A higher consumer price index may affect food importing countries like Botswana whose households tend to spend a larger percentage of income on foodstuff. According to Statistics Botswana, food comes third after transport and housing in this country when it comes to weighing inside the Consumer Price Index basket.
Back to investment in consumables or products that are highly in-demand, sold quickly and affordable, the financial markets are currently responding despite the higher cost of food and its marginal increase in inflation rate.
According to a recent market analysis from a fresh stockbroker research activity spanned across a number of sectors in the market and the Fast-Moving Consumer Goods (FMCG) is leading the pack; “Sefalana and CA Sales, stocks claimed over half of the volumes traded and turnovers even higher.”
According to Motswedi Securities, for the week ending 17 July there was, “a welcome improvement from the 1.58mn shares that traded worth P3.83mn in the prior week.” According to Stockbrokers Botswana, putting the same period and the two FMCG stocks into context, there was a turnover amounting to P27, 4 million as 6, 3 million shares exchanged hands; Sefalana (42 percent) and CA Sales (27 percent) were the biggest contributors to turnover.
Sefalana and CA Sales invest on FMCGs or products that are highly in-demand, sold quickly, and affordable. Value chain for fast-moving consumer goods in Botswana research shows Sefalana takes a bulk of its supplies by trucks or ships as “large supplies from foreign supplies” or imports.
The supplies will then reach a wholesaler and Sefalana acts as a transporter of goods and wholesaler. Before the goods can reach consumers, Sefalana will sell it as a retailer too. CA Sales is a giant independent distribution agent and supplies most grocery chains around the country.
A curious investment appetite movement for a sector whose value chain was almost affected by country to country Covid-19 measures. Truck drivers coming from other countries to Botswana waited at the border for days before they could be tested. If they tested positive for the pandemic, they would be returned home if they are foreigners or quarantined if they are locals. This publication saw trucks which were supposed to deliver FMCGs to the country stuck at boarder gates.
But investors are still in the gamble for the stocks of FMCGs. Some simplistic observation from trade experts is that Botswana is a consumer population and despite the pull of demand to supply being skewed, people will still buy food than any other commodity.
According to the June inflation statistics, food prices went up but there was less action in inflationary consequences in other commodities. Notably, communication recorded low inflation rate, recreation and culture was at a low as well, this was because people stayed at home while transport hit the negatives as cars were packed save for few ones driven for essential services.
When making their investment past decisions, FMCGs investors could be reading the forecast notebook recorded by researchers last year of a strong consumer demand supported by positive economic growth and low inflation which will protect consumer purchasing power over the coming quarters.
That time there was “a recent increase in wages for public servants as well as increases in the minimum wage bodes well for consumer-facing companies.” But that was before Covid-19 when government was forced to withheld public servants salaries and the fiscal and IMF lowered their economic projections.
According to renowned think tank Fitch Solutions, consumer spending growth in Botswana is projected to be weaker in 2020 due to the negative impact of the Covid-19 pandemic. “We have revised our forecast for real household spending growth down to 0.7% y-o-y in 2020 from a pre-Covid-19 forecast growth rate of 4.9% y-o-y,” said the think-tank recently.
Thou shall live by bread and cereal alone
Bread and cereal is the stable food in Botswana and it is shown by Botswana’s continued demand for it at higher volumes and takes the largest weight in the food consumer price index. According to Food and Agriculture Organization (FAO), Botswana is a net importer of cereals, with more than 90 percent of the domestic requirements normally satisfied by imports.
According to the latest Consumer Price Index report from Statistics Botswana, the Food & Non-Alcoholic Beverages group index rose by 0.5 percent, from 105.2 to 105.7 over May and June. According to Statistics Botswana, prices of bread and cereals, which have the largest weight in the food price index, increased steadily throughout 2019 and early 2020, and were estimated to be 4 percent higher year on year in June 2020.
FAO said of March 2020, prices of bread and cereals were slightly higher compared to year‑earlier levels. This increase mainly reflects the high prices of maize in South Africa, the country’s main supplier of grains. A disturbance of bread and cereal import value chains is expected to be worse for June/July statistics given the lockdown border disruptions.
Cereal imports in the 2019/20 marketing year (April/March) increased to an estimated 440 000 tonnes, over 20 percent above the previous five‑year average partly reflecting the low domestic cereal harvest in 2019, according to FAO. Maize which accounts for the largest share of cereal imports, is estimated at 265 000 tonnes.
Without imports Botswana is expected to wait for the harvest which is expected to have concluded in June according to FAO. Harvested cereals are mostly sorghum and maize. About 38 000 people were estimated to be in need of food assistance in the April 2019‑March 2020 period, compared to an estimated 35 000 people in the previous year, according to the Botswana Vulnerability Assessment Committee (BVAC).
In its Global Information and Early Warning System, FAO said the moderate increase is mainly due to the reduced 2019 cereal harvest and the deterioration of livestock body conditions, which particularly affected the livelihoods of subsistence farmers.
FAO in its Global Information and Early Warning System recently also posted that: “Looking further ahead, although an increase in cereal and livestock production in 2020 would improve food availability and ease access constraints to food for subsistence farmers, the risks posed by the COVID‑19 pandemic could cause an increase in the prevalence of malnutrition at the national level.
The effects of the pandemic are expected to be primarily channelled through a reduction in economic activities and associated income losses. A breakdown in supply chains, particularly in relation to trade disruptions with South Africa, which is the primary source of staple foods, would have sizeable impacts on the availability of food supplies in local markets.”
The cost of a healthy diet amid ‘The Great Pandemic’
Cereal and bread are not considered to be healthy food in terms of their nutritional value, as they contain a lot of carbohydrates which are said to be fuelling obesity and its health repercussions in any economy. Fruits and vegetables which are commonly recommended as a panacea to many diseases like immunisations against Covid-19 and makes healthy meals, are trailing the food consumer price index weights at number 6 and 7 respectively.
This paints a picture that Batswana’s diet is predominantly carbohydrates or cereal and bread as opposed to the healthy fruits and vegetables. According to FAO, Assistant Director-General and Regional Representative for Africa, Abebe Haile-Gabriel in a piece sent to BusinessPost, hunger is on the rise in Sub-Saharan Africa, and a healthy diet has become an out-of-reach luxury item for many Africans.
According to Haile-Gabriel, there is a recently launched ‘The State of Food Security and Nutrition in the World (SOFI)’ report which found that Africa has the highest prevalence of undernourishment – more than twice the global average – and the fastest growth in the number of hungry people compared to other regions.
“COVID-19 is compounding the problem. Disruptions to food supply and livelihoods mean that many households are facing increased difficulties in accessing nutritious foods, particularly for the poorest and most vulnerable. Preliminary projections outlined in the report suggest that COVID-19 could add an additional 83 to 132 million people globally to the ranks of the undernourished,” said Haile-Gabriel.
Haile-Gabriel also added that the cost of a healthy diet is above the international poverty line, meaning that people earning less than US$1.90 per day cannot afford to eat adequate calories and nutrients from diverse food groups. The UN representative also said, compared to other regions, this affordability poses the greatest challenge in Africa, where a healthy diet is beyond the means of nearly a billion people.
“In sub-Saharan Africa, a healthy diet costs 3.2 times more than the poverty line, and the situation is even worse in countries with a protracted crisis such as conflict. The poverty line itself needs to be reviewed to include the cost of nutritious food as a basic cost of living,” the FAO chief said.
Newly established wholly indigenous citizen owned retail chain Payless Retail (PTY) Ltd is set to partake in the first session of Botswana Stock Exchange (BSE)’s Tshipidi Mentorship Program (TMP) on Monday June 29th.
The TMP aims to train and capacitate SMEs so they can operate as corporates and eventually list on the local bourse. According to local bourse, BSE, the program aims to provide practical training to potential issuers through a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.
Payless Retail is a newly established supermarket chain whose mission is to become a convenient one-stop shopping destination as it is one of the Botswana oldest retailing brands. It started off as Corner Supermarket in January 1976, and to date boasts of nine stores in, among others, Gaborone, Mochudi, Molepolole and Tlokweng. Payless was recently acquired by Ellis Retail Group, which is led by businessman Elliot Moshoke.
The takeover catapulted Ellis Retail to the envious position of being the first wholly indigenous owned major retail chain. “We jumped at this opportunity because it gave us a chance to prove to Batswana that the retail business is open and lucrative.”
The objective is to create a proudly Botswana retail chain that fully supports our national Vision, economic development and citizen economic empowerment ambitions,” Moshoke told BusinessPost.
He further emphasized that Batswana are capable and able to run large scale businesses hence they need to accept invite foreign investors who will come in to support us not take the business. “Our win as Payless in the Fast Moving Consumer goods (FMCG) industry is a win for Batswana. We need their support in this difficult and challenging journey.
As you are aware, Payless is the only retail chain in the hands of Batswana ba Sekei. We need to take advantage of this to generate employment and create small businesses in retail and Agri businesses,” he explained.
The retailer has also partnered with Botswana Investment & Trade Center (BITC) on their #PushaBW campaign with a view to initiating earnest engagement with local producers to iron out bottlenecks and ensure seamless trading.
“Local producers have to be part of the phenomenal growth of the Payless brand. This will in turn facilitate employment creation and economic growth. We did this because we have the utmost respect for local manufacturers and producers,” he mentioned.
Payless is currently restocking all of its stores; a development that Moshoke says is testament to the retailer’s commitment to growing the brand and ensuring continuity of business. He further revealed that renowned retail suppliers like PST and CA Sales have reignited their trust in Payless, opening their doors for Payless as they have faith in the retailer’s new owners.
The takeover has reportedly saved more than 200 jobs and gave a new lease of life to the previously fledging Payless brand. According to a press release from the management team, the Payless work forces are also extremely excited about what the future holds. The TMP is a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.
The program is administered by experts within the listing ecosystem and seeks to bring the potential issuers closer to the listings advisers, investors and leaders of already listed companies. “As a strategic initiative, the BSE decided to set up this mentorship program in a bid to assist SMEs to strategize, corporatize and acclimatize in order to list to access equity finance and expand operations,” said the BSE.
The TMP will avail to SMEs practical insights, knowledge and feedback from institutional investors, increased awareness of the BSE listing requirements as well as an intimate network of advisors and CEOs of listed companies. After training, Payless will graduate with improve governance structures and better knowledge of articulating its business strategy. The retailer will also gain increased visibility through BSE marketing platforms.
Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.
In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.
The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.
With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.
Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.
BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.
During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.
BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.
As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.
In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.
BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.
The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.
BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.
Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.
According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).
With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.
In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.
Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.
The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.
The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.
The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.