Botswana’s economy significantly slowed down in the second quarter of 2020 owing to adverse impacts of the COVID-19 pandemic.
The novel virus which broke out in Wuhan China, late 2019 curtailed trade, restricted movements of both goods and people, soiled productivity due to social distancing and eroded business sentiments.
Official statistics released by Statistics Botswana show that the nominal Gross Domestic Product (GDP) for the second quarter of 2020 was P36.863.5 billion compared to P50.7 billion registered during the previous quarter. This represents a quarterly decrease of 27.3 percent between the two periods.
During the quarter under review, General Government became the major contributor to GDP for the first time in many years, by 19.7 percent, followed by Finance & Business Services, Trade, Hotels & Restaurants and Mining & Quarrying by 16.7, 16.5 and 8.1 percent respectively.
The contribution of other sectors was below 7.0 percent, with Water & Electricity being the lowest at 1.6 percent.
Real Gross Domestic Product for the second quarter of 2020 decreased by 24.0 percent. The deep contraction was attributed to the huge decline in real value added of Mining & Quarrying and Trade, Hotels & Restaurants industries by 60.2 and 40.3 percent respectively.
Real GDP at constant 2006 prices for the second quarter of 2020 was P18.8 billion compared to the revised P25 billion recorded in the first quarter of 2020. The steep reduction in the domestic economy was observed across all sectors except Government, Agriculture and Water & Electricity.
Statistics Botswana says poor performance of the economy was mainly due to the impact of measures that were put in place to combat the spread of the COVID-19 pandemic.
The General Government industry increased by 2.1 percent in real value added compared to 4.2 percent during the corresponding quarter of 2019. In response to the global COVID-19 pandemic, many governments implemented a wide range of support measures to mitigate its impact on the economy and society.
Botswana Government instigated robust fiscal policy responses in order to influence macroeconomic conditions, including aggregate demand of goods and services, employment, inflation and economic growth.
The Agriculture industry increased by 3.0 percent in real value added during the second quarter of 2020, relative to a narrow contraction of 0.5 percent registered during the same quarter of 2019.
The main driver of the improved performance stems from an increase in real value added of Livestock, Crops and Horticulture farming sub-industries, which posted growth of 1.6, 2.1 and 3.1 percent respectively.
The exceptional performance in the crops sub-industry arose from favorable rainfall experienced during the 2019/20 rainy season, resulting in a bumper crop harvest. Water and Electricity.
Water and Electricity value added at constant 2006 prices for the second quarter of 2020 was P257.8 million compared to P 257.0 million registered in the same quarter of 2019, recording an increase of 0.3 percent.
Even though the industry recorded the positive growth, its contribution to the economy still remained the lowest. In the second quarter of 2020, Electricity recorded a positive value added of P32.0 million compared to P18.9 million registered in the same quarter of 2019, leading to a significant growth of 69.5 percent.
The local electricity production decreased slightly by 0.9 percent while imports of Electricity went down by 13.1 percent during the quarter under review hence increase in real value added.
The water industry recorded a positive value added of P227.7 million compared to P240.2 million registered in the same quarter of the previous year, registering a decline of 5.2 percent.
The main contributor to poor performance of the economy was Mining and Quarryin. The sector registered a decrease in the real value by 60.2 percent mainly influenced by Diamond and Coal real value added.
Diamond production in carats went down by 67.0 percent while Coal production in tonnes decreased by 40.7 percent. Trade, Hotels and Restaurants real value added went down by 40.3 percent in the second quarter of 2020 compared to an increase of 5.1 percent registered in the same quarter of the previous year.
The high reduction is attributed to a decrease in real value added of Hotels & Restaurants, Wholesalers and Vehicle dealer’s sub industries by 61.7, 54.7 and 38.4 percent, respectively.
The suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering the borders of the country and hence affecting the output of Hotels and Restaurants industry.
The negative growth in the Wholesalers value added is due to the unfavorable performance of downstream diamond industries during the quarter under review. The significant lower sales were driven by the COVID-19 pandemic, negatively impacting activity in key markets.
The Manufacturing industry recorded a decline of 31.3 percent in real value added during the second quarter of 2020, compared to a growth of 3.5 percent registered in the corresponding quarter of 2019. The Construction industry recorded a decline of 36.0 percent as compared to 3.0 percent realized in the corresponding quarter in 2019.
This industry comprises of buildings construction, civil engineering and specialized construction activities. All these activities were affected by COVID-19 restriction measures imposed during the second quarter of 2020.
The Transport and Communications value added decreased by 16.9 percent in the second quarter of 2020, compared to 5.4 percent recorded in the same quarter of the previous year.
The negative performance of the industry was mainly attributed to the decline in real value added of all the sub-industries except Post and Communications with a positive growth of 2.6 percent.
The Finance and Business Services industry registered a negative growth of 11.9 percent due to the decline in the real value added of Business Services and Real Estate by 24.4 and 17.8 percent respectively.
The resilient performance of the industry was reflected in both Banking and Insurance sub-industries that recorded positive growths of 4.4 percent and 1.9 percent in real value added respectively.
The Financial sector introduced accommodative (loose) monetary policy responses. Monetary policy involves changing the interest rate and influencing the money supply. The Non-mining GDP decreased by 20.7 percent in the second quarter of 2020 compared to a 4.3 percent.
In the coming months prices will go up and inflation will shoot sharply above the target of 3 percent to 6 percent towards the third quarter of 2021, the Bank of Botswana on the other hand will continue to withhold its knife on the Bank Rate. This is according to a forecast made by Kgori Capital in its recent Market Watch Segment.
Statistics from Statistics Botswana show that the recent 1.8 percent increase in the September inflation, from 1 percent in August, was a reflection of the upward adjustment in public transport fares (Transport (from -6.9 to -3.9 percent) in September 2020, which is estimated to have increased inflation by approximately 0.64 percentage points.
Local anti-trust body, Competition and Consumer Authority (CCA), this month received back to back acquisition proposals from South African clothing retailers to wipe out their former rivals, Edcon, from Botswana malls.
Last week BusinessPost was in possession of Merger Notice No 23 of 2020 whereby a South African clothing retailer owner, Retailability Proprietary Limited, through Oclin Proprietary Limited, proposed to acquire parts of the Edgars business conducted by Edcon in Botswana (through Edcon Botswana), as a going concern, consisting of certain assets and identified liabilities.
South African government’s Business Rescue Practitioners earlier this year announced that Retailability will buy Edgars, after the latter filed for a business rescue plan in April after it failed to pay suppliers. This move will see Retailability add Edgars to its portfolio consisting of brands such as; Legit, Beaver Canoe and Style.
Retailability landed on Botswana shores 18 years ago with its flamboyant urban fashion Style which had 17 stores. Style, having almost the same target market as Edgars as it offers men’s and ladies’ contemporary and formal fashion, gave the 91 year old legendary clothing retailer a run for its money, and has won the battle as its parent company has taken over Edgars.
Retailability brands are synonymous with Botswana shopping centres and there are currently five (5) Beaver Canoe stores, 10 Style stores and seven (7) Legit stores across this country. The Beaver Canoe stores sell clothing apparel for men and boys only. The Legit stores have a fashion store format which focuses on the retailing of clothing, footwear, accessories, colour cosmetics and cellular products.
Retailability operates in over 460 stores across South Africa, Namibia, Botswana, Lesotho, and Eswatini. Many observers suggest that because of the deal with Retailability to swallow Edcon, most Edgars stores in Botswana will change their name and be branded Style. A sad tale for religious consumers of the Edgars trademark who got used to love their favourite brand for years.
According to CCA’s Merger Notice No 23 of 2020, Retailability is controlled by Clifford Raymond Lines (through a company which functions solely as a holding company of his interests in Retailability) and Metier Investment and Advisory Services Proprietary Limited (“Metier”). Metier is a private equity enterprise with investments in a number of industries spanning from healthcare, hospitality, FMCGs and telecommunications.
Retailability directors are mostly South Africans; Clifford Raymond Lines, Mark Richard Friday and Norman Victor Drieselmann. Only Nasreen Essack, who was appointed February this year, is a Motswana. He comes after Brian Thuto Tsima left on the same date. Retailability 100 percent owns Oclin Proprietary Limited, the company it is acquiring Edgars with, by a capacity of 3000 shares.
The target business, Edgars, offer textiles, cosmetics and cellular products. Edcon has a Motswana director, Charles Mzwandile Vikisi, a South African, Shane Van Niekerk and Zimbabwean Jethro Kamutsi.
“The Target Business comprises of two (2) Edgars franchise brands and private label stores across Botswana. These stores target middle to upper income customers and are home to a range of private label brands such as Free2BU, Charter Club and Stone Harbour, and a wide range of market label brands (such as Levi’s and Guess) for clothing, footwear and cosmetics.
In addition, the Target Business operates iconic Edgars Home and Edgars Beauty stores as store-in-store formats rounding out the department store offering in Botswana,” said CCA. Foshini also lines up to take Jet Botswana from Edcon.
The Foschini Group (TFG) released a statement confirming its latest intentions to acquire Edcon assets or Jet for a cash purchase consideration of R480 million. This was after the business rescue practitioners offered TFG to buy Jet by that amount.
CCA is currently mulling on a proposed merger by TFG to take over Jet operations in Botswana. Merger Notice No 21 of 2020 from TFG came a few days before the Retailability proposal. In this merger TFG, acting through Foschini Botswana, want to take over “parts” of the Jet business conducted by Edcon through Jet Supermarkets Botswana.
TFG will be willing to add Jet to its portfolio of 30 retail brands that trade in clothing, footwear, jewellery, sportswear, homeware, cell phones, and technology products from value to upper market segments throughout more than 4085 outlets in 32 countries on five continents. TFG will also get Jet’s distribution centre located in Durban and certain stores in Botswana, Lesotho, Namibia and Eswatini. Also part of this fat deal is that the company is looking to also acquire JET Club and all existing JET stock of no less than R800 million.
Johannesburg listed TGF owns Foschini Retail Group which owns the local operations called Foschini Botswana, the acquiring enterprise according to CCA merger notice. “TFG is not controlled by any enterprise/s and for completeness, the three largest shareholders of TFG holding shares greater than 5% as at 27th March 2020 are: Government Employees Pension Fund (16.2%) Public Investment Corporation (13.2%); Old Mutual Limited (6.7%); and Investec Asset Management (6.3%). The remaining issued share capital in TFG is widely held,” said the merger notice.
Only Abdool Rahim Khan is a Motswana in the Foschini Botswana directorship, the rest; Ganeswari Shani Naidoo, Anthony Edward Thunström and Gustav Jansen (alternate director) are South Africans.
According to the CCA merger, the Jet Business is Edcon’s discount department store division, selling clothing, footwear, homeware and some cosmetics as well as cellular products and targets lower-to-middle income consumers throughout Botswana. The Jet Business does not directly or indirectly control any enterprises, says the notice. CCA seeks any stakeholder views for or against the proposed merger, which may be sent within 10 days from date of this publication to the following address.
Botswana Communications Regulatory Authority BOCRA signed a memorandum of Agreement (MoA) with the Ministries of Transport and Communications (MTC), Basic Education (MoBE) as well as Local Government and Rural Development (MLGRD).
The MoA seeks to continue the collaboration that dates back to 2016 when the three parties first agreed to work together in a project aimed at computerizing and providing broadband Internet to primary schools in remote and underserved areas of Botswana.
The project benefitted 68 primary schools and 9 secondary schools through the construction of Local Area Network (LAN) in each primary school, provision of 5 Mbps dedicated broadband Internet to each Primary School and provision of Wi-Fi enabled tablets, laptops and related peripherals such as printers and copiers.
Further, the project will see the augmentation of computers in 9 Junior Secondary Schools with 30 laptops per identified school and employment of Information Technology (IT) officers at each primary school.
When speaking at the signing ceremony in Gaborone, Chief Executive of BOCRA and Chairperson of Universal Access and Service Fund (UASF) Board of Trustees Martin Mokgware said the project’s ultimate goal is to facilitate pupils in schools and host villages to be able to play a meaningful role in the digital economy.
Mokgware indicated that this necessitates upgrading of existing Telecommunications infrastructure to high capacity broadband that will support delivery of education, accessibility to the quality Internet and usage of ICTs.
The Fund began its inaugural programme by sponsoring the provision of WiFi hotspots in public areas around the country as its first project. Following the successful implementation of public WiFi hotspots, the Fund identified Kgalagadi, Ghanzi and Mabutsane areas for mobile network upgrades, schools computerization and internet provision.
Conscious that the project would not be possible without buy-in and support from MoBE, MTC and MLGRD, the Fund facilitated the signing of the first MoU between the three parties in 2016 for implementation of the project.
BOCRA Chief Executive said the signing of this agreement is aimed at benefitting the Kweneng District, adding that they have already assessed the area and have determined that they will be covering 62 underserved villages and 119 schools, 91 of which are primary schools.
“This is a project for which the partner Ministries need to re-commit for its success. Lessons from the previous schools’ computerization and internet connectivity project require that we increase our involvement and resources dedicated to the project for it to be successful. It is my belief as the project coordinator, that we will not do things the way we did them during the first project, for if we do, then we will not have learnt anything,” he said at the signing ceremony.
The purpose of learning is so that there can be continuous improvement to minimize the length of time and amount of resources utilized, he said expressing confidence that their partners will step up to the plate and ensure they play their part in the implementation of the project and that it will progress smoothly having already tread along a similar path.
UASF’s role lies mainly in funding and project management. According to Mokgware, once the project is completed, the work to integrate ICTs into the classroom begins in earnest. Therefore, he said, the project will not succeed without full cooperation and oversight of partners.
“MoBE will put in place the necessary content and ensure that the curriculum is available to all. MLGRD will provide, among others, the enabling environment by ensuring readiness of the school’s infrastructure and necessary security.”