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COVID-19: Small businesses suffering 

-Small-businesses-suffering

The month of August is known for strong winds and sunny, long days. In front of Lentsweletau Sub-land board offices lies small, worn-out shacks of three women trying to make a living out of something.

For some, these old cottages can be deemed hogwash, but these women see them as their ‘saving grace.’ They have been dented by the strong winds, in any case.

These women sell fat cakes for students who attend Lentsweletau Junior Secondary School, which is adjacent to land board offices. During lunch hour, students are not allowed to go outside the school premises. Therefore land board employees will visit these shacks to buy something to eat.

COVID-19 came over, and there have been sequential closing of schools. This was done to prevent the virus from spreading among students. On this particular sunny day, upon arrival at the small shacks, the women looked so hopeless. There are no students; therefore, that means there is less business. The fat-cakes are still wedged inside the Mango Achar bucket.

Lunch hour is approaching, but land board employees are not coming for lunch. Twenty minutes later, one man hopped out of his car and asked what was in there to eat. He was told that there was no meat, he then continued with his journey. This man came to ask for services from the land board offices; he is not a regular customer. An hour later, two officers from the land board came and sat in one of the three shacks. They ate their lunch.

Sebonetse Modise is one of the three old women trading in this place. Besides selling food, she vends sweets, oranges and snacks for students. Now that COVID-19 is here, none of what she sells goes. When times are hard, she returns home with all her food. She has no choice but to feed her children.

Ke itshetsa ka gone go apaya abo ke rekisetsa bana ba sekolo di sweets. Jannong COVID-19 e re amile. Dikolo sale di tswalwa. Kana re tsaya ma P1 mo banning, yaanong fa dikolo di tswetswe jaana, ga gona sepe se re se bonang. Re kotama jaaka o re bona re kotame jaana. Le tsone dijonyana tse re kgona go apaya, batho ba le boutsana go sena theko mo e leng gore o kgona go bowa ka tsone bana ba go ja ko lapeng, kamoso ga gona sepe se o se rekang.”

In an interpreted description, Modise said, “I survive by selling food and sweets for children who attend school here. Now that the COVID-19 is here, schools have been closed. We get P1.00 to buy sweets, but since schools are closed, absolutely nothing is coming in. We spend time sitting here, as you can see.

Even with the food that we are selling, people come in small numbers to buy. At times we are forced to go back with the food that we eventually give to children; tomorrow, you have nothing to use to buy stock.”

COVID-19 (coronavirus) has exacerbated existing growth challenges, leading to an estimated real gross domestic product (GDP) contraction of 7.9% in 2020 (the largest on record). The economy should expand robustly in 2021, supported by sturdier domestic demand; this is according to experts.

Moreover, pent-up foreign demand and higher commodity prices bolster exports, particularly key diamond sales. Risks are tilted to the downside, however, amid continued uncertainty over the course of the pandemic and the speed of the vaccine drive.

FocusEconomics analysts project the economy to grow 7.2% in 2021, up 0.3 percentage points from last month’s forecast and 6.4% in 2022.

Since COVID-19 hit the country, the government introduced food relief packages and funds for those severely affected by the pandemic. In Lentsweletau, this is news to Modise. “Ga gona, ga gona. Ga re ise re bone le faele sepe. Re tlhola re kokomaletse gore gongwe mongwe o ka tla ka pula a reka sweets gongwe tse pedi. Go thata tota, re a sotlega tota.”

“We haven’t received anything from the government. Absolutely nothing. We spend all days waiting for a customer and hoping they purchase a sweet or at least two of them. It’s rough; we are suffering.”

Similarly, feeling the COVID-19 high temperature like Modise, Magdeline Barobetse survives on zero revenue. Having been operating as an entrepreneur in this place in 2016, this is the first time since COVID-19 that she goes home with nothing.

Ke sale ke dira madi fa ka 2016. Mme e rile go simologa ga COVID-19, ke wetse ko tlase. Fa ele gompieno gone, go worse. Ke ne ke duba borotho ka sekotlele se setona, e re nako e, abo bo fedile. Ke ne ke duba 12.5kg, gompieno ke duba 2.5kg. Ke ne ke apaya nama ya P250.00, le koko   

“I started operating here in 2016, and I was making much money. Ever since COVID-19 came over, I have fallen flat. Today is extremely worse. I used to make bread with a larger bowl, and the bread will sell out. Nowadays, I only produce a quarter of that, and I have also cut down on the size of meat I used to cook.”

She denies ever having help from the government, particularly the Member of Parliament. The Lentsweletau-Mmopane MP is Naniki Makwinja. “Nna mopalamente ga re mo itse. Re bone, motho go mo tlhopha. Maabane nkile ka bona manobonobo a dikoloi a feta yaana, gotwe ke tsa ga mopalamente di ya Dikgatlhong. Le ekare a feta fa, ga a kake a fapoga. O ka tlala leswe.”

Barobetse said, “We don’t know our Member of Parliament. We only voted her into power, but we don’t know her. Yesterday I saw luxurious vehicles passing by going towards Dikgatlhong village. I was told that they were the MP’s convey. Even if she can pass by many times, she wouldn’t stop by t east to see us who voted her to be where she is now. She will get dirty.”

She further indicated that the food relief package was just predisposed and evenly distributed. For some prominent families, they were given food in small quantities. There was no consideration of what people eat or do not eat.

LENTSWELETAU MP SPEAKS

When reached for comment, area MP Makwinja said, “There are social workers and councillors in my constituency. These people have my mobile number and every time they need something, they call. I am trying, by all means, to be there for my constituents, but this is made difficult by the COVID-19. Every weekend I am out checking on my voters. But of course, people never complain, but I do try my best.”

When asked to comment on issues raised by small business owners, Makwinja acknowledged that many problems are arising from the COVID-19 crisis. She also indicated that these street vendors are not the only ones affected by the contagion.

“The fact of the matter is that if these people cannot find help at council offices, there is a ward councillor. If the councillor cannot help them, they can reach me so that I link them with relevant officers. They should get my number, and we map how we can help them.”

LEA AIDS THE INFORMAL SECTOR

The government introduced the Informal Sector, Stimulus Fund, through the Ministry of Investment, Trade and Industry. The Fund was relief support for individuals who are fully dependent on their informal businesses for livelihoods.

All formally employed individuals in Government, Parastatals and Private sector operating informal businesses part-time were not eligible to apply or receive the Informal Sector, Stimulus Fund.

Administered by the Local Enterprise Authority (LEA), all registered and eligible Informal sector business owners were credited with P1 000.00 once-off grant. However, these small business owners in Lentsweletau denied ever being assisted under this Fund.

“We do not have a source of information about these particular initiatives. It’s a surprise that government communicates these initiatives on social media. We do not even know what that is. We don’t have phones to receive such information. All we know is that our representatives in Parliament quarrel all day without agreeing on any tangible solutions.”

UNDP, COVID-19 AND INFORMAL SECTOR

Unlike workers in the formal economy, who benefit from legal and social protections, informal workers earn their living without a safety net. They are mostly women and primarily self-employed, engaged in occupations such as street vending, domestic work, transportation, and garbage collection.

Some also work as off-the-books day labourers in factories, farms, and other formal businesses that don’t extend full rights or protections to all employees. Measures taken by many countries to fight the pandemic—including lockdowns implemented without significant assistance for those whose jobs are affected—have threatened the livelihoods of informal workers and pushed them further into poverty, hunger, and homelessness. Millions of informal jobs have been lost in just a few weeks, and millions more have been put at risk.

According to United Nations Development Programme (UNDP), Botswana’s seven weeks of national lockdown and closure of facilities had immediate adverse effects on the domestic economy as consumer demand declined and the supply chain was disrupted.

Business revenue-generating activity within the informal sector was paused due to the inability of businesses to trade during this period. Affected sectors were widespread across Botswana’s economy and included public transport, hawkers and street vendors, hair salons, liquor stores and restaurants.

In particular, the informal sector bore the major brunt of the national lockdown as staying at home and social distancing is antithetical to the nature of its economic activity and the means of livelihood for participants in this sector. Their plight is expected to worsen.

In its June 2020 forecast, the International Monetary Fund (IMF) states that the “pandemic’s still rapid spread indicates that social distancing measures will need to remain in place for a longer time, depressing economic activity in the second half of 2020.

STATISTICAL QUICK REFERENCE FINDINGS 

(Data from 2015 Multi-Topic Household Survey Report 2015/16, and 2015 Project to Conduct an Informal Sector Study for Botswana)

  • Total estimated number of persons employed in the informal sector: 191,176
  • Total estimated number of informal sector businesses: 116,571 (Avg. 1.64 persons per company)
  • Total Estimated Annual Economic Output from the Informal Sector in Botswana: P7, 875,730,039
  • Portion of Botswana Gross Domestic Product (Ministry Interviews): 5.3%
  • The percentage change in the number of informal sector businesses 2007 – 2015: +233%

Business

New study reveals why youth entrepreneurs are failing

21st July 2022
Youth

The recent study on youth entrepreneurship in Botswana has identified difficult access to funding, land, machinery, lack of entrepreneurial mindset and proper training as serious challenges that continue to hamper youth entrepreneurship development in this country.

The study conducted by Alliance for African Partnership (AAP) in collaboration with University of Botswana has confirmed that despite the government and private sector multi-billion pula entrepreneurship development initiatives, many young people in Botswana continue to fail to grow their businesses into sustainable and successful companies that can help reduce unemployment.

University of Botswana researchers Gaofetege Ganamotse and Rudolph Boy who compiled findings in the 2022 study report for Botswana stated that as part of the study interviews were conducted with successful youth entrepreneurs to understand their critical success factors.

According to the researchers other participants were community leaders, business mentors, Ministry of Trade and Industry, Ministry of Youth, Gender, Sport and Culture, financial institutions, higher education institutions, non-governmental institutions, policymakers, private organizations, and support structures such as legal and technical experts and accountants who were interviewed to understand how they facilitate successful youth entrepreneurship.

The researchers said they found that although Botswana government is perceived as the most supportive to businesses when compared to other governments in sub-Saharan Africa, youth entrepreneurs still face challenges when accessing government funding. “Several finance-related challenges were identified by youth entrepreneurs. Some respondents lamented the lack of access to start-up finance, whereas others mentioned lack of access to infrastructure.”

The researchers stated that in Botswana entrepreneurship is not yet perceived as a field or career of choice by many youth “Participants in the study emphasized that the many youth are more of necessity entrepreneurs, seeing business venturing as a “fall back. Other facilitators mentioned that some youth do not display creativity, mind-blowing innovative solutions, and business management skills. Some youth entrepreneurs like to take shortcuts like selling sweets or muffins.”

According to the researchers, some of the youth do not display perseverance when they are faced with adversity in business. “Young people lack of an entrepreneurial mindset is a common challenge among youth in business. Some have a mindset focused on free services, handouts, and rapid gains. They want overnight success. As such, they give up easily when faced with challenges. On the other hand, some participants argue that they may opt for quick wins because they do not have access to any land, machinery, offices, and vehicles.”

The researchers stated that most youth involved in business ventures do not have the necessary training or skills to maintain a business. “Poor financial management has also been cited as one of the challenges for youth entrepreneurs, such as using profit for personal reasons rather than investing in the business. Also some are not being able to separate their livelihood from their businesses.

Lastly, youth entrepreneurs reported a lack of experience as one of the challenges. For example, the experience of running a business with projections, sticking to the projections, having an accounting system, maintaining a clean and clear billing system, and sound administration system.”

According to the researchers, the participants in the study emphasized that there is fragmentation within the entrepreneurial ecosystem, whereby there is replication of business activities without any differentiation. “There is no integration of the ecosystem players. As such, they end up with duplicate programs targeting the same objectives. The financial sector recommended that there is a need for an intermediary body that will bring all the ecosystem actors together and serve as a “one-stop shop” for entrepreneurs and build mentorship programs that accommodate the business lifecycle from inception to growth.”

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Business

BHC yearend financial results impressive

18th July 2022
BHC

Botswana Housing Corporation (BHC) is said to have recorded an operating surplus of P61 Million, an improvement compared to the previous year. The housing, office and other building needs giant met with stakeholders recently to share how the business has been.

The P61 million is a significant increase against the P6 million operating loss realized in the prior year. Profit before income tax also increased significantly from P2 million in the prior year to P72 million which resulted in an overall increase in surplus after tax from P1 million prior year to P64 million for the year under review.

Chief of Finance Officer, Diratsagae Kgamanyane disclosed; “This growth in surplus was driven mainly by rental revenue that increased by 15% from P209 million to P240 million and reduction in expenditure from P272 million to P214 million on the back of cost containment.”
He further stated that sales of high margin investment properties also contributed significantly to the growth in surplus as well as impairment reversals on receivables amounting to P25 million.

It is said that the Corporation recorded a total revenue of P702 million, an 8% decrease when compared to the P760 million recorded in the prior year. “Sales revenue which is one of the major revenue streams returned impressive margins, contributing to the overall growth in the gross margin,” added Kgamanyane.

He further stated professional fees revenue line declined significantly by 64% to P5 million from P14 million in the prior year which attributed to suspension of planned projects by their clients due to Covid-19 pandemic. “Facilities Management revenue decreased by P 24 million from P69 million recorded in prior year to P45 million due to reduction in projects,” Kgamanyane said.

The Corporation’s strength is on its investment properties portfolio that stood at P1.4 billion at the end of the reporting period. “The Corporation continues its strategy to diversify revenue streams despite both facilities management income and professional fees being challenged by the prevailing economic conditions that have seen its major clients curtailing spending,” added the CEO.

On the one hand, the Corporation’s Strategic Performance which intended to build 12 300 houses by 2023 has so far managed to build 4 830 houses under their SHHA funding scheme, 1 240 houses for commercial or external use which includes use by government and 1 970 houses to rent to individuals.

BHC Acting CEO Pascaline Sefawe noted that; BHC’s planned projects are said to include building 336 flat units in Gaborone Block 7 at approximately P224 million, 100 units in Maun at approximately P78 million, 13 units in Phakalane at approximately P26 million, 212 units in Kazungula at approximately P160 million, 96 units at approximately P42 million in Francistown and 84 units at approximately P61 million in Letlhakane. Emphasing; “People tend to accuse us of only building houses in Gaborone, so here we are, including other areas in our planned projects.”

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Business

Commercial banks to cash big on high interest rates on loans

18th July 2022
Commercial-banks

Researchers from some government owned regulatory institutions in the financial sector have projected that the banking sector’s profitability could increase, following Bank of Botswana Monetary Policy Committee recent decision to increase monetary policy rate.

In its bid to manage inflation, Bank of Botswana Monetary Policy Committee last month increased monetary policy rate by 0.50 percent from 1.65 percent to 2.15 percent, a development which resulted with commercial banking sector increasing interest rate in lending to household and companies. As a result of BoB adjustment of Monetary Policy Rate, from 1.65 percent to 2.15 percent commercial banks increased prime lending rate from 5.76 percent to 6.26 percent.

Researchers from Bank of Botswana, the Non-Bank Financial Institutions Regulatory Authority, the Financial Intelligence Agency and the Botswana Stock Exchange indicated that due to prospects of high inflation during the second half of 2022, there is a possibility that the Monetary Policy Committee could further increase monetary policy rate in the next meeting in August 25 2022.

Inflation rose from 9.6 percent in April 2022 to 11.9 percent in May 2022, remaining above the Bank of Botswana medium-term objective range of 3 – 6 percent. According to the researchers inflation could increase further and remain high due to factors that include: the potential increase in international commodity prices beyond current forecasts, logistical constraints due to lags in production, the economic and price effects of the ongoing Russia- Ukraine conflict, uncertain COVID-19 profile, domestic risk factors relating to possible regular annual administered price adjustments, short-term unintended consequences of import restrictions resulting with shortages in supplies leading to price increases, as well as second-round effects of the recent increases in administered prices “Furthermore, the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices could add upward pressure to inflation,” said the researchers.

The researchers indicated that Bank of Botswana could be forced to further increase monetary policy rate from the current 2.15 percent if inflation rises persistently. “Should inflation rise persistently this could necessitate an upward adjustment in the policy rate. It is against this background that the interest rate scenario assumes a 1.5 percentage points (moderate scenario) and 2.25 percentage points (severe scenario) upward adjustment in the policy rate,” said the researchers.

The researchers indicated that while any upward adjustment on BoB monetary policy rate and commercial banks prime lending rate result with increase in the cost of borrowing for household and compnies, it increase profitability for the banking sector. “Increases in the policy rate are associated with an overall increase in bank profitability, with resultant increases in the capital adequacy ratio of 0.1 percentage points and 0.2 percentage points for the moderate and severe scenarios, respectively,” said the researchers who added that upward adjustment in monetary policy rate would raise extra capital for the banking sector.

“The increase in profit generally reflects the banking industry’s positive interest rate gap, where interest earning assets exceed interest earning liabilities maturing in the next twelve months. Therefore, an increase of 1.5 percentage points in the policy rate would result in industry gains of P71.7 million (4.1 percent increase), while a 2.25 percentage points increase would lead to a gain of P173.9 million (6.1 percent increase), dominated by large banks,” said the researchers.

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