Chobe Holdings Limited, Botswana’s high-end tourism services provider, has significantly reduced its losses during the six months ended 30 August 2021, registering a P22.39 million loss from P35.15 million loss in the comparative six months period ended 30 August 2020.
On Tuesday, the company reported in their unaudited abridged results that the half year under review saw a gradual, but at times, stuttering recovery of travel world-wide. Southern Africa was generally unable to take advantage of this as both Botswana and South Africa remained on Britain’s “Red List“ for the larger part of the period under review.
Despite this, the Group achieved an overall occupancy rate of 17% compared with 8% in the comparable period last year, all of which was generated in the first few weeks of March 2020 before the pandemic broke giving rise to the consequent cessation of all travel. Achieved occupancies in the current period grew from an extremely low base at the start of the financial year, encouragingly, however, steadily improving month by month until the end of the period.
During the period Chobe directors continued to ensure the assets of the company remained not only protected but maintained to a standard that would enable them to be brought back into operation at immediate notice, the benefit of these precautions has allowed for the seamless re-activating of all camps, lodges with particular reference to the aviation division. Whilst no staff were retrenched or went unpaid during the pandemic, salaries and wages were reduced on a sliding scale with the highest paid most severely prejudiced and the lowest least so.
As business improved during the half most staff members have been brought back to work on full remuneration. A combination of careful cost controls, improved trading and an increase of almost P 14 million from the financial year-end in respect of Advance Travel Receipts, has allowed the group to repay almost the entire overdraft facility whilst still retraining net Cash and Cash Equivalents of almost P 11 million at the end of the half. This positive outcome has been achieved despite the suspension of the wage subsidy granted by government in the two previous halves.
To unlock operating capital Chobe sold one of its aviation division’s aircraft with a short field performance profile and no longer required for in excess of P10 million, after reporting date, subject to maintenance checks and other legal requirements all of which have been met. The actual handover of the aircraft and payment is now imminent. The aircraft was presented under assets classified as held for sale in the last financial statements.
Chobe directors noted that results thus reflect the steady improvement of trading conditions and are in line with expectations for occupancies at that level, this especially so given the mix of minimal rates applied to local and regional travellers and the enhanced rates achieved in respect of international travellers.
Looking ahead Chobe Directors observed that whilst the COVID-19 pandemic is not over, circumstances have finally brightened for the world-wide tourism industry thanks to the high vaccination levels among the travelling public and the implementation of effective preventative protocols; such that even if a more virulent strain emerges in future, high immunity levels and the availability of better and more informed healthcare procedure will almost certainly ameliorate the consequence.
This improving situation has already lifted a number of other constraints previously limiting the Group’s ability to trade. Notably travel restrictions have been eased with airlines responding by increasing flight frequencies particularly from Chobe’s source markets in the Northern Hemisphere. The lifting of the state of emergency and the alcohol ban has done much to assure the travelling public as to their safety and rights of enjoyment.
The removal of all Southern African countries, including Botswana, from Britain’s “Red List” has considerably further eased travel to Botswana by British nationals whilst also improving perceptions worldwide. Chobe noted that it has, on an industry-wide basis, successfully engaged with and worked with local health authorities to prioritize the vaccination of tourism workers in terms of the availability of vaccines, logistics such that most were vaccinated at their place of employment and the considerable administrative effort associated with the project.
“Today we are pleased to report that almost all our staff have been double vaccinated and now have the official vaccination certificates issued by the Ministry of Health and Wellness,” the company said. Chobe recently completed negotiations to acquire Nxamaseri Island Lodge on the Okavango Pan Handle, according to directors this will greatly enhance the offerings of Chobe’s Desert & Delta Safaris brand.
“The above has largely restored the confidence of the travelling public to begin to travel again, unleashing a noticeably strong demand pent-up over the past eighteen months. Further the Group’s policy of “don’t cancel but defer” has kept in place a large proportion of the forward bookings that were held at the onset of the pandemic with reservations offices now able to fix travel dates in respect of those travellers.
Most encouragingly, however, is that the aforementioned increase in Advance Travel Receipts reflects a strong future interest by the travelling public, reflecting their confidence in Chobe’s travel offerings. Occupancies in the second half, though increasing, will remain relatively subdued especially, as would be expected, in respect of the company’s traditional low season months of January and February.
Forward bookings already on hand, however, indicate that, barring the unforeseen, trade levels will begin to uptick to their pre-COVID levels from the onset of the new financial year in March. “We remain confident that owing to our effective cost control measures during the pandemic, our unrelenting efforts to maintain all operational assets, the continued loyalty of our staff despite the past difficulties experienced by all, and our still largely debt free balance sheet, we will be able to quickly take advantage of the increased business levels enabling us to restore the group back to profitability” commented J M Gibson, Chobe Deputy Chairman & Chief Executive Officer
Gibson said notwithstanding the financial impact of COVID-19 pandemic on the group, the personal toll on all employees has been significant, “thankfully however as a group, we have remained fatality free during the half under review”. Recognising the importance of preserving the Group’s cash resources, directors have elected to defer the declaration of dividends until such time as the Group’s earnings potential and cash flows allow.
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.”
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.”
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.