Wednesday, September 28, 2022

Botswana’s happy days are numbered ÔÇô BMI report

Eat, drink and be merry for tomorrow things may not be as good, that is a prediction by Business Monitor International (BMI) that Botswana may be entering lean years.

A recent BMI Botswana Food and Drink report for the second quarter of 2012 states that, “amid solid but unspectacular mining-led economic growth, we expect to see below trend private consumption growth of 5.5 percent in 2012 and 2013. In the five years prior to this, private consumption growth expanded by an annual average of 7.4 percent.”

The report cites base effects, unemployment levels and muted wage growth among reasons leading to the drop in local consumption, “and this has fed through into our outlook for Botswana’s food, drink and mass grocery retail sectors. In general, we hold a less positive view towards the industry in Botswana than we do in the wider Sub-Saharan African region over our forecast period”.

Indications are that while the rest of the region will be making merry, with beer flowing, most Batswana will most likely be closed out of the party.

“We expect to see strong beverage sales growth throughout the region over the forecast period and well beyond. There is enormous potential in beer and soft drinks, specifically carbonates at this stage of the region’s development. Throughout the region the beer market is already keenly contested and this level of competition will lead to significant new investment over our forecast period, thus driving strong sector growth.”

The report, however, expects Botswana beer sales volumes to go up by a paltry 2, 8 percent annually over the forecast period to 2016 – well below the regional average.

The report further states that “all Southern Africa markets lag regional leader South Africa in terms of the presence of organised grocery retailing. Across the region, formalisation will be a key driver of mass grocery retail sales growth, as more and more shoppers trade up to organised retail channels. This will be true, even for the region’s more mature markets; however here, we would also expect the steady introduction of new store offerings, such as non-food products, to also help support growth. In Botswana, we estimate that around 40 percent of grocery retail sales are accounted for by the organised sector. This is comfortably ahead of most regional markets, although it does still allow room for solid growth.”

“Demographics are a key component of the region’s appeal, given the very low base from which most growth is occurring and the severe income inequalities that still persist. Botswana’s population dynamics – while not as enticing as many of its regional peers – are still a plus point for investors. The country’s 2.1mn-strong population base will grow to 2.2 mn by 2020 and by 19% over our entire forecast period to stand at 2.5mn in 2050. While this makes Botswana a lot smaller and slower growth than most of neighbours, the country does share similarly appealing age dynamics. In 2012, 43% of Botswana’s population is under 20 and this provides solid long-term growth opportunities for regional investors.

Risk/Reward Ratings: Botswana falls in a reasonably impressive 9th place out of 16 regional markets that are ranked for Sub-Saharan Africa within BMI’s Food & Drink Risk/Reward Ratings. The country scores below the regional average in terms of Rewards, while scoring well above the regional average in terms of Risk.


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