Botswana’s leading citizen-owned and run asset management firm, Kgori Capital, projects the economy will contract by 10.0 percent in 2020 due to the negative impact of COVID-19 on all sectors of the economy, especially the Mining and Wholesale & Retail Trading sectors.
In the company’s third quarter of 2020 (Q3) insights, the COVID-19 pandemic continued to dominate global headlines in Q3 of 2020, with many countries battling a second wave of infections amid the ongoing re-opening of economies. Q3 2020 market performance followed a similar trend as Q2 2020 with local assets significantly underperforming global markets.
It is apparent from earnings releases that restrictions instituted to mitigate the spread of COVID-19 within Botswana borders have had mixed economic implications. Some sectors have been decimated, some have thrived, and the rest remain somewhere in between.
Commenting on the macro-economic side, Kgori Capitals’ portfolio manager, Kwabena Antwi said based on De Beers meeting its 2020 production guidance of 25million-27million carats-risks are skewed to the downside due to the flare-up of COVID-19 cases in Europe and US.
“For wholesale and retail trading we expect a lower contraction of -17 percent (previously -32percent) due to pick up in diamond sales and expectation that consumers will return to normal spending habits in Q3/Q4. Risks are also skewed to the downside as the Tourism sector is still blocked though easing in terms of charter planes into Botswana has been allowed and borders start to re-open in December,” he added in his commentary.
On the equities side, portfolio manager, Tshegofatso Tlhong highlighted that the expectation on tourism is that the sector will continue in the doldrums going into Q1 2021 as the local transmission curve steepens and cross-border travel remains minimal. Local tourism should keep some providers who cannot go into care and maintenance afloat
“Consumer staples remain resilient. Profitability in the telecommunications sector is under pressure due to the shift in consumer behaviour and the mining sector is starting to ramp up gain. We are cautiously optimistic as we go into the last quarter of the year. The property sector has also fared better than expected; though revenues did take a hit and expansion plans have been halted, sector profitability has remained broadly intact,” she said.
In this sector, distribution yields are expected to recover as tenants trade uninterrupted; however rental yields are expected to track lower as lease renewals are negotiated.