After a tough 2015 in which many economic sectors grappled with debilitating challenges occasioned by diminished purchasing power, hostile trading environments and a liquidity crisis in the finance sector, industry titans look towards 2016 with optimism. TLOTLO LEMMENYANE reports.
Who is better placed to give an insightful take on the performance of the retail sector in Botswana than the man behind the fastest growing retail outlet in Botswana, Ramachandran Ottapathu. Ram is Chief Executive Officer (CEO) of Choppies, a mass grocery retailer that continues to break the mould and make inroads into Africa through its ferocious expansion both at home and into the region.
Trends in the retail sector reflect a sapid mixed picture of growth and stagnation. Over the past decade the sector boasted of significant growth, which was depicted among other things by mushrooming shopping malls especially in the capital city, Gaborone. The mushrooming of new malls accommodated an increase in the number of retail outlets across the varied areas, which include fast moving consumer goods (FMCG), clothing and food. Fast forward to 2015 the economic outlook depicts limited prospects of growth as the sector has grown to a point where it can easily make room for new entrants. Growth particularly within the FMCG was nabbed by declining consumer spending power.
Ram cited painstakingly slow economic activity and a lack of growth in consumers’ real income as causes of the diminished consumer buying power.
“The retail sector survived because of the weakening of the Rand. We would have been in a worse off situation if the Rand had not weakened against the Pula,” he said.
What he anticipates in 2016 does not promise any better, unless the market outlook shows signs of change.
“We don’t expect much betterment than 2015. The Economic Stimulus Package (ESP) should bring in some increased activities if it kicks off in 2016,” he predicted.
Odirile Merafhe, retail sector chairperson of the local apex body, Business Botswana (BB) highlighted a number of issues that haunted the retail sector in the BB 2014 annual report.
These included review of the consumer protection Act, specifically the transfer of its administration to the Competition Authority so as to enhance efficiency in dealing with consumer protection issues, rezoning and licensing of Gaborone International Commerce Park and the licensing procedure. With 2015 coming to an end, it is expected that such issues will be a thing of the past in 2016. Perhaps such fundamental changes can lessen the squeeze of the retail sector.
His position as the President of the Real Estate Institute of Botswana gives him a bird’s eye view on the ins and outs of the property sector, but it is the day to day interactions and experiences with the sector that qualify Modiredi Maruping as the go-to expert. Maruping provides property management, listing and valuations services through his company, Maruping Real Estate.
Property is by and large a contentious subject which portrays on one end an enviable indication of wealth and on another a cumbersome effort riddled with gloomy possibilities of ownership. Affordability and availability of accommodation constantly emerge as the bedevilling issues that haunt a majority of people in Botswana. The supercharged surge in property prices remains at the centre of debates that attempt to explain why a majority of Batswana do not own property.
Maruping describes 2015 as a “rough year.” The difficulty, as he explained, came from the reduction in the loan to value (LTV) ratio, a risk assessment tool that banks use to determine how much funds can be availed against what the borrower needs to buy the property. He explained that banks previously financed at either 100 percent or 90 percent of the value of property but have now gone down to 70 percent, which means that borrowers need to put in more of their own funds to make up for the difference. The problem emerges from the fact that many people do not have excess money to put into the purchase of a property.
“For you to play in the real estate game you have to have money. There are a few people with money which is why there are a few players in it,” said Maruping.
Looking ahead Maruping said there are some positives because banks are finding their footing and are getting the hang of it, which could mean that in 2016 confidence would have returned.
Nkosi Mwaba cuts through various aspects of the manufacturing sector. He is BB’s manufacturing sector chairperson, President of Botswana Exporters and Manufacturers Association (BEMA) and the Head of Corporate Affairs at the privately owned company, Bolux Group, which manufactures maize meal, pasta and flour. Mwaba’s interaction with the sector at different levels accords him authority in matters relating to manufacturing in Botswana.
A sector that unfortunately grew notorious for job losses in 2014, manufacturing in 2015 strode a delicate path to recovery. Threats were however not averted because lurking behind the sector is the possibility of both present and future job losses. If it was not a complete shut-down, it was downsizing of operations. In the 2014 BB annual report, Mwaba cited contributing factors such as permit issues, cross border challenges, water and power supply issues and land availability. Government’s support and directive in the purchase of local products from manufacturing firms through local preference policies was a necessary but insufficient assistance.
Speaking from the perspective of Bolux Group, Mwaba decried that 2015 was challenging due to the drought. It was however not all gloom and doom as Bolux also secured an investment deal from CBORD, an American company that provides among its other services food and nutrition service management software. CBORD acquired an ownership stake of 49 percent in Bolux which in turn gave Bolux boost of capital. This financial capability according to Mwaba will improve efficiencies and improve exploitation of opportunities in its export strategy. The deal however does not make Bolux immune from the food pricing challenge that lies ahead.
“We expect some challenges in the first part of 2016. The drop in the Rand coupled with drought will increase prices of raw materials, particularly that of maize,” lamented Mwaba. He added that prices have already gone up significantly which suggest that by the time the year starts the prices would have surged. “We are concerned with the pricing because that is something we can’t control much,” he bemoaned. Mwaba however stressed that consumers should not be concerned about a shortage of stock because they are geared up to produce and well placed to take on challenges. Bolux imports 95 percent of its raw materials, Mwaba however highlighted that availability of products is guaranteed because they are well placed to source materials from anywhere.