The year economy fought back

| Wednesday December 22, 2010 00:00

 

TourismNot being a physical commodity, estimates of the tourism sector's economic contribution are still in their infancy, having been launched via the Tourism Satellite Account (TSA) in 2007. TSAs since then indicate that Botswana's travel and tourism industry brushed aside the effects of the 2009 recession, growing in both the number of visitors, average spending trends, employment created and economic impact.

The sector's invulnerability stems from the reliance on forward bookings by international clients, some of whom plan and pay for their trips as much as a year in advance. Thus, while sectors such as mining and manufacturing suffered market collapse, the tourism and travel sector had secured its 2009 market during 2008. Experts explain that while the recession affected domestic tourism, the lion's share of revenues in tourism and travel are international, comprising hunting, safari and other forms of tourism.

For 2010, the World Travel and Tourism Council (WTTC) TSA for Botswana estimated that the country would earn P3.8 billion directly from the sector while indirect benefits would reach P8.77 billion. The indirect benefits arise from the sector's linkages to industries such as petroleum retailers, various financial services, catering, construction and textiles. The TSA also estimated that direct employment in tourism and travel would rise by 2.5 percent to 26, 000 in 2010 while the WTTC estimated that by 2020, the sector would employ 33, 293 and contribute P11.3 billion to the economy.

In April, the amended Tourism Act kicked in, transforming the Botswana Tourism Board into the Botswana Tourism Organisation and introducing a slew of quality improvement provisions. Sections of the industry felt aggrieved by a section of the new Act stating that government will revoke the licences of all operators who fail to attain at least a one-star grading after one year of assessment.

The amended Act also made the grading of all tourism facilities and operations compulsory and required all operators to approach BTO to initiate assessment for grading. Policy makers defended the move, saying the one-star was the barest minimum in the effort for higher quality in the sector.

Higher quality in the sector was recognised in May when the Okavango Delta scooped the Tourism for Tomorrow Award at the World Travel and Tourism Council Summit in China. Emerging victorious from more than 160 entries from over 45 countries, the Delta demonstrated a winning relationship between sustainable and profitable tourism on one hand and community upliftment on the other.

During the year, Phakalane Golf Estate Hotel Resort won the 2010 Award for Botswana's Leading Resort while the same establishment opened an 80-bedroom hotel in December.

EnergyWith electricity demand rising to 500 megawatts at peak and unmatched by installed capacity of 120 megawatts (MW), the year opened on yet another bleak note for the country's energy needs. The year 2010 represented the third last year of high supplies from Eskom (250MW). From next year, the supplies will be cut down to 150MW and eventually zero by 2013. While import lines were also sourced from Mozambique, these were of a non-firm nature, meaning that they could be suspended according to the supply/demand dynamic in that country.

Throughout the year, a cash-strapped and beleagured Botswana Power Corporation (BPC) waded through a sea of public criticism to record several victories, including the establishment of the first Independent Power Producer (IPP) at Matshelagabedi worth 70MW. Through strong government and World Bank support, the Corporation also initiated the Morupule B Project, which will pump in an additional 600MW into the national grid by 2012, catering for Eskom's pullout. Another IPP/government initiative was the 90MW dual fuel power station in Orapa that is scheduled for commissioning soon.

While the September collapse of the Mmamabula Energy Project (MEP) was a blow to investors, the community and Botswana in general, the government was able to console itself with the 300MW Mookane Domestic Power Project (MDPP), construction of which is about to begin. The MDPP is an entirely inward-looking project under the Chinese and Canadian investors will supply Botswana with 300MW, representing 25 percent of the 1, 200MW the government had originally been eyeing from MDPP. The country's fuel sector fared badly in 2010, its sensitive underbelly exposed to the vagaries of petroleum supplies in South Africa. In May, the country was hit by fuel shortages due to industrial action in South Africa which supplies nearly all of Botswana's demand of 2.5 million litres per day. Although NDP 10 envisions the diversification of fuel routes and sources, the May shortages forced government to fast-track discussions with Mozambican and Namibian authorities for possible supplies.

Government also announced its intention to develop the Tshele Hills and Francistown storage facilities to hold 150 million litres, equivalent to 60 days of national consumption.

The need for greater strategic storage is being exposed again as shutdowns in some South African refineries and reduced capacity in the key Durban-Gauteng fuel pipeline result in local fuel shortages. By December 14, government had authorised the release of about six million litres of diesel and petrol for use in 'essential and critical services' countrywide, including power stations, hospitals, security services, CTO and mines. The effort earlier in the year to open new routes also came in handy as part of the shortfall was met with five million litres per week from Mozambique and the balance from South Africa.

In the private sector, Swiss-based energy giant, Puma Energy, sealed a multi-billion takeover of BP's assets in southern Africa, including Botswana. Puma Energy is expected to spend 2011 re-branding its new assets, re-negotiating key contracts and expanding its footprint in Botswana.

Financial sectorWith the recovery of the economy, the financial services sector also rebounded with more activity in the market. For commercial banks, although only one new bank opened its doors to the public, BancABC, business was certainly on the recovery path judging by credit and deposit growth. Although the neutral monetary policy adopted by the central bank saw interest income for the banks being squeezed, banks were more flexible with loaning out money to both households and businesses. According to Bank of Botswana figures, credit was sitting at P21.2 billion in the month of September a significant increase from an average of P17 billion last years.

Deposits, on the other hand, have also increased to around P40 billion as of September from around P35 billion last years. On the capital market, although government was expected to float a mammoth bond to finance its deficit, it ended up postponing the bond to next year. However, some companies such as BHC and BVI expressed their appetite for funds by floating bonds. On the Botswana Stock Exchange, activity was subdued as investors are still risk averse but the last quarter of the year saw a lot of offloading by retail investors which is likely to see the mainstream Domestic Companies Index end the year in the red. At the end of last week's trading, the DCI was 11 percent down making its recovery highly unlikely as more sellers are still on the market. The Foreign Companies Index (FCI) was however a healthy 16 percent up largely on the background of resources stocks. Only one company Cresta Marakanelo listed on the bourse in the year while another one, Sefcash, was delisted.

During the year, BSE also reached a milestone when Absa listed gold Exchange Traded Funds.Interest rates were relatively flat throughout the year due to the central bank's neutral monetary will. The only adjustment of the year came last week when the benchmark bank [rate] was cut a 0.5 percentage points to 9.5 percent