Botswana property sector reels from power, water outages

20 Apr, 2014 - 00:04 0 Views

The Sunday News

THE country’s perennial power cuts and water shortage is impacting negatively on the property market, PrimeTime says. Commenting on the property developer’s financial results for the six months that ended February 28, 2014, PrimeTime managing director, Sandy Kelly said while they generally performed well, the economic conditions remain challenging and are now worsened by power and water shortages.

“Our properties performed very solidly during the interim period. Whilst economic conditions remain challenging, and now worsened by power outages and water shortages, we have had to work hard with our tenants to minimise disruption,” he said.

Kelly’s comments come on the back of the forecast by economists that growth will be restricted to lower than five percent in 2014, in part due to the prevailing water and electricity shortages that have disrupted production across all economic sectors.

According to figures released by Statistics Botswana last week, there was a significant decrease in the value added to the economy by the water and electricity sector in the fourth quarter of last year due to supply outages.

The sector recorded a decrease of 205,5 percent in the fourth quarter of 2013 compared to a decrease of 60,5 percent recorded in the same quarter of the previous year.

In the period under review, PrimeTime recorded 5,8 percent increase in profits before tax for the six months period from the P19,5 million recorded in the same period in 2013.

A commentary on the listed company’s results states that new renovations contributed to the company’s good performance. Among the company’s letable areas doing well is the revamped Spar mall in Gantsi, Boiteko Junction in Serowe and Choppies in Ramotswa.

“Francistown is proving to be the capital of the north and our properties there are performing soundly with negligible vacancies. Prime Plaza, our flagship in the new CBD saw the second building completed in December 2013 with Cresta, Stockbrokers, GIZ and SA Express taking up tenancies,” he added.

Kelly added that the company’s share price is stable and for the first time in a while, they have seen some large trades at increased prices, indicating a strong appetite in the market for the stock. The profits distributed via debenture interest payments continue to reflect the two main drivers of the company’s current strategy.

“Profits are being applied to some major improvements to our existing properties. Secondly, we are continuing to follow our leveraged model and sinking some of the debt, in line with the terms of the various facilities,” said Kelly. These strategies are strengthening the longer-term asset base of the company, which will result in capital growth.

Kelly said the company continues to look for more opportunities to expand the business. “Despite the challenges which face us in Botswana with power and water, we are pleased to report that there are very positive signs going forward in terms of enquiries that we have received,” he said. On the contrary, PrimeTime’s venture into Zambia is proving to be very challenging as regulations and laws are changing constantly, making it very difficult for the company to plan the strategy.

The SI33 and SI55 introduced in May 2012 and October 2013 respectively were recently revoked in an effort by Zambian government to protect the depreciation in the Kwacha, which lost 15 percent against the US dollar this year as foreign investors grappled with managing their financial affairs.  Property investment in that country has also been hit with an increase in property transfer tax from five to 10 percent and a withholding tax of 10 percent on rentals as a final tax. This, together with a 15 percent withholding tax on foreign dividends or interest is making property investment unattractive.

“We shall be re-considering our position for further investment there very carefully. Opportunities are, however, abundant, albeit hard work to get there in terms of securing properties, development and funding,” said Kelly.He said the company would, despite these challenges continue to explore opportunities outside of Botswana and remain positive that prospects to continue on our growth strategy will be achieved. — mmegi

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