GENERAL NEWS
From the MD’s desk
By Sandy Kelly
Ahead of elections –
Where are we headed
in the Botswana
property space?
As always, it’s a challenging time for business and in our instance, property markets,
ahead of an election. This time it seems to be more intense than ever before with
competition for power and control of our country. Much is centred around politicking
as the candidates canvas for support and votes. Not our business, but the whole
hunting and elephant matter has also attracted worldwide interest.
In the property space, as in the last two issues, I have written about the
tax law changes that will have massive effects on how and what we
do, namely the Tax Amendment Act and the proposed change to the
Property Transfer Tax Act. We have implored government to consider the
effects that the laws could have on the industry and everyone, including
every business and every citizen’s wealth. Things have moved on a bit
since and as it is an ever evolving topic, this message has also been
updated since it was emailed to our stakeholders.
In respect of the Tax Amendment Act, pleasingly, government has taken note
of the Botswana business community’s concerns and as such, has issued an
amendment to the Act exempting the VRLS companies and SMMEs from
the limitation of interest expense to 30% of EBITDA which is a blessing for
the listed property funds and small business. The VRLS model as an efficient
investment structure would have been eroded to the point that it would either
have been unsustainable so would have collapsed or the option would have
been to migrate offshore – neither of which the country would have wanted.
Other businesses, however, are still affected, so will surely be looking at ways
to restructure which could result in a loss of both the business activity and
employment in Botswana and the loss of tax should they migrate or close.
ABOUT TIME, the quarterly
newsletter of Time Projects
Editor: Brett Marlin
The 30% and 5% property transfer tax for non-citizens and citizens
respectively was passed by parliament in August and Gazetted in
September. Though it still must be promulgated (signed-off by the minister
we understand) this is a serious concern for us in the property industry
and our clients. Valuations WILL drop by a minimum of 25% which will
erode every investor’s wealth including each and every citizen property
owner. We are not sure that the government and MPs are aware of
those consequences. Renowned economist, Keith Jefferis has published
a report on what the effects are likely to be, but this seems to have
been ignored or discarded. The Institute of Bankers has also made
its concerns known via the Central Bank. All the banks’ securities for
property loans will be devalued by 25% which in turn will affect the
loan to value requirements. This is tantamount to a similar position in
the global financial crisis of 2008 which was initiated by a sub-prime
lending position which many banks found themselves in at the time. It is
very unlikely that banks will be in the lending space in this situation.
Already standing properties are cheaper than the cost of new development
properties, so if this falls further, developments which also require funding
for the development will most likely result in sales drying up completely.
Managing editor: Faye-Marie Cloete
Email: [email protected]
Cell: +267 7137 6232
Contributors: Brett Marlin, Julien Matoka, Kagiso
Sebetso, Turnie Morolong, Mmika Selei, Roy
Mapharing and Heinrich Malan
Tel: +267 395 6080 | Fax: +267 390 0160 | Email: [email protected] | Website: www.time.co.bw
ABOUT TIME is published on behalf of Time Projects by Nova Communications (Pty) Ltd.
The opinions expressed in this newsletter are those of the authors and people interviewed and do not necessarily reflect the views of the editor, publisher or Time Projects. While all
precautions have been taken to ensure accuracy of information, the editors and publisher cannot accept responsibility for any inaccuracies which may inadvertently have occurred.
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ISSUE 39 - SEPTEMBER 2019