3.FEASIBILITY STUDY REPORT
(a) Terms of Reference
Having been appointed by the Directors/Shareholders of Nature’s World Holdings (Pty) Ltd, otherwise to trade under the Business Name of ‘KGOMOTSO LODGE’ to assess the economic, operational and technical feasibilities of its intended operation of a lodge and some related facilities in the northern outskirts of Gaborone, Interlands Botswana (Pty) Ltd hereby submits its report.
(b) Methods of Study
We followed a number of routes in our study that included the followings:
- Our constant meetings with the intended owner/Managing Director (Ms Kgomotso Ntsatsi), who is the majority shareholder at 99%.
- Our joint visiting to the site of the project, just opposite the well-known Phakalane Estate in Gaborone North.
- A visit to the nearest competitor, the Phakalane Golf Estate was carried out.
4. “National Development Plan 9 (2003/4 –2008/9)” as published by the Ministry of Finance and Development Planning in Gaborone was used for reference.
5. “Tourism Statistics 2002” published by the Central Statistics Office (CSO) in Gaborone.
6. “Statistical Bulletin” (June and September 2001, Vol. 2, Nos 2 & 3) also published by CSO.
7. “Bajanala: A Tourist Guide to Botswana”, Vol. 5, a Publication of the Department of Tourism in Gaborone.
- “Discover Botswana”, a recent Publication by the same Department of Tourism.
9. “Tourist Guide to Botswana”, a Shell Oil Company’s Publication as authored by Veronica Roodt.
- “National Conservation Strategy (Co-ordinating) Agency”, a leaflet published by the Ministry of Environment, Wildlife and Tourism in Gaborone.
(c)Analysis and Development
This project relates to the promotion of tourism and the need for the provision of conferencing facilities. Botswana, with Gaborone as a particular case still lacks behind in the provision of conferencing facilities that could cater for a world class come together. Many lodges/guest houses in at least Gaborone are composed of fewer rooms that could accommodate at least one group of conference attendants at a go.
The result is that many high-class conferences earmarked for Botswana are shifted to such neighbouring countries as South Africa, Namibia or Zimbabwe. The benefits of selling Botswana internationally and the positive economic impacts are therefore also shifted. Past statistics, although old, indicated that local hotels/motels/lodges/guest houses had 1 620 rooms in 1992; 1 709 (1993); 1 773 (1994); 1 724 (1995); 1 755 (1996); 1 959 (1997) and 1 815 (1998). The rooms’ occupancy rates in the average were 54.6 (1992); 52.4 (1993); 51.4 (1994); 50.6 (1995); 51.6 (1996); 57.9 (1997) and 48.0 (1998).
The overall monthly hotel turnover, based on 73 of such facilities that responded to the Central Statistics Office’s enquiry as touched above averaged P249 559 228.00 in 1998 covering such amenities as accommodation, meals, bar sales and others. Many people topping the list of arrivals were day visitors, holidaying, business and those in transit during 1994 to 2002.
In 2001 for instance, 560 054 visitors entered Botswana; those for holiday/tourists were 197219; returning residents (296 680); in transit (265 697), while 146 437 arrived for business purposes. There are other statistics for diplomats, students, employment seekers, etc, but we quoted the above figures as they are synonymous with the project. All in all, 2001 registered 1 917 819 arrivals. We chose the entry points of Ramokgwebana, Tlokweng, Sikwane, Ramatlabama, Pioneer Gate, Kazungula Ferry, Sir Seretse Khama Airport (SSKA), Maun Airport, Sowa Airport, Ramotswa, Kasane, Tsabong and Francistown Airport as our tools of analysis.
Even though the figures tell us more about the entries into Botswana through the stated points of entry, it is difficult to trace their exact lodgings either for night or day throughout their stay within Botswana. We thus chose a compromise approach by assuming that those who chose a particular point of entry would likewise lodge in the nearest facility or within that region or district. With this project planned for Gaborone, we consequently assumed that it would have a share from those entrants at Tlokweng, SSKA, Pioneer Gate, Ramotswa, Ramatlabama, Sikwane, etc.
This project’s only immediate competitor is the affluent Phakalane Golf Estate Hotel Resort, just 5 kilometres away located in the affluent Phakalane Estate. It has eight (8)Chalets of three (3) bedrooms each. They have two (2) bathrooms, Satellite Television, communal swimming pool, self-catering facilities, laundry service and braai facilities. Their charges are as thus:
Persons / Midweek / Weekends4-6 Occupants / P385.00 p/p per night sharing / P1 100.00 per Chalet/night
2-3 Occupants / P440.00 p/p per night sharing / P1 100.00 per Chalet/night
1 Occupant / P825.00 p/p per night single / P1 100.00 per Chalet/night
Children under 14 years / P145.00 p/child per night sharing
Group Rate / P300.00 p/p per night sharing
It also has twelve (12) villas of either three (3) or four (4) bedrooms. The three (3) bedroomed ones are made up of one (1) Executive Suite (master-en-suite) and two (2) Standard rooms, while the four (4) bedroomed ones are made up of one (1) Executive Suite (master-en-suite) and three (3) Executive rooms (en-suites). It further on has six (6) budget rooms. Other facilities as a satellite TV, communal swimming pool, self-catering, laundry service and braai are also available. Their charges are as thus:
Persons
/ ChargesStandard Room (sharing bath & shower) / P 350.00 per room per night
Executive Room (en-suite) / P 450.00 per room per night
Executive Suite (master en-suite) / P 615.00 per room per night
Single Occupancy (3 bedroom Villa) / P1 100.00/villa/night single
Single Occupancy (4 bedroom Villa) / P1 200.00/villa/night single
Children under 14 years / P 175.00 per room per night
Budget Room (day use, 08h00 – 18h00 / P 120.00 per room per day
Budget Room (night use) / P 145.00 per room per night
Group Rate / P 300.00/person/night sharing
Weekend Rate (3 bedroom Villa) / P1 100.00 per villa per night
Weekend Rate (4 bedroom Villa) / P1 500.00 per villa per night
(d)Conclusions and Recommendations
1.To experience maximum benefit to Botswana of the hospitality industry’s impact, we suggest that more citizens be accorded entry into this industry. That would go a long way in “localising” the associated benefits of dividends, profits, expertise, etc, that are shipped out of the country by foreign shareholders.
2.We recommend that this project should carry out services and provide such facilities as categorised under the Explanatory Notes of the Income Statement (Revenue Computation) for it to be viable. The labour force is depicted under the Organisational Structure chapter.
3. For optimum achievement, this project would need seeding funding to an estimated tune of P3 650 500.00 as computed under the Explanatory Notes of the Cash Flow Statement (Loan Computation). Should a Grant be awarded either fully or partially secured, the better.
4.Having assessed this project’s economicfeasibility as derived from the projected Cash Flow Statement, Income Statement, Balance Sheet and Trial Balance; the Operational Feasibility as touched under the covered Organisational Structure, Succession Arrangement and SWOT Analysis as well as the Technical Feasibility as learned normally from other existing similar projects in Botswana, we give this project thumbs up.
4.OPERATIONAL METHODOLOGY, ENVIRONMENTAL IMPACT STUDY
AND MARKETING APPROACH
The intended project herein is to be for the provision of medium to high class lodging and its related facilities like Conferencing, Restaurant/Bar, Hair/Beauty Salon, Laundry services for clients in residence, Secretarial services, Swimming, etc. Meals of various cultures as per the clients’ tastes would also be in the offering.
Clients would book in through the reception and then allocated rooms’ usages for whatever time frame. The same procedure would be applied in the case of booking for the conference facilities. The Bar/Restaurant would be open to both in-house clients and members of the public. The conference room would, like the rooms be equipped with certain facilities like telephones, televisions, air conditioners, chairs and tables, etc where relevant. The rooms would also encompass such basics as beds, beddings and cutlery for self service. The recreational side would be occupied by an already available swimming pool, which would be operated on a pay-as-you-use basis for outside clients, but would be free for in-house clients.
The Hair/Beauty Salon is aimed at being rented out to professionals on monthly rentals, the same procedure that is planned for the Curio shop. Kgomotso Lodge would only take over their operations should there be no potential tenant fitting the requirement.
The entire complex is to generate various forms of waste. There would be plastics, papers, food and beverages’ waste to be considered. There would also be issues of internal landscapes and used water from both the swimming pool and other mentioned business operations. For all such and sub-such eventualities, adequate measures are already planned for. The swimming pool water would be re-used after being rejuvenated up to a certain accepted health condition and then would be diverted to a drainage system. All the water from the toilets, water basins and baths/showers would be diverted to a drainage system enroad to the Gaborone system as well.
In marketing itself, the project is to institute a host of promotional gestures like Billboards, Street poles’ adverts, Brochures, Magazines, Television, Radio, Internet, Newspapers, Sign boards and Telephone Directory, especially the Yellow pages.
Te project is intending to participate in community development projects and charities in the form of donations - giving in one way or the other to the level of its ability as part of its social responsibility. It will also find ways of being a tourist promotion venture through its intended Curio shop that would market traditional products made by the rural communities.
That would supplement the Government’s concerted NDP 9 efforts of developing and implementing the National Eco-Tourism Strategy that stands to diversify tourism products, thus leading to the improvement of every local community’s lives. That participation would build loyalty to this project in the minds of the selling community and other beneficiaries as well as announcing its entry in the minds of its clientele.
This venture is further on intending to stress on positive customer relations attitude from the part of its staff. There would also be strategically placed suggestion boxes closer to the customers for their convenience rather than to the staff as that would indirectly be threatening
to both staff concerned and the customers.
ORGANISATIONAL STRUCTURE, SUCCESSION ARRANGEMENT AND SWOT ANALYSIS
To be manned by a staff component of 19 including the Managing Director Ms Kgomotso Ntsatsi, this project’s daily grassroots operations are to fall under two supervisors, one per shift, who would report directly to her. Ms Ntsatsi would in turn report to the two-member Board of directors made up of herself (99%) and Tefo Ntsatsi (1%).
We suggest that the supervisors be in possession of at least certificates in any course related to the Hospitality Industry. Five years experience is suggested. Any further qualifications in especially Human Resources or Customer Relations will be added advantages.
There will also be a need for a professional and energetic Sales and Marketing Manager with at least a Diploma in either Sales or Marketing, a combination of both of which will be an added advantage. A minimum of 3 years post-qualifications experience in the Hospitality Industry are preferred. His/Her job description would include events managements, customer/public relations, indoor/outdoor advertising, etc.
Ordinary Level qualification in which Accountancy and Mathematics were subjects as well as Computer Literacy and Reception/Secretarial course are suggested for each of the two Receptionists/Bookkeepers, who will work on shift basis. Three years experience in any industry is preferred. We suggest 2 Chefs (one per shift), 2 Cooks and 2 Waiters/Waitresses, all apportioned one per shift as well. While we do not stress professional qualifications here, any relevant one will be added advantages. The most important criterion will be uppermost practical experiences in the industry including in restaurants. Knowledge of Setswana food would be favoured.
We further suggest one Gardener to handle the two plots as envisaged. A minimum of a Primary School Leaving Certificate and physical fitness are suggested with a minimum of 2 years relevant experience in any industry. A Driver with at least a light duty driver’s license to cater for the project’s multi-dimensional needs is suggested. At least 3 years are preferred in any industry. We suggest that the project better engage the service of a hired security guard who would be from local security companies including their alarm system.
With this span in mind, we foresee no mission impediments. This is the project’s potential strength. On the other hand, the project is to be directed by its owner, who is new in the industry, at least to this magnitude. Still we foresee light at the end of the tunnel, as a host of relevantly qualified and experienced team would surround her.
Ms Kgomotso Ntsatsi as the Head of the project on the other hand possesses a Masters degree in Accounting and Finance from the University of Birmingham in the United Kingdom which followed her attainment of Postgraduate Diploma in Finance from the same university. She previously obtained a Bachelor of Arts degree majoring in Accounting and Economics from the University of Botswana. She is a Banker working for Bank of Botswana having held various portfolios whose current one being that of Manager in the Department of Payments and Settlement. She attended various seminars and traveled widely, an experience that would go a long way in running a hospitality venture of this nature.
There are opportunities for this project in recognition that it has just one competitor in the vicinity. Should this project intensify advertising and promotion aspects to the planned optimum level, we foresee it reaping fruits even from the seemingly distant Gaborone city centre due to the privacy and quietness of the Gaborone North and Phakalane areas. Should future competition emerge, at least the business would have passed its teething stage earlier, thus fit enough to challenge any newcomer.
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6.PROJECTED 5-YEAR INCOME STATEMENT
(ANNUAL TOTALS IN PULA)
2008/9 / 2009/10 / 2010/11 / 2011/12 / 2012/13 / TOTALREVENUE / 2 327 980 / 2 490 939 / 2 665 305 / 2 851 876 / 3 015 507 / 13 387 607
Less Operating Expenses
MD’s Salary / 120 000 / 127 200 / 134 832 / 142 922 / 151 497 / 676 451
Other Salaries / 402 000 / 426 120 / 451 687 / 478 788 / 507 515 / 2 266 110
Food and Beverages / 70 000 / 72 100 / 74 263 / 76 491 / 78 786 / 371 640
Electricity and Water / 60 000 / 61 800 / 63 654 / 65 564 / 67 531 / 318 549
Stationery, Telephone and Fax / 15 000 / 15 300 / 15 606 / 15 918 / 16 236 / 78 060
Repairs and Maintenance / 5 000 / 5 100 / 5 202 / 5 306 / 5 412 / 26 020
Insurance / 20 000 / 20 400 / 20 808 / 21 224 / 21 648 / 104 080
Transport / 35 000 / 36 400 / 37 856 / 39 370 / 40 945 / 189 571
Advertising and Promotion / 10 000 / 5 000 / 5 200 / 5 408 / 5 624 / 31 232
Cleaning Materials/Uniforms / 15 000 / 4 000 / 4 900 / 17 000 / 5 200 / 46 100
Auditing and Consultancy / 10 000 / 7 725 / 7 957 / 8 196 / 8 442 / 42 320
Other Expenses (including Security) / 6 000 / 6 180 / 6 365 / 6 556 / 6 753 / 31 854
Total Operating Expenses / 768 000 / 787 325 / 828 330 / 882 743 / 915 589 / 4 181 987
Profit Before Depreciation, Interest and Taxes / 1 559 980 / 1 703 614 / 1 836 975 / 1 969 133 / 2 135 918 / 9 205 620
Less Depreciation / 10 000 / 10 000 / 10 000 / 10 000 / 10 000 / 50 000
Profit Before Interest and Taxes / 1 549 980 / 1 693 614 / 1 826 975 / 1 959 133 / 2 125 918 / 9 155 620
Less Interest (20.5%) / 748 353 / 673 517 / 598 682 / 523 847 / 449 012 / 2 993 411
Profit Before Taxes / 801 627 / 1 020 293 / 1 228 293 / 1 435 286 / 1 676 906 / 6 162 209
Less VAT (10%) / 208 198 / 225 693 / 242 350 / 259 085 / 279 493 / 1 214 819
Profit Before Corporate Tax / 593 429 / 749 404 / 985 943 / 1 176 201 / 1 397 413 / 4 947 390
Less Corporate Tax (25%) / 148 357 / 198 601 / 246 486 / 294 050 / 349 353 / 1 236 847
Profit After Corporate Tax / 445 072 / 595 803 / 739 457 / 882 151 / 1 048 060 / 3 710 543
Balance Brought Down / 0 / 445 072 / 1 035 875 / 1 767 832 / 2 639 983 / 0
Funds Available to Shareholders / 445 072 / 1 040 875 / 1 775 332 / 2 649 983 / 3 688 043 / 3 710 543
Less Dividends / 0 / 5 000 / 7 500 / 10 000 / 12 500 / 35 000
Balance Carried Down / 445 072 / 1 035 875 / 1 767 83 / 2 639 983 / 3 675 543 / 3 675 543
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7.PROJECTED 5-YEAR CASH FLOW STATEMENT
(ANNUAL TOTALS IN PULA)
2008/9 / 2009/10 / 2010/11 / 2011/12 / 2012/13 / TOTALLoan / 3 650 500 / 3 650 500
Revenue / 2 327 980 / 2 490 939 / 2 665 305 / 2 851 876 / 3 051 507 / 13 387 607
Total Inflows / 5 978 480 / 2 490 939 / 2 665 305 / 2 851 876 / 3 051 507 / 17 038 107
Less Outflows:
Land and Buildings / 3 100 000 / 3 100 000
Furniture/Air cons/TVs / 200 000 / 200 000
Bedding/Cutlery / 100 000 / 100 000
Walls/Gates / 100 000 / 100 000
Telephones/Fax / 10 000
MD’s Salary / 120 000 / 127 200 / 134 832 / 142 922 / 151 497 / 676 451
Other Salaries / 402 000 / 426 120 / 451 687 / 478 788 / 507 514 / 2 266 110
Electricity/Water / 60 000 / 61 800 / 63 654 / 65 564 / 67 531 / 318 640
Food and Beverages / 70 000 / 72 100 / 74 263 / 76 491 / 78 786 / 371 640
Stationery, Telephone and Fax / 15 000 / 15 300 / 15 606 / 15 918 / 16 236 / 78 060
Repairs and Maintenance / 5 000 / 5 100 / 5 202 / 5 306 / 5 412 / 26 020
Insurance / 20 000 / 20 400 / 20 808 / 21 224 / 21 648 / 104 080
Transport / 35 000 / 36 400 / 37 856 / 39 370 / 40 945 / 189 571
Advertising and Promotion / 10 000 / 5 000 / 5 200 / 5 408 / 5 624 / 31 232
Cleaning Materials/Uniforms / 15 000 / 4 000 / 4 900 / 17 000 / 5 200 / 46 100
Auditing and Consultancy / 10 000 / 7 725 / 7957 / 8 196 / 8 442 / 42 320
Other Expenses / 6 000 / 6 180 / 6 365 / 6 556 / 6 753 / 31 854
Interest on Loan / 748 353 / 673 517 / 598 682 / 523 847 / 449 012 / 2 993 411
Loan Repayment / 365 050 / 365 050 / 365 050 / 365 050 / 365 050 / 1825 250
Value Added Tax / 208 198 / 225 693 / 242 350 / 259 085 / 279 493 / 1 214 819
Corporate Tax / 0 / 148 357 / 198 601 / 246 486 / 294 050 / 887 494
Dividends / 0 / 0 / 5 000 / 7 500 / 10 000 / 22 500
Total Outflows / 5 599 601 / 2 199 942 / 2 238 013 / 2 284 711 / 2 313 194 / 14 635 459
Surplus (Deficit) / 378 879 / 290 997 / 427 292 / 567 165 / 738 313 / 2 402 647
Balance Brought Down / 100 / 378 979 / 669 976 / 1 097 268 / 1 664 433 / 100
Balance Carried Down / 378 979 / 669 976 / 1 097 268 / 1 664 433 / 2 402 746 / 2 402 746
8.PROJECTED 5-YEAR BALANCE SHEET
(ANNUAL TOTALS IN PULA)
YEAR 0 / 2008/9 / 2009/10 / 2010/11 / 2011/12 / 2012/13FIXED ASSETS
Land and Buildings / 3 100 000 / 3 100 000 / 3 100 000 / 3 100 000 / 3 100 000 / 3 100 000
Furniture/Air cons/TVs / 200 000 / 200 000 / 200 000 / 200 000 / 200 000 / 200 000
Bedding/ Cutlery / 100 000 / 100 000 / 100 000 / 100 000 / 100 000 / 100 000
Walls/ Gates / 100 000 / 100 000 / 100 000 / 100 000 / 100 000 / 100 000
Telephones/ Fax / 10 000 / 10 000 / 10 000 / 10 000 / 10 000 / 10 000
Total Gross Fixed Assets / 3 510 000 / 3 510 000 / 3 510 000 / 3 510 000 / 3 510 000 / 3 510 000
Less Accumulated Depreciation / 0 / 10 000 / 20 000 / 30 000 / 40 000 / 50 000
Total Net Fixed Assets / 3 510 000 / 3 500 000 / 3 490 000 / 3 480 000 / 3 470 000 / 3 460 000
CURRENT ASSETS
Cash/ Bank / 140 600 / 378 979 / 669 976 / 1 097 268 / 1 664 433 / 2 402 746
CURRENT LIABILITIES
Provision For Taxation / 0 / 148 357 / 198 601 / 246 486 / 294 050 / 349 353
Provision for Dividends / 0 / 0 / 5 000 / 7 500 / 10 000 / 12 500
Total Current Liabilities / 0 / 148 357 / 203 601 / 253 986 / 304 050 / 361 853
Net Current Assets / 140 600 / 230 622 / 466 375 / 843 282 / 1 360 383 / 2 040 893
Total Net Assets / 3 650 600 / 3 730 622 / 3 956 375 / 4 323 282 / 4 830 383 / 5 500 893
OWNERS’ EQUITY
Authorized Share Capital / 3 000 / 3 000 / 3 000 / 3 000 / 3 000 / 3 000
Issued Shared Capital / 100 / 100 / 100 / 100 / 100 / 100
Retained Earnings / 0 / 445 072 / 1 035 875 / 1 767 832 / 2 639 983 / 3 675 543
Total Owners’ Equity / 100 / 445 172 / 1 035 975 / 1 767 932 / 2 640 083 / 3 675 643
LOAN-TERM LIABILITY
Loan (20.5%) / 3 650 500 / 3 285 450 / 2 920 400 / 2 555 350 / 2 190 300 / 1 825 250
- PROJECTED 5-YEAR TRIAL BALANCE
( ANNUAL TOTALS IN PULA)
2008/9 / 2009/10 / 2010/11 / 2011/12 / 2012/13Dr Cr / Dr Cr / Dr Cr / Dr Cr / Dr Cr
Land and Buildings / 3100000 / 3100000 / 3100000 / 3100000 / 3100000
Furniture/Air cons/TVs / 200000 / 200000 / 200000 / 200000 / 200000
Bedding/Cutlery / 100000 / 100000 / 100000 / 100000 / 100000
Walls/Gates / 100000 / 100000 / 100000 / 100000 / 100000
Telephones/Fax / 10000 / 10000 / 10000 / 10000 / 10000
Cash/Bank / 378979 / 669976 / 1097268 / 1664433 / 2402746
Capital / 100 / 100 / 100 / 100 / 100
Loan / 3285450 / 2920400 / 2555350 / 2190300 / 1825250
Retained Earnings / 445072 / 1035875 / 1767832 / 2639983 / 3675543
Depreciation / 10000 / 20000 / 30000 / 40000 / 50000
Provision for Taxation / 148357 / 198601 / 246486 / 294050 / 349353
Provision for dividends / 5000 / 7500 / 10000 / 35000
Totals / 3888979 3888979 / 4179976 4179976 / 4607268 4607268 / 5174433 5174433 / 5912746 5912746
10.CONCLUSIONS
We did our best to draw a picture objectively appropriate of this project in our quest to assess its economic, operational and technical feasibilities given the conditions and research submissions at hand. Although this Business Plan is primarily meant for a total grant financing to the envisaged tune of P3 650 500.00, we found it better to also be assessed on a most pessimistic position – that of test-driving it on a situation where the entire amount is sourced from a private lender at about 20.5% Rate of Interest annually. In that way, we feel we would be test-driving the strength of its pillars.
We also prepared this plan with a tourism licensing application in mind as a Business Plan would be necessary in that aspect. We also found it better to come up with a plan that would practically guide the owners on the situation on the ground. That aspect ranged from pointing out potential competitor(s) operating in the area and their strengths, the magnitude of this project’s role in the shaping of the tourist industry in line with Botswana as a country economically, socially and culturally. We do not claim to have touched all these aspects mentioned in details herein as this Business Plan was not specifically meant for that. We are satisfied with our findings; otherwise we would not have produced this Business Plan and handed it over for financial sourcing/licensing in detriment to our client’s financial obligations and the financiers’ risk investment. But business is not necessarily a product of academic and mathematical computations. Most professors are not millionaires out of business. Business is a component of the society in which we live with others being the employees, competitors, the government, technology, changing clients’ preferences, natural overturns, etc. That can change the terrain forever for either the worst or best either in combination or intoto.
In this Business Plan, we cracked our heads to produce an all in one prescription should the worst hit. While others are seemingly explicit herein, others have their doors unlocked and only to open in cases of emergencies. Staff composition for example, could be shrunk or expanded in response to circumstances.
With all these in mind, we thank you in appreciation!