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Global economic growth hits record low since 2008/09 recession

The International Monetary Fund, a global economic think tank based in Washington, United States has projected global economic growth at 3.0 percent for 2019, its slowest pace since the 2008/09 global financial crisis. This according to the World Economic Outlook report released by IMF on Tuesday is a serious climb-down from 3.8 percent in 2017, when the world was in a synchronized upswing.

The subdued growth is attributed to rising trade barriers; elevated uncertainty surrounding trade and geopolitics; idiosyncratic factors causing macroeconomic strain in several emerging market economies; and structural factors, such as low productivity growth and aging demographics in advanced economies. Global growth in 2020 is projected to improve modestly to 3.4 percent, a downward revision of 0.2 percent from the IMF April projection. However the World Economic Outlook states that unlike the synchronized slowdown, this recovery is not broad based and is said to be precarious. Growth for advanced economies is projected to slow to 1.7 percent in 2019 and 2020, while emerging market and developing economies are projected to experience a growth pickup from 3.9 percent in 2019 to 4.6 percent in 2020.

About half of this is driven by recoveries or shallower recessions in stressed emerging markets, such as Turkey, Argentina, and Iran, and the rest by recoveries in countries where growth slowed significantly in 2019 relative to 2018, such as Brazil, Mexico, India, Russia, and Saudi Arabia. A notable feature of the sluggish growth in 2019 is the sharp and geographically broad-based slowdown in manufacturing and global trade.

In depth the IMF says factors driving this are higher tariffs and prolonged uncertainty surrounding trade policy which has dented investment and demand for heavily traded capital goods. The automobile industry is contracting owing also to idiosyncratic shocks, such as disruptions from new emission standards in the euro area and China that have had durable effects.

Consequently, trade volume growth in the first half of 2019 is at 1 percent, the weakest level since 2012. In contrast to weak manufacturing and trade, the services sector across much of the globe continues to hold up; this has kept labor markets buoyant and wage growth healthy in advanced economies.
International Monetary Fund Economist, Gita Gopinath observed in the report that the world economy has been slowing sharply in the last three quarters of 2018 with the pace of global economic activity remaining weak. “Momentum in manufacturing activity, in particular, has weakened substantially, to levels not seen since the global financial crisis,” he said.

Gopinath further notes that rising trade and geopolitical tensions have increased uncertainty about the future of the global trading system and international cooperation more generally, taking a toll on business confidence, investment decisions, and global trade. “A notable shift towards increased monetary policy accommodation through both action and communication has cushioned the impact of these tensions on financial market sentiment and activity, while a generally resilient service sector has supported employment growth, the outlook in the entirety remains precarious,” he said.

The IMF says a projected slowdown in China and the United States, and prominent downside risks, a much more subdued pace of global activity could well materialize, recommending that to forestall such an outcome, policies should decisively aim at defusing trade tensions, reinvigorating multilateral cooperation, and providing timely support to economic activity where needed. “To strengthen resilience, policymakers should address financial vulnerabilities that pose risks to growth in the medium term. Making growth more inclusive, which is essential for securing better economic prospects for all, should remain an overarching goal” advices the US based think tank.

Over the past year, global growth has fallen sharply. Among advanced economies, the weakening has been broad based, affecting major economies, the United States and especially the euro area and smaller Asian advanced economies. The slowdown in activity has been even more pronounced across emerging market and developing economies, including Brazil, China, India, Mexico, and Russia, as well as a few economies suffering macroeconomic and financial stress.  Furthermore the IMF analyses that regional disparities in real output, employment, and productivity in advanced economies have attracted greater interest in recent years against a backdrop of growing social and political tensions.

Regional disparities in the average advanced economy have risen since the late 1980s, reflecting gains from economic concentration in some regions and relative stagnation in others. On average, lagging regions have worse health outcomes, lower labor productivity, and greater employment shares in agriculture and industry sectors than other within country regions. Moreover, adjustment in lagging regions is slower, with adverse shocks having longer lived negative effects on economic performance.

Trade shocks in particular greater import competition in external markets do not appear to drive the differences in labor market performance between lagging and other regions, on average. By contrast, technology shocks proxied by declines in the costs of machinery and equipment capital goods, raise unemployment in regions that are more vulnerable to automation, with more exposed lagging regions particularly hurt.

In recommendation IMF says National policies that reduce distortions and encourage more flexible and open markets, while providing a robust social safety net, can facilitate regional adjustment to adverse shocks, dampening rises in unemployment. “Place based policies targeted at lagging regions may also play a role, but they must be carefully calibrated to ensure they help rather than hinder beneficial adjustment,” advices the World Economic Outlook.

On the reforms fronts the IMF says, the pace of structural reforms in emerging market and developing economies was strong during the 1990s, but it has slowed since the early 2000s. The Washington headquartered economic think  tank says a reform push in such areas as governance, domestic and external finance, trade, and labor and product markets could deliver sizable output gains in the medium term.

The World Economic Outlook posts that a major and comprehensive reform package might double the speed of convergence of the average emerging market and developing economy to the living standards of advanced economies, raising annual GDP growth by about 1 percentage point for some time. “At the same time, reforms take several years to deliver, and some of them easing job protection regulation and liberalizing domestic finance may entail greater short-term costs when carried out in bad times; these are best implemented under favorable economic conditions and early in authorities’ electoral mandate.”

The outlook also observes that reform gains also tend to be larger when governance and access to credit two binding constraints on growth are strong, and where labor market informality is higher because reforms help reduce it. “These findings underscore the importance of carefully tailoring reforms to country circumstances to maximize their benefits,” it says.

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Jewellery manufacturing plant to create over 100 jobs

30th January 2023

The state of the art jewellery manufacturing plant that has been set up by international diamond and cutting company, KGK Diamonds Botswana will create over 100 jobs, of which 89 percent will be localized.

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Investors inject capital into Tsodilo Resources Company

25th January 2023

Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.

According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.

The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.

Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.

Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.

Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana.  The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.

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Global CEOs Back Plan to Unlock $3.4 Trillion Potential of Africa Free Trade Area

23rd January 2023

African heads of state and global CEOs at the World Economic Forum Annual Meeting backed the launch of the first of its kind report on how public-private partnerships can support the implementation of the African Continental Free Trade Area (AfCFTA).

AfCFTA: A New Era for Global Business and Investment in Africa outlines high-potential sectors, initiatives to support business and investment, operational tools to facilitate the AfCFTA, and illustrative examples from successful businesses in Africa to guide businesses in entering and expanding in this area.

The report aims to provide a pathway for global businesses and investors to understand the biggest trends, opportunities and strategies to successfully invest and achieve high returns in Africa, developing local, sub-regional and continental value chains and accelerating industrialization, all of which go hand in hand with the success of the AfCFTA.

The AfCFTA is the largest free trade area in the world, by area and number of participating countries. Once fully implemented, it will be the fifth-largest economy in the world, with the potential to have a combined GDP of more than $3.4 trillion. Conceived in 2018, it now has 54 national economies in Africa, could attract billions in foreign investment, and boost overseas exports by a third, double intra-continental trade, raise incomes by 8% and lift 50 million people out of poverty.

To ease the pain of transition to its new single market, Africa has learned from trade liberalization in North America and Europe. “Our wide range of partners and experience can help anticipate and mitigate potential disruptions in business and production dynamics,” said Børge Brende, President, and World Economic Forum. “The Forum’s initiatives will help to ease physical, capital and digital flows in Africa through stakeholder collaboration, private-public collaboration and information-sharing.”

Given the continent’s historically low foreign direct investment relative to other regions, the report highlights the sense of excitement as the AfCFTA lowers or removes barriers to trade and competitiveness. “The promising gains from an integrated African market should be a signal to investors around the world that the continent is ripe for business creation, integration and expansion,” said Chido Munyati, Head of Regional Agenda, Africa, World Economic Forum.

The report focuses on four key sectors that have a combined worth of $130 billion and represent high-potential opportunities for companies looking to invest in Africa: automotive; agriculture and agroprocessing; pharmaceuticals; and transport and logistics.

“Macro trends in the four key sectors and across Africa’s growth potential reveal tremendous opportunities for business expansion as population, income and connectivity are on the rise,” said Wamkele Mene, Secretary-General, AfCFTA Secretariat.

“These projections reveal an unprecedented opportunity for local and global businesses to invest in African countries and play a vital role in the development of crucial local and regional value chains on the continent,” said Landry Signé, Executive Director and Professor, Thunderbird School of Global Management and Co-Chair, World Economic Forum Regional Action Group for Africa.

The Forum is actively working towards implementing trade and investment tools through initiatives, such as Friends of the Africa Continental Free Trade Area, to align with the negotiation process of the AfCFTA. It identifies areas where public-private collaboration can help reduce barriers and facilitate investment from international firms.

About the World Economic Forum Annual Meeting 2023

The World Economic Forum Annual Meeting 2023 convenes the world’s foremost leaders under the theme, Cooperation in a Fragmented World. It calls on world leaders to address immediate economic, energy and food crises while laying the groundwork for a more sustainable, resilient world. For further information,

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