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Domestic Monetary Policy withstands volatile 2019

Economic experts and think tanks alike depicts the election year of 2019 as a year of uncertainty and volatility, but it is still waters for the central bank whose bank rate remains unchanged while forecasted inflation remains within objective range.

On Thursday this week the Bank of Botswana (BoB) decided to maintain the Bank rate at 5 percent, this has been the rate since it was slashed to the current level October 2017. While the Bank Rate remained in the same level since more than a year inflation ranges below the lower bound of the Bank’s objective range of 3-6 percent in April and May 2019.

According to the Bank an increase in public transport fares and electricity tariffs in the second quarter of 2018 inherited the lower inflation of this year’s second quarter-this reflected base effects, which means the higher prices of last year’s second quarter would mirror 2019 lower prices of this quarter. When updating the media this week on the Monetary Policy Committee decision and economic outlook, BoB Governor Moses Pelaelo said subdued domestic demand pressures and the modest increase in foreign prices contribute to the positive inflation outlook in the medium term.

He explained that this outlook is subject to upside risks emanating from the potential rise in administered prices and government levies and/or taxes, beyond current forecasts. Modest growth in global economic activity, technological progress and productivity improvement present risks to the outlook.

Pelaelo painted a rosy picture of the country’s finance environment which he said it is “conducive, sound and ideal” for businesses. As the Bank Rate remains maintained at 5 percent for over a year the interest rates are also low paving a way for a conducive business environment, said the governor. The Bank is now synonymous with price stability and so is the exchange rate according to Pelaelo. This, said Pelaelo, should enable a conducive environment for business hence facilitating growth.

“The significant influences on domestic economic performance include conducive financing environment that facilitate policy transmission, intermediation and risk mitigation,” Pelaelo told the media this week. While many expected the negatives to come with the recent increment in salaries and major spending in infrastructure projects the BoB governor sits on the positive saying the expenditure will be supportive to economic activity. So is the implementation of government initiatives and the Doing Business reforms, said Pelaelo, which are expected to boost economic activity hence brighter 2019.

“The latest Business Expectation Survey indicate that businesses are optimistic about economic developments in 2019 and expect a higher rate of growth compared to 2018. Overall, the economy is projected to operate close to, but below full capacity in the short to medium term, thus posing no upside risk to the inflation outlook,” said Pelaelo.

While the domestic economy is not facing any major internal shock Pelaelo touched external factors which might burst Botswana’s bubble in the long run. Global output growth is expected to be moderate, easing to 3.3 percent in 2019, form an estimated expansion of 3.6 percent in 2018. According to the governor, the moderation in global growth was due to various factors including inter-alia: trade and geopolitical tensions which have the possibility to hamper confidence, investment and growth.

“Continuing policy uncertainty; possible slower growth in China; a “no deal’ Brexit; tightening financial conditions and high debt levels,’ said Pelaelo. Regionally the South African Reserve Bank, the central bank of a country Botswana is economically independent to, revised the forecast for GDP growth for 2019 downwards to 1 percent from 1.3 percent. According to BoB, this results from the larger than expected slowdown in the first quarter which is attributable to weak business and consumer confidence.

Pelaelo concluded by saying the current state of the economy and the outlook for both domestic and external economic activity suggest that the prevailing monetary policy stance is consistent with inflation reverting to within the objective range of 3-6 percent in the medium term, hence the Bank deciding to retain the Bank Rate at 5 percent. The remaining MPC meetings for 2019 are scheduled as follows: 29 August 2019, 31 October 2019 and 5 December 2019

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Matsheka seeks raise bond program ceiling to P30 billion

14th September 2020
Dr Matsheka

This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.

“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.

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Lucara sits clutching onto its gigantic stones with bear claws in a dark pit

14th September 2020
Lesedi La Rona

Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.

A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.

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Botswana Diamonds issues 50 000 000 shares to raise capital

14th September 2020
Diamonds

Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.

A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.

Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.

In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.

The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.

In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.

Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.

The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”

In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.

Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.

The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.

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