Connect with us
Advertisement

Gov’t assigns extra bonds

Government continues to issue more bonds and allot more to existing ones listed on the local market. Last week Friday Botswana Stock Exchange Limited (BSEL) notified the market of new changes following new insertions and changes on BBIS Constituent Bonds in the 2018 second quarter.

Ministry of Finance & Economic Development through Bank of Botswana (BOB) recently issued an additional total of P477 million to its existing Bonds, BW007, BW014 and BW015. A communiqué from BSE reveals that at the 31st May 2019 Government Bonds and Treasury Bill Auction, the three Bonds all of which are GovI, BBIFixed and BBI constituent bonds were re-opened and allotted additional issuances.

The BW007 bond was allotted P150.00 million, increasing its total nominal amount in issue to P2, 124 million while BW014 received additional issuance of P227.00 million, raising its total nominal amount in issue to P1, 158.00 million. In addition BW015 was reopened and additional P100 million was allotted. These additional issuances have increased the total nominal amount in issue on the BBIS by P477.00 million to P 14,193.17 million. The Constituents series currently represents 40 constituent bonds in total 33 of which corporate bonds with 24 fixed being rate bonds. The remaining 7 are government bonds.

Botswana Stock Exchange trades its Index Series (BBIS) under a series of 4 bond indices being Composite Bond Index (BBI), Government Bond Index (GovI), Corporate Bond Index (CorpI) and Composite Fixed Rate Bond Index (BBIFixed). The 1st March 2019 auction marked the first quarter of this year’s bond issuances with this 31st May insertions marking second quarter issuance.

Zooming into 2018 Bond performance the BSE Bond Index Series (BBIS) appreciated by 3.2% whereas the GovI and CorpI registered returns of 3.5% and 3.3% respectively. The BBIFixed returned 2.6% since its introduction in April 2018. Inflation averaged of 3.2% in 2018 mirrored that listed bonds provided purchasing power protection, save for the fixed rate bonds. Inflation in the year predominantly remained within the objective range of 3%-6% whereas interest rates were held constant throughout the year.

The value of bonds traded increased over four times from P535.6 Million in 2017 to P2, 222.7 Million in 2018. Government bonds continued to dominate liquidity of the market accounting for 97.9% of total turnover. The BSE registered a record number of new bond listings as 10 new bonds came on board compared to 8 in 2017. “This cushioned the impact of the 4 bond delisting in the year 2018.

Even though Government bonds accounted for the majority of trading activity corporate bonds dominated in terms of the quantity of bonds listed, a phenomenon that in most African markets is the reverse. At sector level, the profile of the bond market at the end of 2018 was such that Government bonds accounted for 63.8% of market capitalization, Quasi-Government (1.3%), Parastatals (7.9%), Corporate (25.3%) and Supranational (1.7%).

For 2019, trading activity increased significantly during 2019 Quarter 1 compared to the same period in 2018. The value of bonds traded over the period was P251.9 Million in comparison to P27.4 Million traded over the same period in 2018.  At the 1 March 2019 Government Bonds and Treasury Bill auction, the Bank of Botswana (BoB), on behalf of the Government offered additional tranches of the BW013 allotting P137.00 Million ,  increasing its total nominal amount in issue to P1,076.00 Million as well as BW014 allotting P335.00 Million hiking up its total nominal amount in issue to P931.00 Million.

On the back of Government bonds tap issuances and new issuances, the market capitalization of listed bonds increased to P15.4 Billion compared to P14.7 Billion as at the same period in 2018. On quarterly basis Government issues long dated bonds with a view to support the local capital market, observers in the financial services industry also hold the same sentiments. Experts and service providers in the insurance industry say regular bond issuances sparks confidence and in particular boosts the annuity book across investment & insurance market.

This was also reiterated by Catherine Lesetedi Chief Executive Officer of leading financial services, insurance and investment group Botswana Insurance Holdings Limited (BIHL) late last year when delivering her company’s financial results. For 2018 H1 she highlighted that BIHL delivered satisfactory figures on the annuity front because of continued commitment to support the market by Government “we are pleased that during the first six months we realized an improvement in annuity inflows, we were able to manage the annuity risk bolstered by government quarterly bond issuing” She said.

Lesetedi further  explained that the annuity book was an extremely risky segment to manage noting that for BHIL , the breakthrough would also be attributed to well structured risk management framework handled by a team of actuaries that manage the risk and meets on a monthly basis , “It would be remise of me not to mention the fact that managing the annuity book requires long dated assets and we are quite pleased as BIHL that we have seen government come to the party and issue on a quarterly basis long dated bonds which sparks confidence in the market and boost annuity inflows”

Government bond which is sometime referred to as sovereign bond is a bond issued by a national government unusually through the treasury or central bank, generally with a promise to pay periodic interest payments and to repay the face value on the maturity date. The bonds are usually denominated in the country's own currency; the terms on which a government can sell bonds depend on how creditworthy the market considers it to be. International credit rating agencies would provide ratings for the bonds, but market participants would then make up their own minds about a particular bond. In the case of Botswana, several years ago Government decided to assist in the growth of a stable and vibrant capital market in the country.

Government through Bank of Botswana resolved to issue debt instrument in the form of bonds and treasury bills, issued on quarterly basis. Botswana Stock Exchange Limited has played a pivotal role in boosting the annuity market and the capital market at large by calling for government to issue more bonds. BSE argued that the limited availability of listed government bonds negatively impact the demand of debt instruments while also compromising the liquidity of the debt market.

In mid 2017, Thapelo Tsheole, the Chief Executive Officer of Botswana Stock Exchange now a demutualized limited company remarked that lack of adequate government bonds as well as the wide gaps between their maturity dates was posing the danger of negatively hitting the pricing of corporate bonds. “We need to have more government bonds issued to maintain a robust risk free curve and the viability of the existing BSE bond indices.

These wide gaps in the yield curve negatively impact the pricing of assets such as corporate bonds that ordinarily reference risk free assets and this brings distortions in pricing and compromises the liquidity and the appetite for debt instruments,” said the BSE Chief quoted in July 2017.

Catherine Lesetedi noted that government decision to participate more and coming up with a reviewed framework that speaks to a specified and defined interval of bond issuing was commendable “We are quite pleased that at the last auction Government came to the market with a new bond BW 0015 which is a 25 year tenure bond, and this is very helpful for anyone who is in the market for annuities to manage their liabilities,” she said.

Continue Reading

Business

Inflation will bounce back to objective range in 2022- BoB

25th October 2021
Moses Pelaelo

The Monetary Policy Committee (MPC) of the Bank of Botswana decided to maintain the Bank Rate at 3.75 percent at a meeting held on October 21, 2021.  Briefing members of the media moments after the meeting Bank of Botswana Governor Moses Pelaelo explained that Inflation decreased from 8.8 percent in August to 8.4 percent in September 2021, although remaining above the upper bound of the Bank’s medium-term objective range of 3 – 6 percent.

He said Inflation is projected to revert to within the objective range in the second quarter of 2022, mainly on account of the dissipating impact of the recent upward adjustment in value added tax (VAT) and administered prices from the inflation calculation; which altogether contributed 5.2 percentage points to the current level of inflation.  Overall, risks to the inflation outlook are assessed to be skewed to the upside.

These risks include the potential increase in international commodity prices beyond current forecasts; persistence of supply and logistical constraints due to lags in production; possible maintenance of travel restrictions and lockdowns due to the COVID-19 pandemic; domestic risk factors relating to regular annual price adjustments; as well as second-round effects of the recent increases in administered prices and inflation expectations that could lead to generalised higher price adjustments.

Furthermore, aggressive action by governments (for example, the Economic Recovery and Transformation Plan (ERTP)) and major central banks to bolster aggregate demand, as well as the successful rollout of the COVID-19 vaccination programmes, could add pressure to inflation.  These risks are, however, moderated by the possibility of weak domestic and global economic activity, with a likely further dampening effect on productivity due to periodic lockdowns and other forms of restrictions in response to the emergence of new COVID-19 variants.

A slow rollout of vaccines, resulting in the continuance of weak economic activity and the possible decline in international commodity prices could also result in lower inflation, as would capacity constraints in implementing the ERTP initiatives. Real Gross Domestic Product (GDP) for Botswana grew by 4.9 percent in the twelve months to June 2021, compared to a contraction of 5.1 percent in the corresponding period in 2020.

The increase in output is attributable to the expansion in production of both the mining and non-mining sectors, resulting from an improved performance of the economy from a low base in the corresponding period in the previous year. Mining output increased by 3 percent in the year to June 2021, because of a 3.2 percent increase in diamond mining output, compared to a contraction of 19.3 percent in 2020. Similarly, non-mining GDP grew by 5.4 percent in the twelve-month period ending June 2021, compared to a decrease of 0.7 percent in the corresponding period in 2020.

The increase in non-mining GDP was mainly due to expansion in output for construction, diamond traders, transport and storage, wholesale and retail and real estate.  Projections by the Ministry of Finance and Economic Development and the International Monetary Fund (IMF) suggest a rebound in economic growth for Botswana in 2021. The Ministry projects a growth rate of 9.7 percent in 2021, moderating to a growth of 4.3 percent in 2022.  On the other hand, the IMF forecasts the domestic economy to grow by 9.2 percent in 2021; and this is expected to moderate to a growth of 4.7 percent in 2022. The growth outcome will partly depend on success of the vaccine rollout.

According to the October 2021 World Economic Outlook (WEO), global output growth is forecast at 5.9 percent in 2021, 0.1 percentage point lower than in the July 2021 WEO update.  The downward revision reflects downgrades for advanced economies mainly due to supply disruptions, while the growth forecast for low-income countries was lowered as the slow rollout of COVID-19 vaccines weigh down on economic recovery.  Meanwhile, global output growth is anticipated to moderate to 4.9 percent in 2022, as some economies return to their pre-COVID-19 growth levels.

The South African Reserve Bank, for its part, projects that the South African GDP will grow by 5.3 percent in 2021, and slow to 1.7 percent in 2022.  The MPC notes that the short-term adverse developments in the domestic economy occur against a growth-enhancing environment.  These include accommodative monetary conditions, improvements in water and electricity supply, reforms to further improve the business environment and government interventions against COVID-19, including the vaccination rollout programme.

In addition, the successful implementation of ERTP should anchor the growth of exports and preservation of a sufficient buffer of foreign exchange reserves, which have recently fallen to an estimate of P47.9 billion (9.8 months of import cover) in September 2021.  Overall, it is projected that the economy will operate below full capacity in the short to medium term and, therefore, not creating any demand-driven inflationary pressures, going forward.

The projected increase in inflation in the short term is primarily due to transitory supply-side factors that, except for second-round effects and entrenched expectations (for example, through price adjustments by businesses, contractors, property owners and wage negotiations), do not normally attract monetary policy response. In this context, the MPC decided to continue with the accommodative monetary policy stance and maintain the Bank Rate at 3.75 percent.  Governor Moses Pelaelo noted that the Bank stands ready to respond appropriately as conditions warrant.

Continue Reading

Business

SEZA to boost investment through Mayors forum

25th October 2021
SEZA-CEO-Lonely-Mogara

The Special Economic Zones Authority (SEZA) recently launched the Mayor’s forum. The Authority will engage with local governments to improve ease of doing business, boost investment, and fast track the development of Botswana’s Special Economic Zones (SEZs).

The Mayors Forum was established to recognise the vital role that local authorities play in infrastructure development; as they approve applications for planning, building and occupation permits. Local authorities also grant approvals for industrial licenses for manufacturing companies.
SEZA Chief Executive Officer (CEO) Lonely Mogara explained that the Mayor’s Forum was conceptualised after the Authority identified local authorities as critical partners in achieving its mandate and improving the ease of doing business. SEZA intends to develop legal instructions for different Ministries to align relevant laws with the SEZ Act, which will enable the operationalisation of the SEZ incentives.

“Engaging with local government will bring about the much-needed transformation as our SEZs are located in municipalities. For us, a good working relationship with local authorities is the special ingredient required for the efficient facilitation of SEZ investors, which will lead to their competitiveness and ultimate growth,” Mogara stated.

The Mayors Forum will focus on the referral of investors for establishment in different localities, efficient facilitation of investors, infrastructure and property development, and joint monitoring and evaluation of the SEZ programme at the local level. SEZA believes that collaborating with local authorities will bring about much-needed transformation in the areas where SEZs are located and ultimately within the national economy. Against this background, the concept of hosting a Mayors Forum was birthed to identify and provide solutions to possible barriers inhibiting ease of doing business.

One of the key outcomes of the Mayors Forum is the free flow of information between SEZA and local authorities. Further, the two will work together to change the business environment and achieve efficiency and competitiveness within the SEZs. Francistown Mayor Godisang Rasesigo was elected as the founding Chairman of the Mayors Forum. The forum will also include the executive leadership of all city, town and district councils, among them Mayors, City or Council Chairpersons, Town Clerks and District Commissioners.

Mogara explained that initial efforts would engage the local government in areas that host SEZA’s eight SEZs: Gaborone, Lobatse, Selebi Phikwe, Palapye, Francistown, Pandamatenga and Tuli Block. Meanwhile, Mogara told WeekendPost that they are confident that a modest 150 000 jobs could be unleashed in the next two to five years through a partnership with other government entities. He is adamant that the jobs will come from all the nine designated economic zones.

This publication gathers that the Authority is currently sitting on about P30 billion worth of investment. The investment, it is suggested, could be said to be locked up in government bureaucracy, awaiting the proper signatures for projects to take off. Mogara informed this publication that the Authority onboard investors who are bringing P200 million and above. He pointed out that more are injecting P1 billion investments compared to the lower stratum of their drive.

SEZA’s mandate hinges on the nine Special Economic Zones – being Gaborone (SSKIA), whose focus is of Mixed-use (Diamond Beneficiation, Aviation); Gaborone (Fairgrounds) for Financial services, professional services and corporate HQ village; Lobatse for Beef, leather & biogas park; Pandamatenga designated for Agriculture (cereal production); Selibe Phikwe area which is also of a Mixed-Use (Base metal beneficiation & value addition), Tuli Block Integrated coal value addition, dry port logistics centre, coal power generation and export; Francistown is set aside for International Multimodal logistics hub/ Mixed Use (Mining, logistics and downstream value-adding hub); whilst Palapye is for Horticulture.

The knowledge economy buzz speaks to SEZA’s agenda, according to Mogara. The CEO is determined to ensure that SEZA gets the buy-in from the government, parastatals and the private sector to deliver Botswana to a high economic status. “This will ensure more jobs, less poverty, more investment, and indeed wealth for Batswana,” quipped the enthusiastic Mogara. SEZA was established through the SEZ Act of 2015 and mandated with establishing, developing and managing the country’s SEZs. The Authority was tasked with creating a conducive domestic and foreign direct investment, diversifying the economy and increasing exports to facilitate employment creation.

Continue Reading

Business

De Beers Q3 production up 28 %

25th October 2021
De-Beers

De Beers rough diamond production for the third quarter of 2021 increased by 28% to 9.2 million carats, reflecting planned higher Production to meet more robust demand for rough diamonds. In Botswana, Production increased by 33% to 6.4 million carats, primarily driven by the planned treatment of higher-grade ore at Jwaneng, partly offset by lower Production at Orapa due to the scheduled closure of Plant 1.

Namibia’s Production increased by 65% to 0.4 million carats, reflecting the marine fleet’s suspension during Q3 2020 as part of the response to lower demand at that time. South Africa production increased by 34% to 1.6 million carats due to the planned treatment of higher grade ore from the final cut of the Venetia open pit and an improvement in plant performance. Production in Canada decreased by 13% to 0.8 million carats due to lower grade ore being processed.

Demand for rough diamonds continued to be robust, with positive midstream sentiment reflecting strong demand for polished diamond jewellery, particularly in the key markets of the US and China. Rough diamond sales totalled 7.8 million carats (7.0 million carats on a consolidated basis) from two Sights, compared with 6.6 million carats (6.5 million carats on a consolidated basis) from three Sights in Q3 2020 and 7.3 million carats (6.5 million carats on consolidated basis) from two Sights in Q2 2021.

De Beers tightened Production guidance to 32 million carats (previously 32-33 million carats) due to continuing operational challenges, subject to the extent of any further Covid-19 related disruptions. Commenting on the production figures, Mark Cutifani, Chief Executive of De Beers parent company Anglo American, said: “Production is up 2%(1) compared to Q3 of last year, with our operating levels generally maintained at approximately 95%(2) of normal capacity.

The increase in Production is led by planned higher rough diamond production at De Beers, increased output from our Minas-Rio iron ore operation in Brazil, reflecting the planned pipeline maintenance in Q3 2020, and improved plant performance at our Kumba iron ore operations in South Africa. “We are broadly on track to deliver our full-year production guidance across all products while taking the opportunity to tighten up the guidance for diamonds, copper, and iron ore within our current range as we approach the end of the year.

“Our copper operations in Chile continue to work hard on mitigating the risk of water availability due to the challenges presented by the longest drought on record for the region, including sourcing water that is not suitable for use elsewhere and further increasing water recycling.”
On Wednesday, De Beers announced the value of rough diamond sales (Global Sightholder Sales and Auctions) for the eighth sales cycle of 2021. The company raked in US$ 490 million for the cycle, a slight improvement when compared to US$467 million recorded in 2020 cycle 8.

Owing to the restrictions on the movement of people and products in various jurisdictions around the globe, De Beers Group has continued to implement a more flexible approach to rough diamond sales during the eighth sales cycle of 2021, with the Sight event extended beyond its normal week-long duration.   As a result, the provisional rough diamond sales figure quoted for Cycle 8 represents the expected sales value from 4 October to 19 October. It remains subject to adjustment based on final completed sales.

Commenting on the cycle 8 sales De Beers Group Chief Executive Officer Bruce Cleaver said that: “As the diamond sector prepares for the key holiday season and US consumer demand for diamond jewellery continues to perform strongly, we saw further robust demand for rough diamonds in the eighth sales cycle of the year ahead of the Diwali holiday when demand for rough diamonds is likely to be affected by the closure of polishing factories in India.”

Continue Reading
Do NOT follow this link or you will be banned from the site!