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Alcohol levy slash, fuel hike won’t move November inflation

Economists and researchers said the November inflation would not change much despite the slash of the alcohol levy or the recent increase in fuel prices.

On the beginning of this month the Ministry of Investment, Trade and Industry took a decision to cut the alcohol levies by 20 percent while the Ministry of Mineral Resources, Green Technology and Energy Security hiked fuel prices. These changes will not have significant inflationary effect according to experts.

On the reduction of alcohol levy, FNBB economist MoatlhodiSebabolesaid “the 20 percent reduction in levy is not significant enough to move the headline inflation because alcohol beverages weight is low on the Consumer Price Index, so minimal impact on inflation.”  Sebabole said the fuel prices increase to slightly push up inflation from its current 12 month averages of 3.1 percent. He said the forecast is for inflation rate of 3.5 percent for 2018.

They will be upward pressure on inflation, but minimal. He said administered prices of fuel, water and electricity will induce upward pressure on inflation whereas the reduction in alcohol and communication tariffs will exert downward pressure.  “That means we are having supply side inflationary pressure (cost push); not demand side (demand pull). The FNBB researcher concluded that inflation will remain low and close to the lower inflation objective.

Another economists Garry Juma, a top economic and market researcher at Motswedi Securities, concurred with Sebabole that inflation will not be moved that much next month. He said this is because fuel prices were increased just in the beginning of this month (15 October 2018). He said people should not expect “a sudden jump in inflation” that soon.

KBL refusal to decrease prices

Just after government decision to slash down the alcohol levy, Botswana’s premium brewer Kgalagadi Breweries Limited (KBL) decided not to follow suit and decrease alcohol prices, a decision which was met with a lot of disapproval.  In a leaked communication believed to be destined to liquor outlets such as bottle stores, wholesalers and distributors, written by Botswana and Namibia Managing Director Renaud Beauchamp to “Dear Valued Customer”, the brewer said it, “will not be reducing prices on its products.”

KBL spokesperson MasegonyaneMadisa confirmed that the letter was from the brewer to liquor outlets. He said KBL is yet to release a statement on their stance regarding the reduction of the alcohol levy. The reason being, the brewer sees this as “an opportunity to recover and to return to profitability.” This statement was made much to the chagrin of alcohol drinkers who stopped short of calling the brewer opportunistic, capitalist and a vulture.

This name calling thronged local radio stations and social media platforms.  KBL said the hiking of the alcohol levy by government in the past affected their Corporate Social Investment (CSI) initiatives which had to roll back. The reduction of alcohol levy which the brewer called a “breather” will improve the company’s financial performance which will help sustain jobs in Botswana and in the process enable KBL to implement robust Corporate Social Investment (CSI) projects “in order to play a positive and meaningful role within the communities it operates.”


However, Juma warned against KBL not following suit and decreasing prices as expected by alcohol consumers. He explained that KBL stands a risk of losing its customers and this will make the brewer’s market to go down since drinkers have always been desperate for reduction on alcohol prices. Juma hopes the refusal to reduce prices is only a temporary move because it will cause frustration to KBL’s market.He gave an example that consumers will now opt for KBL rivals and take in imported beverages to avoid paying more for alcohol.

“There could be a consumer switch, especially when important beverages become much cheaper. This will make drinkers to desert the KBL products for imported alcoholic beverages,” said Juma. According to Monetary Policy  Report of October 2018, Monetary policy has, so far in 2018, been implemented in the context of a favorable medium-term inflation outlook, associated with moderate domestic demand resulting from the restrained increase in personal incomes and modest increase in foreign prices.

Hence, the Bank Rate was maintained at 5 percent at the October 2018 Monetary Policy Committee meeting. The last policy change was in October 2017, when the Bank Rate was reduced by 50 basis points from 5.5 percent to 5 percent, said the Report. The Report further says upside risks to the inflation outlook relate to any substantial upward adjustment in administered prices, international oil and food prices as well as government levies and taxes beyond current forecasts. 

However, the report says, restrained growth in global economic activity, technological progress and productivity improvement, along with modest wage growth, present downside risks to the inflation outlook. The Bank’s formulation and implementation of monetary policy focuses on entrenching expectations of low and sustainable inflation through a timely response to price developments. The Bank remains committed to responding appropriately to ensure price stability without undermining economic activity.

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Gambling Authority tender dangles as a jittery lottery quandary

30th November 2020
SEFALANA MD: CHANDRA CHAUHAN

Lucrative and highly anticipated national lottery tender that saw several Batswana businessmen partnering to form a gambling consortium to pit against their South African counterparts, culminates into a big power gamble.

WeekendPost has had a chance to watch lottery showcase even before the anticipated and impending national lottery set-up launches. A lot has been a big gamble from the bidding process which is now set for the courts next year January following a marathon legal brawl involving the interest of the gambling fraternity in Botswana and South Africa.

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The uncertainty of getting the next meal in Botswana

30th November 2020
uncertainty of getting the next meal

Households representing more than half of Botswana’s population-mostly residing in rural areas- do not know where their next meal will come from, but neither do they take into consideration the quality and/or quantity of the food they consume.

This is according to the latest Prevalence of Food Insecurity in Botswana report which was done for the 2018/19 period and represents the state of food insecurity data even to this time.
The Prevalence of Food Insecurity was released by Statistics Botswana and it released results with findings that the results show that at national level 50.8 percent of the population in Botswana was affected by moderate to severe food insecurity in 2018/19, while 22.2 percent of the population was affected by severe food insecurity only.

According to the report, this translates to 27 percent of the population being food secure that is to say having adequate access to food in both quality and quantity. According to Statistician General, Burton Mguni, when explaining how the food data was compiled, Food and Agriculture Organization of the United Nations (FAO), is custodian of the “Prevalence of Undernourishment (PoU)” and “Prevalence of moderate or severe food insecurity in the population based on the Food Insecurity Experience Scale (FIES)” SDG indicators, for leading FIES data analysis and the resultant capacity building.

“The FIES measures the extent of food insecurity at the household or individual level. The indicator provides internationally comparable estimates of the proportion of the population facing moderate to severe difficulties in accessing food. The FIES consists of eight brief questions regarding access to adequate food, and the questions are answered directly with a yes/no response. It (FIES) complements the existing food and nutrition security indicators such as Prevalence of Undernourishment.

According to the FIES, with increasing severity, the quantity of food consumed decreases as portion sizes are reduced and meals are skipped. At its most severe level, people are forced to go without eating for a day or more. The scale further reveals that the household’s experience of food insecurity may be characterized by uncertainty and anxiety regarding food access and compromising the quality of the diet and having a less balanced and more monotonous diet,” says Mguni.

The 50.8 percent of the population in Botswana which was affected by moderate to severe food insecurity are characterized as people experiencing moderate food insecurity and face uncertainties about their ability to obtain food. These people have been forced to compromise on the quality and/or quantity of the food they consume according to the report on food insecurity.

Those who experience severe food insecurity, the 22.2 percent of the population, are people who have typically run out of food and, at worst, gone a day (or days) without eating. According to the statistics, rural area population experienced moderate to severe food insecurity at 65 percent while urban villages were at 46.60 percent and cities/town were at 31.70 percent. Those experiencing the most extreme and severe insecurity were at rural areas making 33.10 percent while urban villages and towns were at 11.90 percent and 17.50 respectively.

According to a paper compiled by Sirak Bahta, Francis Wanyoike, Hikuepi Katjiuongua and Davis Marumo and published in December 2017, titled ‘Characterization of food security and consumption patterns among smallholder livestock farmers in Botswana,’ over 70 percent of Botswana’s population reside in rural areas, and majority (70%) relies on traditional/subsistence agriculture for their livelihoods.

The study set out to characterize the food security situation and food consumption patterns among livestock keepers in Botswana. “Despite the policy change, challenges still remain in ensuring that all persons and households have access to food at all times. For example, during an analysis of the impacts of rising international food prices for Botswana, BIDPA reported that food prices tended to be highest in the rural areas already disadvantaged by relatively low levels of income and high rates of unemployment,” said the study.

According to the paper, about 9 percent of households were found to be food insecure and this category of households included 6 percent of households that ranked poorly and 3 percent that were on the borderline according to the World Food Programme’s (WFP) definition of food security.

Media reports state that the World Bank has warned that disruption to production and supply chains could ‘spark a food security crisis’ in Africa, forecasting a fall in farm production of up to 7 percent, if there are restrictions to trade, and a 25 percent decline in food imports.

Food security in Botswana or food production was also attacked by the locust pandemic which swept out this country’s vegetation and plants. The locust is said to have contributed to 25 percent loss in production.

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Solid demand for diamonds towards the ‘gift’ season

30th November 2020
Diamonds

Global lockdown have been a thorn in diamonds having shiny sales, but a lot of optimism shows with the easing of Covid-19 restrictions, the precious stones will be bought with high volumes towards festive season. The diamond market is however warned of the resurgence of Covid-19 in key markets presents ongoing risks amid the presence and optimist about the new Covid-29 vaccines.

The latest findings published as De Beers Group’s latest Diamond Insight ‘Flash’ Report, which looks at the impact of the pandemic on relationships and engagements, has revealed that in the US that more couples than ever are buying diamond engagement rings. Bridal sales is mostly the primary source of diamond jewellery demand in recent months, De Beers said.

According to De Beers, interviews with independent jewellers around the US revealed that the rate of couples getting engaged has increased compared with the period when Covid-19 first had an impact in the US in the spring.

“In addition, despite challenging economic times, consumers were spending more than ever on diamond engagement rings – often upgrading in colour, cut and clarity, rather than size. Several jewellers speculated that with consumers spending less on elaborate weddings and/or honeymoons in the current environment, they had more to spend on choosing the perfect ring,” said De Beers.

According to De Beers, a national survey of 360 US women in serious relationships, undertaken in late October in collaboration with engagement and wedding website, The Knot. This survey is said to have found that the majority of respondents (54%) were thinking more about their engagement ring than the wedding itself (32%) or the honeymoon (15%), supporting jewellers’ hypothesis that engagement ring sales were benefiting from reduced wedding and travel budgets in light of Covid-19 restrictions.

When it came to researching engagement rings, online was by far the predominant channel for gaining ideas/inspiration at 86% of consumers surveyed, with 85% saying they had saved examples of styles they liked, according to De Beers. According to the survey, only a uarter of respondents said they had looked in-store at a physical location for design inspiration.

“For many couples, the pandemic has brought them even closer together, in some instances speeding up the path to engagement after forming a deeper connection while experiencing lockdown and its associated ups and downs as a partnership. Engagement rings are taking on even greater symbolism in this environment, with retailers reporting couples are prepared to invest more than usual, particularly due to budget reductions in other areas,” De Beers CEO Cleaver said.

According to De Beers Group, its Diamond Insight Flash Report series is focused on understanding the US consumer perspective in light of Covid-19 and monitoring how it evolves as the crisis evolves. Also, the company said, it is augmenting its existing research programme with additional consumer, retailer and supply chain touch-basis to understand the pain points and the opportunities for stakeholders across the diamond pipeline.

Demand for diamonds is as hard and resilient as the precious stone itself. De Beers pocketed US$ 450 million in its recently held ninth rough diamond sales cycle, and the company says it is more flexible approach to rough diamond sales during the ninth sales cycle of 2020, with the Sight event extended beyond its normal week-long duration.

“Steady demand for De Beers Group’s rough diamonds continued in the ninth sales cycle of the year, reflecting stable consumer demand for diamond jewellery at the retail level in the US and China, and expectations for reasonable demand to continue throughout the holiday season. However, the resurgence of Covid-19 infections in several consumer markets presents ongoing risks,” said De Beers CEO Bruce Cleaver recently.

High expectations are on diamonds being a sentimental gift for holiday season or as the most fetished gift. However the ninth cycle was lower than the eighth which registered US$ 467 million. For the last year period which corresponds with the current one, De Beers managed to raise US$ 400.

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