The free fall of the South African rand amid the country’s abrupt plunge into what appears to be the worst case of recession for Africa’s biggest economy since 2009, may also have negative impacts for Botswana, analysts have warned.
FNBB economist, Moatlhodi Sebabole told WeekendPost this week that the free fall of rand has also come with its own disadvantages. He explained that this fall should be seen as a three-sided coin. “The first side of the coin is an advantage to most local consumers who buy consumable goods at retail shops who import these items directly from South Africa. For example a 10kg of rice which was bought with South African rand at South Africa would cost lesser when bought with pulas as you have seen the recent fall of prices of consumables,” said Sebabole.
On the flip side, said Sebabole, the middle side of the coin is that the fall of rand may affect local companies negatively especially those who tend to be in competition for customers with their South African counterparts. The economist said for example, car dealers may lose customers to South African dealers who are in the chase of weak rand advantage.He also gave an example of those in the business of designing clothes like tailor made or designer suits, saying they stand to countenance a loss of customers to their South African counterparts.
“The third side of the coin is with buying of bonds in South African markets which may be disadvantageous to the buyer as they will have erosion in value with the weakness of the currency used in transactions. He explained that when one converts the income or the bonds to pula from the rand he will get less in the investment. He said this will be the same case for those who have shares in companies listed at South Africa as they will have to change their dividend income to pulas from rands and get less,” said Sebabole.
According to Bank of Botswana, the Pula appreciated against the rand (6.1 percent), but depreciated against SDR currencies at the end of August 2018. The pula continues to appreciate against the weak rand which has been deteriorating since the beginning of September. Expert believe the rand will continue to depreciate even towards the festive season with tickling Batswana consumer appetite when looking at the festive season and Black Friday which is coming in the next two months.
Most street vendors in Botswana who sell clothes buy from South Africa and the number of those people is expected to rise with the news of South African rand weakening. The reported South African real gross domestic product contracted by 0.7% in the second quarter of 2018 and this was followed by a revised fall of 2.6% in the first quarter of the year. According to Statistics SA,the fate of South Africa’s economy has been gloomy towards the second quarter of 2018 with annual consumer price inflation increasing to 5.1% in July, up from 4.6% in June.
Another lowlight for Botswana is that South Africa continues to perform poorly on the agriculture sector. Botswana is a major importer of South Africa’s agricultural products and stands to equally suffer when neighbour’s struggle in food security. In the second quarter of 2018 the agriculture sector declined by 29 percent and it contributed to -0.8 percentage point to GDP growth.
This drop was mainly due to a drastic drop in the production of field crops and horticulture products, and the dreadful impact of drought according to Statistics SA. Due to its neigbour’s weak production in agriculture products, Botswana may also experience an unforeseen rise in wheat products or bread-the most consumable products in this country’s households.
Government is currently sitting on 4 400 vacant posts that remain unfilled in the civil service. This is notwithstanding the high unemployment rate in Botswana which has been exacerbated by the recent outbreak of the deadly COVID-19 pandemic.
Just before the burst of COVID-19, official data released by Statistics Botswana in January 2020, indicate that unemployment in Botswana has increased from 17.6 percent three years ago to 20.7 percent. “Unemployment rate went up by 3.1 percentage between the two periods, from 17.6 to 20.7 percent,” statistics point out.
Leading commercial bank, First National Bank Botswana (FNBB), expects the central bank to sharpen its monetary policy knife and cut the Bank Rate twice in the last quarter of 2020.
The bank expects a 25 basis point (bps) in the beginning of the last quarter, which is next month, and another shed by the same bps in December, making a total of 50 bps cut in the last quarter. According to the bank’s researchers, the central bank is now holding on to 4.25 percent for the time being pending for more informed data on the economic climate.
An audit of the accounts and records for the supply of food rations to the institutions in the Northern Region for the financial year-ended 31 March 2019 was carried out. According to Auditor General’s report and observations, there are weaknesses and shortcomings that were somehow addressed to the Accounting Officer for comments.
Auditor General, Pulane Letebele indicated on the report that, across all depots in the region that there had been instances where food items were short for periods ranging from 1 to 7 months in the institutions for a variety of reasons, including absence of regular contracts and supplier failures. The success of this programme is dependent on regular and reliable availability of the supplies to achieve its objective, the report said.
There would be instances where food items were returned from the feeding centers to the depots for reasons of spoilage or any other cause. In these cases, instances had been noted where these returns were not supported by any documentation, which could lead to these items being lost without trace.
The report further stressed that large quantities of various food items valued at over P772 thousand from different depots were damaged by rodents, and written off.Included in the write off were 13 538 (340ml) cartons of milk valued at P75 745. In this connection, the Auditor General says it is important that the warehouses be maintained to a standard where they would not be infested by rodents and other pests.
Still in the Northern region, the report noted that there is an outstanding matter relating to the supply of stewed steak (283×3.1kg cans) to the Maun depot which was allegedly defective. The steak had been supplied by Botswana Meat Commission to the depot in November 2016.
In March 2017 part of the consignment was reported to the supplier as defective, and was to be replaced. Even as there was no agreement reached between the parties regarding replacement, in 51 October 2018 the items in question were disposed of by destruction. This disposal represented a loss as the whole consignment had been paid for, according to the report.
“In my view, the loss resulted directly from failure by the depot managers to deal with the matter immediately upon receipt of the consignment and detection of the defects. Audit inspections during visits to Selibe Phikwe, Maun, Shakawe, Ghanzi and Francistown depots had raised a number of observations on points of detail related to the maintenance of records, reconciliations of stocks and related matters, which I drew to the attention of the Accounting Officer for comments,” Letebele said in her report.
In the Southern region, a scrutiny of the records for the control of stocks of food items in the Southern Region had indicated intermittent shortages of the various items, principally Tsabana, Malutu, Sunflower Oil and Milk which was mainly due to absence of subsisting contracts for the supply of these items.
“The contract for the supply of Tsabana to all depots expired in September 2018 and was not replaced by a substantive contract. The supplier contracts for these stocks should be so managed that the expiry of one contract is immediately followed by the commencement of the next.”
Suppliers who had been contracted to supply foodstuffs had failed to do so and no timely action had been taken to redress the situation to ensure continuity of supply of the food items, the report noted.
In one case, the report highlighted that the supplier was to manufacture and supply 1 136 metric tonnes of Malutu for a 4-months period from March 2019 to June 2019, but had been unable to honour the obligation. The situation was relieved by inter-depot transfers, at additional cost in transportation and subsistence expenses.
In another case, the contract was for the supply of Sunflower Oil to Mabutsane, where the supplier had also failed to deliver. Examination of the Molepolole depot Food Issues Register had indicated a number of instances where food items consigned to the various feeding centres had been returned for a variety of reasons, including food item available; no storage space; and in other cases the whole consignments were returned, and reasons not stated.
This is an indication of lack of proper management and monitoring of the affairs of the depot, which could result in losses from frequent movements of the food items concerned.The maintenance of accounting records in the region, typically in Letlhakeng, Tsabong, and Mabutsane was less than satisfactory, according to Auditor General’s report.
In these depots a number of instances had been noted where receipts and issues had not been recorded over long periods, resulting in incorrect balances reflected in the accounting records. This is a serious weakness which could lead to or result in losses without trace or detection, and is a contravention of Supplies Regulations and Procedures, Letebele said.
Similarly, consignments of a total of 892 bags of Malutu and 3 bags of beans from Tsabong depot to different feeding centres had not been received in those centres, and are considered lost. These are also not reflected in the Statement of Losses in the Annual Statements of Accounts for the same periods.