Indebtedness, cautious commercial banks, low personal incomes are key themes from the Bank of Botswana presentation of the monetary Policy Statement, an indication that many households continue with the inescapable consumerism that has been so much a feature of Batswana’s lifestyle.
Amid the achievement of key objectives of an Inflation range within the 3-6 percent and a stable financial environment, the recently released Bank of Botswana Mid-Term Review (MTR) of the 2017 Monetary Policy Statement (MPS) paint a picture of Batswana swimming in debt. According to the Bank of Botswana, annual growth in commercial bank credit was 4.1 percent in June 2017, lower than the yearly increase of 6.2 percent in June 2016, against the background of moderate economic activity and restrained growth in personal incomes. In particular, the year on year increase in lending to households fell from 7.6 percent to 5 percent in this period.
“The yearly growth in lending to the business sector decreased from 4.2 percent in December 2016 to 2.8 percent in June 2017; some large loans were repaid by parastatals. Excluding parastatals, the annual increase in borrowing by businesses rose from 7.4 percent in December to 9.5 percent in June 2017.” However Banking sector performance indicators, including levels of capital, liquidity, profitability and default ratios, suggest a stable financial environment. Even then, the aggregate ratio of non-performing loans (NPLs) to total loans increased from 4.9 percent in December 2016 to 5.3 percent in June 2017, says Bank of Botswana.
Meanwhile the slight deterioration in asset quality experienced by the banking sector is attributed to, in the main, challenges for some diamond cutting and polishing businesses, job losses resulting from the closure of BCL group of companies and ongoing retrenchments by some major employers, as well as weaker market for high-value residential properties. Job losses are the biggest dent to the economy at the moment more so that unemployment, especially among the youth, remains a thorn.
“The NPL to total loans ratio for individual banks ranged from 0.2 percent to 10.8 percent in June 2017. Households account for a larger share of total lending by commercial banks, which stood at 59.6 percent in June 2017.” Low personal incomes are forcing many households into debt. The Bank of Botswana observes that the annual growth in mortgages moderated to 4.4 percent in June 2017, from 7.3 percent in June 2016, which mainly reflects a weak housing market, especially at the upper-end, and tighter lending criteria by some banks.
“Nevertheless, unsecured household lending, which constitutes a large proportion of commercial bank credit, represents relatively small amounts spread across many borrowers of differing credit profiles, which mitigates associated financial stability risks.” The BoB says: Overall, current levels of credit growth continue to be supportive of economic activity and augur well for durable stability of the financial system. “The Board of the Bank has approved broadening the range of securities that are eligible for use by commercial banks as collateral when accessing credit facilities offered by the Bank. By allowing all government securities, regardless of maturities to be used for this purpose, commercial banks will be able to manage liquid assets more efficiently, with less reliance on BoBCs for collateral.”
The Central Bank is of the view that in turn, this should improve the efficiency of the policy transmission mechanism, while also reducing further the costs of monetary policy implementation. The bank new framework will become operational in the second half of 2017. “The Bank’s implementation of the exchange rate policy will continue to entail a 0.26 percent upward rate of crawl of the NEER for the remainder of 2017, given that inflation in Botswana is projected to be within the medium-term objective range of 3 – 6 percent and below the projected average inflation of trading partner countries.”
MPS examines price developments and the underlying causal factors in the first half of 2017. It also assesses key financial and economic developments that are likely to influence the inflation outlook and financial stability, in order to determine the likely monetary policy response in the second half of 2017.
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.
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.
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,