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World Economic Outlook

The pickup in global growth anticipated in the April World Economic Outlook remains on track, with global output projected to grow by 3.5 percent in 2017 and 3.6 percent in 2018.

The unchanged global growth projections mask somewhat different contributions at the country level. U.S. growth projections are lower than in April, primarily reflecting the assumption that fiscal policy will be less expansionary going forward than previously anticipated. Growth has been revised up for Japan and especially the euro area, where positive surprises to activity in late 2016 and early 2017 point to solid momentum. China’s growth projections have also been revised up, reflecting a strong first quarter of 2017 and expectations of continued fiscal support. Inflation in advanced economies remains subdued and generally below targets; it has also been declining in several emerging economies, such as Brazil, India, and Russia.

While risks around the global growth forecast appear broadly balanced in the near term, they remain skewed to the downside over the medium term. On the upside, the cyclical rebound could be stronger and more sustained in Europe, where political risk has diminished. On the downside, rich market valuations and very low volatility in an environment of high policy uncertainty raise the likelihood of a market correction, which could dampen growth and confidence. The more supportive policy tilt in China, especially strong credit growth, comes with rising downside risks to medium-term growth. Monetary policy normalization in some advanced economies, notably the United States, could trigger a faster-than-anticipated tightening in global financial conditions. And other risks discussed in the April 2017 WEO, including a turn toward inward-looking policies and geopolitical risks, remain salient.

Projected global growth rates for 2017–18, though higher than the 3.2 percent estimated for 2016, are below pre-crisis averages, especially for most advanced economies and for commodity-exporting emerging and developing economies. Among the former, many face excess capacity as well as headwinds to potential growth from aging populations, weak investment, and slowly advancing productivity. In view of weak core inflation and muted wage pressures, policy settings should remain consistent with lifting inflation expectations in line with targets, closing output gaps, and—where appropriate—external rebalancing. Reforms to boost potential output are of the essence, and slow aggregate output growth makes it even more important that gains are shared widely across the income distribution. Financial stability risks need close monitoring in many emerging economies. Commodity exporters should continue adjusting to lower revenues, while diversifying their sources of growth over time.

Risks

Short-term risks are broadly balanced, but medium-term risks are still skewed to the downside. Risks to the U.S. forecast are two sided: the implementation of a fiscal stimulus (such as revenue-reducing tax reform) could drive U.S. demand and output growth above the baseline forecast, while implementation of the expenditure-based consolidation proposed in the Administration’s budget would drive them lower. On the upside, the pickup in activity in the euro area, with buoyant market sentiment and reduced political risks, could be stronger and more durable than currently projected. On the downside, protracted policy uncertainty or other shocks could trigger a correction in rich market valuations, especially for equities, and an increase in volatility from current very low levels.

In turn, this could dent spending and confidence more generally, especially in countries with high financial vulnerabilities. Lower commodity prices would further exacerbate macroeconomic strains and complicate adjustment needs in many commodity exporters. Other downside risks threatening the strength and durability of the recovery include:

A more protracted period of policy uncertainty. Despite a decline in election-related risks, policy uncertainty remains at a high level and could well rise further, reflecting—for example—difficult-to-predict U.S. regulatory and fiscal policies, negotiations of post-Brexit arrangements, or geopolitical risks. This could harm confidence, deter private investment, and weaken growth.

Financial tensions. In China, failure to continue the recent focus on addressing financial sector risks and curb excessive credit growth (mainly through tighter macroprudential policy settings) could result in an abrupt growth slowdown, with adverse spillovers to other countries through trade, commodity price, and confidence channels. A faster-than-expected monetary policy normalization in the United States could tighten global financial conditions and trigger reversals in capital flows to emerging economies, along with U.S. dollar appreciation, straining emerging economies with large leverage, U.S. dollar pegs, or balance sheet mismatches.

At the same time, to the extent that such monetary policy tightening reflects a stronger U.S. outlook, U.S. trading partners would benefit from positive demand spillovers. In some euro area countries, weak bank balance sheets and an unfavorable profitability outlook could interact with higher political risks to reignite financial stability concerns, and a rise in long-term interest rates would worsen public debt dynamics. Finally, a broad rollback of the strengthening of financial regulation and oversight achieved since the crisis—both nationally and internationally—could lower capital and liquidity buffers or weaken supervisory effectiveness, with negative repercussions for global financial stability.

Inward-looking policies. Over the longer term, failure to lift potential growth and make growth more inclusive could fuel protectionism and hinder market-friendly reforms. The results could include disrupted global supply chains, lower global productivity, and less affordable tradable consumer goods, which harm low-income households disproportionately. Noneconomic factors. Rising geopolitical tensions, domestic political discord, and shocks arising from weak governance and corruption can all weigh on economic activity.

These risks are interconnected and can be mutually reinforcing. For example, an inward turn in policies could be associated with increased geopolitical tensions as well as with rising global risk aversion; noneconomic shocks can weigh directly on economic activity as well as harm confidence and market sentiment; and a faster-than-anticipated tightening of global financial conditions or a shift toward protectionism in advanced economies could reignite capital outflow pressures from emerging markets.

Policies

Policy choices will therefore be crucial in shaping the outlook and reducing risks. Strengthening the momentum. With countries at present facing divergent cyclical conditions, differing stances of monetary and fiscal policy remain appropriate. In advanced economies where demand is still lacking and inflation too low, monetary and (where feasible) fiscal support should continue; elsewhere monetary policy should normalize gradually, in line with economic developments, and fiscal policy should focus on supporting reforms aimed at expanding the economy’s supply potential. Countries in need of fiscal consolidation should do so with growth-friendly measures. Emerging market economies should continue to allow exchange rates to buffer shocks, wherever possible.

Making growth resilient and balanced. Efforts to accelerate private sector balance sheet repair and ensure sustainability of public debt are critical foundations for a resilient recovery. So are efforts from surplus and deficit countries alike to reduce excess current account imbalances. Sustaining high and inclusive growth in the long term. This goal calls for well-sequenced and tailored structural reforms to boost productivity and investment, measures to narrow gender labor force participation gaps, and active support for those hurt by shifts in technology or trade.

Enhancing resilience in low-income countries. Among low-income developing countries, commodity exporters generally need sizable adjustment to correct macroeconomic imbalances, a challenge that would be exacerbated for fuel exporters by a persistent decline in oil prices. Policy priorities for diversified low-income developing countries vary, given the diversity of country circumstances, but an overarching goal for these economies should be to enhance resilience against potential future shocks by strengthening fiscal positions and foreign reserves holdings while growth is strong.

Working toward shared prosperity. A well-functioning multilateral framework for international economic relations is another key ingredient of strong, sustainable, balanced, and inclusive growth. Pursuit of zero-sum policies can only end by hurting all countries, as history shows. Because national policies inevitably interact and create spillovers across countries, the world economy works far better for all when policymakers engage in regular dialogue and work within agreed mechanisms to resolve disagreements. A rule-based and open world trading system is especially vital for global prosperity, but it must be supported by domestic policies to facilitate adjustment, not only to trade but to rapid technological change.

Cooperating to ensure evenhandedness. At the same time, the international community should continue to adapt the multilateral system to the changing global economy. Active dialogue and cooperation will help to improve and modernize the rules, while addressing valid country concerns. This process will ensure continued mutual benefits and evenhandedness. Together with strong domestic policies, it will also help avoid a broad withdrawal from multilateralism, either through widespread protectionism or a competitive race to the bottom in financial and regulatory oversight, which would leave all countries worse off.

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Business

Botswana records first trade surplus since January

7th October 2021
Botswana-records-first-trade-surplus-

Botswana has recorded its first trade surplus for 2021 since the only one for the year in January.

The country’s exports for the month of July surpassed the value of imports, Statistics Botswana’s July International Merchandise Trade data reveals.

Released last Friday, the monthly trade digest reports a positive jump in the trade balance graph against the backdrop of a series of trade deficits in the preceding months since January this year.

According to the country’s significant data body, imports for the month were valued at P7.232 billion, reflecting a decline of 6.6 percent from the revised June 2021 value of P7.739 billion.

Total exports during the same month amounted to P7.605 billion, showing an increase of 6.1 percent over the revised June 2021 value of P7.170 billion.

A trade surplus of P373.2 million was recorded in July 2021. This follows a revised trade deficit of P568.7 million for June 2021.

For the total exports value of P7.605 billion, the Diamonds group accounted for 91.2 percent (P6.936 billion), followed by Machinery & Electrical Equipment and Salt & Soda Ash with 2.2 percent (P169.7 million) and 1.3 percent (P100.9 million) respectively.

Asia was the leading destination for Botswana exports, receiving 65.2 percent (P4.96 billion) of total exports during July 2021.

These exports mostly went to the UAE and India, having received 26.3 percent (P1. 99 billion) and 18.7 percent (P1.422 billion) of total exports, respectively. The top most exported commodity to the regional block was Diamonds.

Exports destined to the European Union amounted to P1.64 billion, accounting for 21.6 percent of total exports.

Belgium received almost all exports destined to the regional union, acquiring 21.5 percent (P1.6337 billion) of total exports during the reporting period.

The Diamonds group was the leading commodity group exported to the EU. The SACU region received exports valued at P790.7 million, representing 10.4 percent of total exports.

Diamonds and Salt & Soda Ash commodity groups accounted for 37.8 percent (P298.6 million) and 6.2 percent (P48.7 million) of total exports to the customs union.

South Africa received 9.8 percent (P745.0 million) of total exports during the month under review. The Diamonds group contributed 39.9 percent (P297.4 million) to all goods destined for the country.

 

In terms of imports, the SACU region contributed 62.7 percent (P4.534 billion) to total imports during July.

The topmost imported commodity groups from the SACU region were Fuel; Food, Beverages & Tobacco, and Machinery & Electrical Equipment with contributions of 33.3 percent (P1.510 billion), 17.4 percent (P789.4 million) and 12.7 percent (P576.7 million) to total imports from the region, respectively.

South Africa contributed 60.1 percent (P4.3497 billion) to total imports during July 2021.

Fuel accounted for 32.1 percent (P1.394 billion) of imports from that country. Food, Beverages & Tobacco contributed 17.7 percent (P772.0 million) to imports from South Africa.

Namibia contributed 2.0 percent (P141.1 million) to the overall imports during the period under review. Fuel was the main commodity imported from that country at 82.1 percent (P115.8 million).

During the months, imports representing 63.5 percent (P4.5904 billion) were transported into the country by Road.

Transportation of imports by Rail and Air accounted for 22.7 percent (P1.645 billion) and 13.8 percent (P996.2 million), respectively.

During the month, goods exported by Air amounted to P6, 999.2 million, accounting for 92.0 percent of total exports, while those leaving the country by Road were valued at P594.2 million (7.8 percent).

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Business

The 2021/2022 Stanford Seed Transformation Program Begins

7th October 2021

Founders from twenty companies have been accepted into the program from Botswana, Namibia, and South Africa

The 4th Cohort of the Stanford Seed Transformation Program – Southern Africa (STP), a collaboration between Stanford Graduate School of Business and De Beers Group commenced classes on 20 September 2021. According to Otsile Mabeo, Vice President Corporate Affairs, De Beers Global Sightholder Sales: “We are excited to confirm that 20 companies have been accepted into the 4th Seed Transformation Programme from Botswana, Namibia, and South Africa. The STP is an important part of the De Beers Group Building Forever sustainability strategy and demonstrates our commitment to the ‘Partnering for Thriving Communities’ pillar that aims at enhancing enterprise development in countries where we operate in the Southern African region”. Jeffrey Prickett, Global Director of Stanford Seed: “Business owners and their key management team members undertake a 12-month intensive leadership program that includes sessions on strategy and finance, business ethics, and design thinking, all taught by world-renowned Stanford faculty and local business practitioners. The program is exclusively for business owners and teams of for-profit companies or for-profit social enterprises with annual company revenues of US$300,000 – US$15million.” The programme will be delivered fully virtually to comply with COVID 19 protocols. Out of the 20 companies, 6 are from Botswana, 1 Namibia, and 13 South Africa. Since the partnership’s inception, De Beers Group and Stanford Seed have supported 74 companies, 89 founders/CEOs, and approximately 750 senior-level managers to undertake the program in Southern Africa.

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Business

Minergy overcomes challenges – improves revenue and produces record breaking coal sales to date

7th October 2021
Minergy

Minergy, the coal mining and trading company with the Masama coal mine, this week released results for the year ended 30 June 2021. The company achieved revenue of P193 million (2020: P81 million) with significant improvement in sales volumes surpassing 415 000 tonnes sold for the year.

The performance was divided into two distinct periods with very different operating environments. The first eight-month period (July 2020 – February 2021), was negatively impacted by delayed funding, COVID-19 impacts and excessive rain; and the last four-month period (March – June 2021), was a more stable production environment moving toward nameplate capacity.

According to Minergy CEO, Morné du Plessis, production and sales initially recovered in July and August 2020 with the easing of COVID-19 restrictions and recoveries were further bolstered by the successful launch of the rail siding. Delays experienced in concluding the funding contributed to contractors limiting operations to manage arrears.

“However, the heavy rains we experienced from December 2020 through February 2021 flooded the mine pit making access difficult and impacting both production and sales. Fortunately, the rain subsided in March 2021, and we entered a more stable environment, with a positive impact on operations. Good recoveries in production and sales were experienced during the last four-month period of the year, with the mine moving closer toward a breakeven position.”

“Despite these operational constraints, including the effects of COVID-19 on logistics and manning of shifts, we expect to reach consistent nameplate capacity in the 2022 financial year,” du Plessis added.

FINANACIAL REVIEW

In addition to the revenue reported above, the company incurred costs of sales of P256 million (2020: P150 million) with operating costs of P23 million (2020: P31 million). This effectively resulted in an operating loss of P86 million (2020: P100 million). Finance costs of P51 million (2020: P17 million) were incurred, bringing the net loss before taxation to P136 million (2020: P117 million).

Du Plessis explains that the adverse conditions in the first eight-month period contributed to 86% of the gross loss, while the more stable four-month period alone contributed to 50% of total sales value, helping to decrease monthly gross losses, albeit below breakeven levels.

The company benefited from a strengthening in the South African Rand (“ZAR”) supporting higher back-on- mine sales prices.

“As announced, we’re pleased to have secured P125 million of additional convertible debt funding through the Minerals Development Company Botswana (Proprietary) Limited (“MDCB”). Minergy remains grateful for this support.”

He added that the first tranche of additional funding provided by the MDCB had been received in December 2020, which allowed Minergy to settle the majority of the contractor’s arrears and allowed their teams to be remobilised. The second and final tranche was paid post the financial year-end and will allow the business to reach nameplate capacity in the new financial year.”

COAL SALES AND MINE PERFORMANCE

Sales volumes increased by 110%, supported by increased sales in Botswana and internationally in South Africa and Namibia. Sales for June 2021 exceeded 56 000 tonnes, a record since the inception of the mine, with pricing increasing late in the financial year on the back of buoyant international prices and a strengthening ZAR.

Minergy also concluded a further 12-month off-take agreement to the existing off-take agreement, with a further agreement finalised post year end.

Overburden moved during the reporting period increased by 86% and extracted coal by 50%. Coal mined in June 2021 alone exceeded 100 000 tonnes. “This is a good performance considering the challenges faced such as sacrificing pre-stripping activities for a period to manage arrears, excessive rain and COVID-19,” du Plessis indicated.

“The wash plant was initially starved of coal due to the factors noted already. Despite this, overall plant throughput performance was 37% higher than 2020. Consistent output was supported by the completion of the Stage 2 rigid crushing section as well as the water saving dewatering screen with filter press contributing to a reduction in water usage of 60% per tonne of coal. A record throughput of more than 84 000 tonnes was achieved in March 2021 and this consistency has been maintained.”

OUTLOOK

According to du Plessis, the completion of Stage 4 of the Processing Plant, the rigid screening and stock handling section, remains a key optimisation step, which has associated benefits. “The completion was unfortunately delayed by a southern African wide shortage of structural steel but was commissioned post year-end.”

Minergy expects the positive momentum in international coal pricing for southern African coal to remain in place. Higher coal prices have resulted in coal being withdrawn from the inland market in favour of lucrative international markets. Du Plessis added that the regional market is currently under- supplied with sized coal, which supports higher pricing and new customer opportunities for Minergy.

“Our objective for the 2022 financial year is to achieve nameplate capacity by completing final ramp-up of operations. This will enable the company to generate sufficient cash flow to stabilise the business at breakeven or better. The bullish coal market is also providing support. COVID-19 will still be closely managed, and we look forward to the lifting of the State of Emergency, as announced, and trust that vaccination programmes will achieve herd immunity in Botswana during the next 12 months.”

Du Plessis expressed his excitement on prospects stating that, “The Eskom due diligence process is continuing, and we are hopeful of receiving feedback during the current financial year. In addition to this opportunity, Minergy is also investigating participation in the request by the Government of Botswana to provide a 300MW power station for which the company has been shortlisted.”

The approved process to issue shares for cash is showing positive leads and he concluded by saying that a listing in London is still being investigated.

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