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Economic report card

The Bank of Botswana Annual Report for the year ended December 2016, which was released and shared with cabinet early this week on Tuesday has highlighted that the bank was successful in the implementation of its work programmes and, in general, achieved its policy objectives during 2016.


The Report provides a summary of the operational activities and audited financial statements of the Bank for the period ended December 31, 2016. According  to an overview available on Bank of Botswana website, the report outlines the accountability framework for the Bank’s performance which include  functions and responsibilities from conducting  of monetary policy, maintaining financial stability, implementation of the exchange rate policy, the design and issuance of currency, management of foreign exchange reserves to  regulation and supervision of banks, oversight of the payments systems and provision of banking and settlement services to Government, commercial banks and other  financial institutions as well as economic research and policy advice.


According to Governor, Moses Pelaelo in his foreword, 2016 was of special significance to the Bank in several ways. “The banking industry remained sound, prudently managed, solvent, liquid and profitable. All licensed banks met the minimum prudential requirements as set out in the Banking Act and Banking Regulations. The industry’s profitability was due to the increase in both net interest income and non-interest income.”


Further, the report contains a theme topic titled Botswana’s Trade Pattern, International Investment and Regional Economic Integration: Opportunities for Industrial Development and Inclusive Growth. “The topic reviews Botswana’s external sector, in particular, trade and investment performance, related institutional and policy support, and suggests opportunities that should be exploited through trade and industrial policies to stimulate sustainable economic diversification, inclusive growth and job creation,” reads the statement signed by the recently appointed Pelaelo.


However, according to the statement, as in the previous year, the domestic and external environment was less favourable and uncertain. Global economic activity was weak in 2016 relative to 2015, with varying performance across countries and regions. In   August 2016 the Bank rate was reduced by 0.5 % point to 5.5 percent due to a positive medium-term outlook for inflation and a stable financial environment which provided scope for monetary policy easing to support economic activity.

 

The monetary policy easing was undertaken moreover, to encourage productive commercial bank lending and market efficiency, as well as alleviate the cost of liquidity absorption. The 2016 report also states that due to  projected low inflation in Botswana compared to trading partner countries, the nominal effective exchange rate (NEER) of the Pula crawled upwards by 0.38 percent during 2016, while the Pula basket weights were 50 percent each for the South African rand and the Special Drawing Rights (SDR). ”However, the real effective exchange rate (REER) depreciated by 0.8 percent in 2016, as the upward rate of crawl was smaller than the inflation differential between Botswana and its trading partner countries.”


The banking sector was adequately capitalized, profitable and liquid as at December 31, 2016. The industry’s compliance with the regulatory and prudential requirements was satisfactory. Most banks reported higher levels of profit compared to the previous year, with the exception of Standard Chartered Bank, First National Bank, Bank of India and Bank SBI.


According to the governor,  the banking sector’s balance sheet increased by 5.2 %  from P76.7 billion in December 2015 to P80.7 billion in December 2016. The 4.1 percent and 8.7 percent growth in total deposits and capital, respectively, supported the increase in government bonds, treasury bills and gross loans and advances. “Even so, annual credit growth slowed from 7.1 percent at the end of 2015 to 6.2 percent at the end of 2016 because of the slower rate of increase in lending to both households and businesses,” Pelaelo observed.


Notably the bank ‘s financial performance fell tremendously as the Bank’s total assets fell by P7.8 billion to P77.6 billion in December 2016, of which P76.8 billion (P84.9 billion in 2015) was foreign exchange reserves. “The reserves were equivalent to 17 months of imports of goods and services.

 

The decrease in foreign exchange reserves, in Pula terms, reacts a drawdown in the Government Investment Account, market and currency valuation losses, the latter being due to the appreciation of the Pula against currencies in which the reserves are held.” The Bank’s net income for the year 2016 also fell to P1.4 billion, compared to P9.1 billion in 2015, however 2016 saw the Bank register currency gains of P2.2 billion from the Currency Revaluation Reserve, the net distributable income was P3.6 billion, which was higher than the P2.3 billion given to Government in 2015.


The Bank of Botswana Governor states in the report that the focus on skills development, through appropriate short and long-term training programmes, and staff welfare improvement was maintained with a view to sustaining the Bank’s operational and leadership capability and productivity.


According to the statement, Botswana Certificates (BoBCs) decreased from P8.2 billion at the end of 2015 to P7.9 billion in December 2016. Repurchase Agreements (repos) and reverse repos were used during the year to manage liquidity in between BoBCs auctions, resulting in outstanding reverse repos of P1.3 billion at the end of 2016 compared to P1.7 billion in December 2015.


As in 2015, there were no outstanding repos at the end of 2016 The 14-day BoBC weighted average yield decreased from 0.97 percent in December 2015 to 0.84 percent in December 2016, while the yield on the 91-day BoBC decreased from 1.17 percent to 1.01 percent in the same period. The prime lending rate of the commercial banks decreased from 7.5 percent in 2015 to 7 percent in 2016 in line with the Bank’s decision to reduce the Bank Rate by 0.5 percentage points during the year. Meanwhile, the nominal 3-month (88-day) deposit interest rate decreased from 2.5 percent in December 2015 to 2.03 percent at the end of 2016.

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Business

Investors inject capital into Tsodilo Resources Company

25th January 2023

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.

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Business

Global CEOs Back Plan to Unlock $3.4 Trillion Potential of Africa Free Trade Area

23rd January 2023

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,

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Business

Electricity generation down 15.8%

9th January 2023

Electricity generation in Botswana during the third quarter of 2022 declined by 15.8%, following operational challenges at Botswana Power Corporation’ Morupule B power plant, according to Statistics Botswana Index of Electricity Generation (IEG) released last week.

The index shows that local electricity generation decreased by 148,243 MWH from 937,597 MWH during the second quarter of 2022 to 789,354 MWH during the third of quarter of 2022.

This decrease, according to the index, was mainly attributed to a decline in power supply realized at Morupule B power station. The index shows that as a result of low power supply from the plant, imported electricity during the third quarter of 2022 increased by 76.3 percent (123,831 MWH), from 162,340 MWH during the second quarter of 2022 to 286,171 MWH during the current quarter and Statistics Botswana added that the increase was necessitated by the need to augment the shortfall in generated electricity.

In the index Statistics Botswana stated that Eskom was the main source of imported electricity at 42.0 percent of total electricity imports. “The Southern African Power Pool (SAPP) accounted for 38.4 percent, while the remaining 10.1, 9.1 and 0.5 percent were sourced from Electricidade de Mozambique (EDM), Cross-border electricity markets and the Zambia Electricity Supply Corporation Limited (ZESCO), respectively. Cross-border electricity markets are arrangements whereby towns and villages along the border are supplied with electricity from neighbouring countries such as Namibia and Zambia.”

The government owned statistics entity stated that distributed electricity decreased by 2.2 percent (24,412 MWH), from 1,099,937 MWH during the second quarter of 2022 to 1,075,525 MWH during the third quarter of 2022. The entity noted that electricity generated locally contributed 73.4 percent to electricity distributed during the third quarter of 2022, compared to a contribution of 85.2 percent during the third quarter in 2022 and added that this gives a decline of 11.8 percentage points. “The quarter-on-quarter comparison shows that the contribution of electricity generated to electricity distributed decreased by 11.8 percentage points compared to the 85.2 percent contribution during the second quarter of 2022.”

Statistics Botswana meanwhile stated that the year-on-year analysis shows some improvement in local electricity generation. Recent figures from entity show that the physical volume of electricity generated increased by 36.3 percent (210,319 MWH), from 579, 036 MWH during the third quarter of 2021 to 789,354 MWH during the current quarter. According to Statistics Botswana electricity generated locally contributed 73.4 percent to electricity distributed during the third quarter of 2022, compared to a contribution of 57.7 percent during the same quarter in 2021. This gives an increase of 15.7 percentage points.

 

The entity noted that trends also show an increase in physical volume of electricity distributed from 2013 to the third quarter of 2022, thereby indicating that there are ongoing efforts to meet the domestic demand for power. “There has been a gradual increase of distributed electricity from the first quarter of 2013 to the third quarter of 2022, even though there are fluctuations. The year-on-year perspective shows that the amount of distributed electricity increased by 7.2 percent (71,787 MHW), from 1,003,738 MWH during the third quarter of 2021 to 1,075,525 MWH during the current quarter.”

The statistics entity noted that year-on-year analysis show that during the third quarter of 2022, the physical volume of imported electricity decreased by 32.6 percent (138,532 MWH), from 424,703 MWH during the third quarter of 2021 to 286,171 MWH during the third quarter of 2022. “There is a downward trend in the physical volume of imported electricity from the first quarter of 2013 to the third quarter of 2022. The downward trend indicates the country’s continued effort to generate adequate electricity to meet domestic demand, hence the decreased reliance on electricity imports.”

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