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BoB adopts dovish approach

Domestic inflation was mostly below the lower end of the Bank's objective range of 3 – 6 percent in 2016 against the background of benign domestic demand pressures, modest wage growth and favorable foreign price developments. This was revealed by Bank of Botswana’s Monetary Policy Statement (MPS) for 2017 report released on Tuesday.


The Monetary Policy Statement (MPS) is the Bank of Botswana's main medium through which stakeholders are informed of the framework for the formulation and implementation of monetary policy. The 2017 MPS reviews the previous year's economic and policy developments and also evaluates the determinants of changes in the level of prices and their impact on inflation in Botswana. The Statement also makes an assessment of economic and financial developments that are likely to influence the inflation path in the medium term and, in turn, the Bank's policy choices in 2017.


Inflation was below the lower end of the Bank's medium-term objective range of 3 – 6 percent for most of 2016 and decreased from 3.1 percent in December 2015 to 3 percent in December 2016.  Global GDP growth is projected to be higher in 2017 than in 2016, while global inflation is forecast to increase as oil prices rise modestly and output gaps steadily contract.


“It is projected that inflation will remain low and stable in the medium term, consistent with the Bank's objective range. The Bank's formulation and implementation of monetary policy will focus on entrenching expectations of low and sustainable inflation, through timely response to price developments, while ensuring that credit and other market developments are in line with durable stability of the financial system. The Bank remains committed to monitoring economic and financial developments with a view to ensuring price and financial stability, without undermining sustainable economic growth.”

The report indicated that given projected low inflation in the medium term, the monetary policy stance was accommodative and the Bank Rate was reduced by 50 basis points to 5.5 percent in August 2016 to support economic activity; it was maintained at this level at the December 2016 meeting. The Bank also implemented an upward 0.38 percent annual rate of crawl of the nominal effective exchange rate (NEER) of the Pula effective January 2016, as inflation in Botswana was low compared to the average for the trading partner countries.

 

Bilaterally, the Pula depreciated by 7.5 percent against the South African rand, but appreciated by 8.9 percent against the SDR in the twelve months to December 2016.2 The real effective exchange rate (REER) depreciated by 0.77 percent year on year to December 2016, given that the differential between the lower inflation in Botswana and average inflation in trading partner countries was larger than the upward rate of crawl.


Furthermore, the MPS report reveals that, domestic monetary policy was conducted against the backdrop of below-trend economic activity (a non-inflationary output gap) and a positive medium-term inflation outlook. Moreover, foreign inflation was low, on average, with benign pressure on domestic prices.


Monetary policy implementation entailed the use of Bank of Botswana Certificates (BoBCs) to absorb excess liquidity9 in order to maintain interest rates that are consistent with the monetary policy stance; while reverse repurchase agreements (repos) were used to absorb excess liquidity between weekly auctions of BoBCs.


The report shows that monetary policy was conducted within a fiscal environment that was supportive of domestic economic activity, with 9.7 percent annual growth in government expenditure (twelve months to December 2016), slightly higher than 9.6 percent growth in the twelve-month period ending in December 2015. Development and recurrent expenditure increased by 20.3 percent and 6.1 percent, respectively, in the same period. The growth in recurrent expenditure included a 3 percent increase in salaries for civil servants, the impact on aggregate demand of which was not significant enough to generate notable inflationary pressures.


However it was reported that despite an accommodative monetary policy stance, annual growth in commercial bank credit decreased from 7.1 percent in December 2015 to 6.2 percent in December 2016, against a background of subdued economic activity and restrained growth in personal incomes. The slowdown in annual credit expansion was mostly associated with the decrease in growth in lending to households from 12.8 percent in December 2015 to 7.6 percent in December 2016, largely reflecting the effect of restrained growth in personal incomes.


“The lower rate of increase in lending to households was mostly due to a slowdown in the yearly rate of expansion in unsecured loans to this sector from 15.5 percent to 8.3 percent in the same period. Meanwhile, the annual growth in mortgage lending to households also slowed from 7.2 percent to 6.3 percent in the same period. The share of mortgages in total bank households' credit decreased from 28.8 percent in December 2015 to 28.4 percent in December 2016. The lower growth of mortgage lending appears to be consistent with the weaker residential property market in 2016.”


For businesses, year-on-year growth in lending accelerated from a contraction of 0.3 percent in December 2015 to growth of 4.2 percent in December 2016. Even then, while lending to manufacturing, “other”, and construction expanded, credit growth to agriculture decelerated, while it was negative for other sector. Notably, there was a significant decline in credit for the mining sector, mainly as a result of the BCL group loan repayment in December 2016.


“In general, the non-inflationary increase in credit for consumption as well as business investment and operations is positive for the economy. In the circumstance, accommodative monetary policy stance and restricted liquidity absorption through BoBCs was appropriate.”


The report concludes by projecting that growth in personal incomes will continue to be restrained, contributing to modest overall domestic demand, with a dampening effect on inflation in the medium term. Given prospects for benign external price developments, it is projected that inflation will remain within the 3 – 6 percent objective range in the medium term. The forecast incorporates the effect of the expected increase in fuel prices as well as water and electricity tariffs.


“Any substantial upward adjustment in administered prices and government levies and/or taxes as well as any increase in international food and oil prices beyond current forecasts present upside risks to the inflation outlook. However, there are downside risks associated with the restrained global economic activity, technological progress and falling commodity prices.”


In 2017, the Bank's implementation of the exchange rate policy entailed a 0.26 percent upward rate of crawl of the NEER to stabilize the REER, given that inflation is projected to be around the lower end of the medium-term objective range of 3 – 6 percent. The crawling band exchange rate policy supports international competitiveness of domestic industries and contributes towards macroeconomic stability and economic diversification. The MPC this week decide to maintain the bank rate at 5.5 percent.

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Food prices continue to rise, but at a slower rate

28th November 2022

Prices for cereals or staple foods in Botswana and other Southern African countries continue to rise at a slower pace, following trends in the global markets, according to the latest November 2022 Food Price Monitoring and Analysis by Food Agricultural Organization (FAO) of the United Nations.

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Still doing business the old way?

18th November 2022

It’s time to get business done better with MTN Business Botswana’s ICT Solutions.

Running a digital businessMTN Business Solutions Botswana, popularly known as MTN Business is an Internet Service Provider. We are a subsidiary of MTN Group Limited, a multinational telecommunications Group headquartered in South Africa, which operates in 19 markets across Africa and the Middle East.

More and more, clients are looking for ways to keep their staff productive in a dynamically changing business environment. Whether your people are working from home, the office or abroad, there is a growing recognition that digitising your operations can offer unprecedented commercial value in flexibility, productivity and growth. This new, digital reality means that it is more important than ever to stay agile – if there is anything that can slow a business down, it is being burdened by othatld technology.

Having made substantial investments in fibre technology, high-speed terrestrial and undersea networks and new frequency spectrum across the markets wherein it operates, MTN is perfectly positioned to respond to this shift in the market.

A few years ago, MTN also made the decision to build an IP capable radio network for its mobile services, giving its core network the ability to seamlessly integrate with enterprise IP networks. The mobile towers deliver services to enterprise clients absolutely anywhere it has a network, shortening the last mile and removing complexity and cost.

Now there is increasing demand from clients to connect their remote sites in all areas, including rural and semi- rural. MTN has assisted clients with overcoming this connectivity hurdle, enabling their staff to get the job done wherever they are.
MTN’s evolution

For MTN, the focus has shifted from just being a core telecommunications services provider, towards also becoming a technology solutions provider. The service offering now also includes Unified Communications, Data Hosting and Cloud Solutions, Security-As-A-Service and Managed Network Services. The scope has changed to being client and industry specific, so the requirements and service portfolio vary from one client to the next. The expectation is that a company like MTN must respond to these challenges, helping clients to get business done better as they shift from old to new technologies.

As many businesses continue to grapple with a digitally dynamic world, they face new challenges that have to be solved. This environment will benefit those that are more digitally enabled and agile. It is a brave new world that will favour online over on-site, wireless over wired and fluid over formulaic. Businesses will seek out partners and suppliers that are every bit as flexible and forward-looking as they are.
Ultimately, clients need partners like MTN Business that will invest in infrastructure, deliver the services they require, have market credibility, are financially sound and have a long-term commitment to their market presence.

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BIE to vitalize the Dignity of Engineers

9th November 2022

Botswana Institution Of Engineers (BIE), has last week hosted a gala dinner in  which they appreciated engineers who worked tirelessly and with dedication for 10 years from 1983 to steer the BIE to its current status.

The event that was held at the Phakalane Golf Estate had brought together young, experienced and veteran engineers and was held under the theme “Vitalize the dignity and eminence of all professional engineers”.

Explaining the theme, the institution’s treasurer, Thanabalasingam Raveendran said that engineers were looked upon reverentially with respect as the educated but with time it seems to have deteriorated. He indicated that there is a need to change the narrative by all means.

“The BIE exists for the welfare and the betterment of us Botswana engineers, we need to recognize specialised units within our Institution. We Engineers strongly believe in Engineers make it happen” Raveendran said.

He indicated that under the theme they appeal to all engineers to energize, to attain quality of being worthy of honour and respect and to achieve recognized superiority amongst the Society.

Raveendran stated that engineers need to ensure their end product is of good quality satisfying the end users expectations and engineers must be honest in their work.

“Approximately 8000 engineers registered with Engineering Regulatory Board (ERB) are not members of the BIE, engineers need to make every effort to recruit them to BIE” he said.

He alluded that BIE being a society, it currently needs to upgrade itself at par with professional institutions elsewhere like the UK and USA.

He further stated that BIE has to have engineering units of specialised disciplines like Civil/Mechanical/electrical etc

“As President Masisi indicated in his inaugural speech, the young people, who make 60 percent of the population of this country, are the future leaders and therefore investing in them is building the bridge to the future” said Raveendran

Kandima indicated that BIE has a memorandum of Understanding with Engineers Registration Board (ERB), where BIE is a recognised provider of CPD training, mentorship programmes and more importantly IPD undertaking to upgrade the skills and know-how of our engineers.

“For us to achieve our mandate and make worthwhile changes to engineering in Botswana, we have to be totally focused and act with intent” said Kandima.

Furthermore, Stephen Williams, past president of the BIE from 1986-1988 told the engineers that  the BIE provides a fertile environment where they can meet, share ideas and grow professionally.

“The BIE is also a nesting place for graduate engineers to learn from their peers and seniors, it also cater for engineering technicians and technologists and so nobody in the technology field is left out” he said.

He further indicated that Botswana Government provides a conductive environment for growth of engineering professionals.

“It must be stated that the Botswana Government recognises the existence of BIE and it can further be stated that the government enables ERB to carry out its mandate as a regulator of engineering professionals” said Williams

He plead with engineering companies to recognize and support BIE as it is the only source of engineering personnel’s for various Industries .

Furthermore, when giving his farewell speech, Michael Pinard , a past president of the institution  said how they are viewed as engineers by the general public might be due to some lack of appreciation as to exactly what role they play in the development of the country.

“The BIE slogan is aptly coined-Engineers make it happen, in other words, what man dreams engineers create” Said Pinard.

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