Global Competitiveness Report: Botswana improves ranking
Business
The World Economic Forum (WEF) has just released the Global Competitiveness Report 2016/17(GCR). The theme for this year’s Report is “Declining Openness a Major Threat to Global Competitiveness”. The GCR 2016-2017 finds declining openness to be threatening growth and prosperity. It reports that a ten-year decline in the openness of economies at all stages of development poses a risk to countries’ ability to grow and innovate.
In this Report Botswana is ranked at #64 out of 138 countries which is a notable improvement from the previous year where the Country was ranked 71 out of 140 countries. The quality score has also improved from 4.2 to 4.3 out a total of 7. These results are worth celebrating as the country has moved 7 places up and the improvement comes at a time when Botswana is celebrating its 50 years of independence.
The good news about this performance is that, Botswana’s competitiveness has improved in almost all the twelve pillars used by WEF to assess competitiveness. A notable improvement is on the Goods Markets Efficiency pillar, jumping from 95th (in 2015) to 73rd in 2016. The Report indicates that local competition has intensified and anti-monopoly policy is starting to be effective (jumping from 71 to 63). The degree of Customer Orientation and buyer sophistication has also improved modestly.
There has also been some improvement on the Higher Education and Training pillar with a ranking of 88th compared to 100th last year. This is attributed mainly to the improvement in the tertiary education enrolment rates, quality of the education system and internet access in schools.
The establishment of the Innovation Hub is now starting to show some results as the Innovation Pillar has improved from 102 last year to 84 this year. Though the quality score of this Pillar is still low at 3.2 out of 7, the Hub’s efforts are worth celebrating. The Report shows that there has been some improvement in the Capacity to Innovate, Company Spending on Research and Development and University-Industry Collaboration in Research and Development. Initiatives linked to the likes of the Human Resource Development Council Research and Innovation Grant probably contributed to this improvement.
Botswana’s Macro-Economic Environment is still considered among the best in the world ranked in the top 10 countries. In addition Botswana has been doing well in the Institutions pillar for the past 6 years. This year, the latter is ranked 37 as in last year. This may indicate however, that more effort needs to be made to improve this area as it is stagnant. There is some improvement in the infrastructure pillar (from 96th to 90th). This is mainly due to the improvement in the air infrastructure, mainly the completion of the Sir Seretse Khama International Airport and the Francistown International airport.
In the Health and Primary Education pillar, there has been some notable improvements in both the quality score (4.5 to 4.7) and the ranking (119 to 113) compared to last year. Though there has been some great improvement in the life expectancy from 47.4 years to 64.4 years, this is still considered among the lowest in the world. Overall this pillar remains an area of main concern in the Report and has rankings that put the country amongst the lowest performers. Tuberculosis incidence and its impact on business are still very high. HIV prevalence rate (25.2%) and business impact of HIV/AIDS are also still very high.
Although Poor work ethic in the national labour force continues to be the most problematic factor for doing business in the country, the severity of this problem, however has significantly dropped from 19% last year to 16.2% this year. There has also been a significant drop in the intensity of inefficient government bureaucracy from 12.7% to 9.5%. Access to financing has moved up as the second most problematic factor this year followed by inadequately educated workforce.
Beyond 50 years of Independence, Botswana has to leverage on technology and innovation in order to enhance business sophistication. A business sophisticated economy tends to be innovative, productive and competitive in nature. Thus private sector involvement and active participation in the development of Botswana is very important.
For the eighth consecutive year, Switzerland ranks as the most competitive economy in the world, narrowly ahead of Singapore and the United States. Following these two is Netherlands and then Germany. The latter has climbed four places in two years. The next two countries, Sweden (6th) and the United Kingdom (7th) both advance three places, with the latter’s Global Competitive Index score being based on pre-Brexit data. The remaining three economies in the top ten are Japan (8th), Hong Kong SAR (9th) and Finland (10th) all move backwards.
In sub-Saharan Africa, Rwanda is one of the most improved nations moving 6 places to 52nd. It is closing in on the region’s traditionally most competitive economies, Mauritius and South Africa, although both these countries register more modest improvements, climbing to 45 and 47 respectively. Lower down the rankings, Kenya climbs to 96, Ethiopia holds steady at 109 while Nigeria slips three to 127.
Business
Botswana financial sector safe despite high unsecured household loans – IMF
Botswana’s financial sector has been deemed safe and resilient by the International Monetary Fund (IMF), despite the presence of high levels of unsecured household loans. The IMF’s 2023 report on the country’s financial sector highlights the robustness of Botswana’s banking system and its ability to withstand various shocks.
According to the report, credit risk is the largest risk in Botswana’s banking system, with a significant portion of total assets comprising loans concentrated in the household sector. Specifically, 70 percent of bank loans to households in Botswana are personal loans, primarily in the form of unsecured consumer credit. However, the IMF notes that a large share of lenders collect repayments through direct salary deduction, resulting in a generally low level of non-performing household loans.
The IMF’s assessment confirms that most banking entities in Botswana have strong capital buffers, which would enable them to survive even in the event of an increase in non-performing loans in the household sector. While a 20 percent transition of performing loans into non-performing loans would result in some banks experiencing a significant capital shortfall, the majority of banks possess robust total capital buffers and would remain unaffected by severe shocks to household loans.
Furthermore, the IMF team conducted Bank Solvency Stress Tests, which demonstrated that Botswana’s banking system remains profitable and resilient to severe macro-financial shocks. The stress tests revealed that the aggregate capital depletion in an adverse scenario is relatively small, amounting to less than 0.02 percent of GDP. Although credit risk increases significantly under the adverse scenario, the impact on the capital ratio from rising non-performing loans is outweighed by the increase in net interest income.
The IMF’s assessment also indicates that Botswana’s financial sector weathered the Covid-19 pandemic well. The authorities have made notable progress in strengthening financial supervisory and regulatory frameworks since 2007. The financial sector is deemed stable, sound, and resilient, with risks primarily related to banks’ high concentration of short-term deposits from retirement funds and insurance companies, volatility in diamond prices, geopolitical developments, and tightening global financial conditions. However, the financial system remains resilient to a wide range of shocks associated with these risks, although some vulnerabilities exist.
The Financial Stability Council (FSC), a statutory body led by the Governor of the Bank of Botswana, also recently affirmed the resilience and safety of the domestic financial system. The FSC’s assessment found that the financial sector in Botswana is robust, safe, and unconstrained in providing a range of financial services to support the economy. This resilience is attributed to strong capital and liquidity buffers, profitability, continuous innovation and adaptability, and a robust regulatory environment. The FSC believes that the macroeconomic environment, characterized by positive economic growth, well-managed government fiscal position, and modest inflation, further supports financial stability. Stress tests conducted on banks validate their strong solvency and resilience.
IMF concludes that Botswana’s financial sector remains safe and resilient, despite the presence of high levels of unsecured household loans. The IMF’s assessment highlights the strong capital buffers of banking entities, their ability to withstand shocks, and the overall stability of the financial system. The country’s financial sector has also demonstrated its resilience during the Covid-19 pandemic. The Financial Stability Council further affirms the safety and effectiveness of the financial system in providing financial services to support the economy.
Business
Botala Energy debuts on the BSE
Botala Energy, an Australian energy company, recently made its debut on the Botswana Stock Exchange (BSE), joining a growing number of energy development companies trading on the exchange. The company, established in 2018, is focused on exploring and developing natural gas and renewable energy opportunities in Botswana, particularly in the Serowe Gas Project and Solar Opportunities.
The listing of Botala Energy on the BSE was welcomed by Mr Tsamatse Mamola, the Head of Listings & Tradings at the exchange. He recognized the company as a pioneering force in the field of gas exploration and development. Mamola also highlighted the company’s commitment to clean energy production, which aligns with the global movement towards sustainable practices. By harnessing the potential of coal bed methane in the Serowe Project and integrating it with solar power generation, Botala Energy is not only innovating in the energy sector but also contributing to a greener and more sustainable future.
Mamola emphasized the significance of Botala Energy’s decision to list all of its issued shares on the BSE. This move demonstrates the company’s confidence in the exchange as a strategic partner in its corporate journey. The listing provides Botala Energy with access to diverse sources of capital, which will be instrumental in advancing its exploration and development projects, fostering technological innovation, and achieving its clean energy production goals. The BSE, as a facilitator of capital raising, plays a crucial role in supporting ambitious initiatives and fostering growth.
The listing of Botala Energy also brings benefits to the broader Botswana economy. It increases investor interest, contributing to the liquidity and vibrancy of the market. Botswana, traditionally reliant on diamonds, recognizes the importance of diversifying its economic base. The inclusion of a dynamic and forward-looking company like Botala Energy on the exchange reflects the evolving economic landscape of the nation.
In the pursuit of economic diversification, the Botswana Stock Exchange serves as a bridge connecting visionary companies with investors who share their commitment to progress. By providing a marketplace for a diverse range of industries, from traditional sectors to emerging technologies, the exchange becomes a catalyst for economic resilience and sustainability.
Peter Grant, the Non-Executive Director of Botala Energy, shared some insights into the company’s operations. Since commencing exploration in Botswana, Botala has made significant progress, drilling exploration wells and pilot production wells. The company expects to become a modest producer of commercial gas within 12 months and increase production rapidly. Botala Energy has independently certified gas reserves and prospective resources within its project area, which have the potential to supply significant amounts of gas for power generation.
Grant also mentioned Botala Energy’s focus on delivering Liquefied Natural Gas (LNG) to off-grid communities, providing them with reliable and affordable electricity and gas. The company is exploring the commercial option of establishing an Energy Hub and Industrial Park near Palapye, where it aims to produce energy for Botswana and export it to neighboring South Africa. Additionally, Botala Energy plans to establish a solar/gas hybrid plant in Serowe to feed into the local grid, in collaboration with the Ngwato Development Trust.
Market analysts say the listing of Botala Energy on the Botswana Stock Exchange marks an important milestone for the company and the energy sector in Botswana. It provides the company with access to capital, fosters economic growth and diversification, and contributes to the global movement towards sustainable energy practices. Botala Energy’s innovative approach to gas exploration and development, combined with its commitment to clean energy production, positions it as a key player in shaping a greener and more sustainable future for Botswana.
Business
Beverages dominate Botswana’s food imports
Beverages dominate Botswana’s food imports for August 2023, according to the latest figures released by Statistics Botswana. The country imported beverages, spirits, and vinegar worth approximately P332 million during this month. This is a significant increase from the previous month, where the food import bill slightly rose from P1,063,990,477.2 in July 2023 to P1,233,702,300.4 in August 2023.
The total imports for Botswana in August 2023 were valued at P6,995,115,623.2, compared to P6,897,364,155.2 recorded in July 2023. Food imports accounted for 15.9 percent of this amount, contributing P1,233,702,300.4. Among the food items imported, beverages, spirits, and vinegar accounted for the majority at 26.9 percent. Cereals and sugars followed with 13.4 percent and 8.8 percent, respectively.
Within the category of beverages, spirits, and vinegar, the most imported commodities were mineral waters and aerated waters containing sugar or other sweetening matter or flavored, contributing 47.0 percent. Beer made from malt accounted for 16.7 percent, while fermented beverages and non-alcoholic beverages accounted for 15.9 percent. The import bill for beverages, spirits, and vinegar shows that the country imported mineral waters and aerated waters containing added sugar or other sweetening matter or flavored worth approximately P156 million. Beer made from malt accounted for around P55 million, while fermented beverages and non-alcoholic beverages were valued at around P79.1 million. Wine and liqueurs and cordials were also imported, with values of P12.6 million and P6.4 million, respectively.
In terms of cereals, dried maize excluding seed and other wheat and muslin accounted for 42.3 percent and 27.4 percent, respectively. Rice imports contributed 21.2 percent. The country spent approximately P165 million on cereal imports, with dried maize accounting for around P70 million, wheat around P45 million, and rice around P44.7 million.
Other food imports included preparations of cereals, flour, starch, or milk; pastry cooks’ products, which amounted to around P89 million. Preparations of vegetables, fruit, nuts, or other parts of plants accounted for around P88 million, while sugars and sugar confectionery were valued at around P108 million. Miscellaneous edible preparations, animal or vegetable fats and oils, dairy produce, prepared animal fodder, coffee, tea, and spices, fruits and nuts, meat, vegetables and certain roots and tubers, and products of the milling industry such as malt, starches, and wheat gluten were also imported, with values ranging from P13 million to P74.6 million.
In conclusion, beverages, particularly mineral waters and aerated waters containing sugar or other sweetening matter or flavored, dominate Botswana’s food imports for August 2023. The country also imports a significant amount of cereals, sugars, and other food products. These figures highlight the country’s reliance on imported food items and the need for strategies to promote domestic production and reduce dependence on imports.