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Botswana working age to increase by 29%

Between now and 2050, the working-age population will increase by 29 percent in Botswana, 36 percent in Lesotho, 53 percent in Namibia, and 43 percent in Swaziland, this is according to a World Bank report titled FOREVER YOUNG? Social Policies for a Changing Population in Southern Africa by Lucilla Maria Bruni; Jamele Rigolini; and Sara Troiano.

The report suggests that in South Africa the percentage figure will be lower, 28 percent, yet representing an increase of almost 10 million people. But even now, before these increases occur, unemployment is endemic.

According to the report, “Between a third and half of Southern Africa’s young males are looking for work but can’t find it. Many more, although not studying, are simply idle and out of the labour force. Employment prospects for young females are even dimmer.”

It further indicates that these unemployment and inactivity rates are high by international standards. In most low-income countries, unemployment is low—especially for males. In the OECD, only 20 percent of working-age males and 40 percent of females of that group are out of the labour force.

“Having so much of Southern Africa’s population (in some cases, the majority of the working-age group) out of the workforce hinders economic growth, equity, and poverty reduction. The economy is underutilizing a valuable resource—labour—while at the same time it needs to provide for a large number of dependents. And unemployment among youth means a double loss: the economy is forgoing not only the economic benefit of more workers, but the benefit of the very cohort that has achieved historically high levels of education.”

The World Bank report states that if unaddressed, this employment will soon turn into a full-fledged jobs crisis with long-lasting consequences. It says if youth do not find stable and well-paid employment, they will not be able to provide for themselves and their families.

“They will be unable to save for old age. And they will likely pass their precarious conditions on to their children, generating a vicious intergenerational cycle of poverty and vulnerability. This means long-term ramifications, spanning from social (poverty and vulnerability), to economic (low-productivity workers and low savings rates) and fiscal challenges (lower tax revenues and added demands on social assistance).

For young people now completing their educations, active labour market policies (ALMP), such as job intermediation and retraining services, can facilitate school-to-work transitions and ensure a better match between what workers can offer and what employers are looking for. For youth with gaps in technical expertise and “soſt skills” such as working within a group, dedicated training and job insertion programs can make a crucial difference.”

According to Bruni, Rigolini and Troiano, Southern Africa also needs action to improve the human capital of the many workers who have already leſt the education system.  They point out that the countries now have 40 million people of working age and many of them lack the skills for a growingly sophisticated global economy. Bolstering the employability of these workers will be a long-term challenge, demanding continuous and remedial education, labour insertion programs, and social assistance.

Invest in Youth’s Human Capital – Starting from the Early Ages

The report says tackling high youth unemployment and low productivity will require serious improvements in the coverage and quality of education. Fortunately, the dramatic fall in fertility rates will open up the fiscal space to invest more in the human capital of the country’s soon-to-be fewer children and its gradually shrinking youth cohort.

“In recent years, all countries in Southern Africa have made great strides in improving coverage of basic schooling. Most have achieved close to universal primary completion rates, but there remain important gaps in coverage at the secondary level. Currently, only between 20 and 50 percent of people born in the late 1990s manage to complete Grade 12. In South Africa, only 60 percent of the group born in 2010 are expected to complete that grade—and Lesotho will need to wait until the 2030 cohort to achieve that level. Making secondary completion universal will require continued investments for decades to come.

Addressing coverage alone will not suffice, however: all Southern African countries also score below international averages in measures of educational quality (Figure VIII). Lesotho, Namibia, and South Africa have among the lowest educational quality scores as measured by the imputed PISA metrics. Creating a solid human capital base requires years, if not decades of investment in education. It starts with building strong foundations for learning through early childhood development (ECD) services, which currently are offered in very few parts of Southern Africa. It continues with basic education that provides solid cognitive and socio-emotional skills. Later on, education curricula must provide the more specialized skills that the labour market will seek. While enrolment in the region’s tertiary institutions— colleges and universities—is relatively low by international standards, it is steadily growing, and it is important to lay down ahead of time institutional bases that will bolster this sector and guarantee the quality of the education it offers. It will be much more difficult and costly to improve badly performing tertiary institutions, than to get them right from the beginning.”

Southern Africa’s Epidemiological Profile

In the next decades, the demographic transition in itself will not much affect Southern Africa’s epidemiological profile, its unique mix and incidence of the various diseases and conditions that undermine public health. This is mostly because the aging of the population will proceed at a slow pace, the World Bank report suggests.

“As the simulations show, even if the spending profile across age groups were to rise to the levels of OECD countries, overall health care expenditures would increase only moderately. This does not imply, however, that the health sector will face no challenges. Changing lifestyles are adding new diseases that the health sector will have to confront. It will also need to keep up with old ones, which are not likely to fade out soon,” narrate the authors of the report.

The report further indicates that Non-communicable diseases (NCDs) are becoming a growing cause of years of life lost in Southern Africa, while chronic malnutrition and communicable diseases (CDs) such as HIV/AIDS continue to afflict millions of people (Figure IX).  It notes that young people are disproportionately at risk. New HIV/AIDS cases, for instance, are concentrated among this group, in large part due to continuation of unsafe sex practices. Redirecting the public health system will be no easy task. The service delivery model to tackle NCDs is very different and more expensive than the one used against CDs.

Rebalance Social Assistance across the Life Cycle

The World Bank report notes that countries in Southern Africa have generous and comprehensive social assistance systems. It says fiscal resources allocated to these programs are high in comparison with most emerging economies. ‘This is consistent with explicit policy priorities of the sub-region’s governments to assist poor and vulnerable people to achieve more equitable societies.’

“Social assistance is heavily geared towards supporting the elderly: resources per individual in the 65plus age group are four and a half times higher than those available to people aged 0-19 in Botswana and six times higher in South Africa. The ratio increases to 12 in Lesotho, 30 in Swaziland, and 38 in Namibia.”

The World Bank report further deducts that the lower resources allocated to children and youth help explain why cash transfers are too small to have much effect on poverty among the younger generations.  Apart from in South Africa, the impact on the nonelderly remains negligible. The “trickle down” effect of old-age pensions to younger household members is oſten called an important indirect benefit of pensions, suggests the report.

According to the report, “Overall, Southern Africa’s social assistance systems are geared towards a protective role and may miss an equally important role of promoting the human capital development of the younger generations. Well-designed cash transfers to children and youth can boost use of crucial health services such as growth monitoring checkups for infants, assuring healthier childhoods, and at later ages can help reduce school drop-out rates, in particular among the poor and vulnerable. ALMPs and continuous education programs can help vulnerable youth find places in the job market. Yet in Southern Africa these programs are rare.”

“What few of the countries have are often implemented in isolation from one another, which prevents tailoring assistance to the specific needs and vulnerabilities of each individual and following that person across the life cycle. Integrating social assistance programs into a well-articulated national system could bring significant gains in reach and efficiency. For vulnerable youth, social policies should go beyond the labour market to address the main threats to their welfare. These include unwanted pregnancy, HIV/AIDS, and low-quality education,” reads the report.

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Inflation will bounce back to objective range in 2022- BoB

25th October 2021
Moses Pelaelo

The Monetary Policy Committee (MPC) of the Bank of Botswana decided to maintain the Bank Rate at 3.75 percent at a meeting held on October 21, 2021.  Briefing members of the media moments after the meeting Bank of Botswana Governor Moses Pelaelo explained that Inflation decreased from 8.8 percent in August to 8.4 percent in September 2021, although remaining above the upper bound of the Bank’s medium-term objective range of 3 – 6 percent.

He said Inflation is projected to revert to within the objective range in the second quarter of 2022, mainly on account of the dissipating impact of the recent upward adjustment in value added tax (VAT) and administered prices from the inflation calculation; which altogether contributed 5.2 percentage points to the current level of inflation.  Overall, risks to the inflation outlook are assessed to be skewed to the upside.

These risks include the potential increase in international commodity prices beyond current forecasts; persistence of supply and logistical constraints due to lags in production; possible maintenance of travel restrictions and lockdowns due to the COVID-19 pandemic; domestic risk factors relating to regular annual price adjustments; as well as second-round effects of the recent increases in administered prices and inflation expectations that could lead to generalised higher price adjustments.

Furthermore, aggressive action by governments (for example, the Economic Recovery and Transformation Plan (ERTP)) and major central banks to bolster aggregate demand, as well as the successful rollout of the COVID-19 vaccination programmes, could add pressure to inflation.  These risks are, however, moderated by the possibility of weak domestic and global economic activity, with a likely further dampening effect on productivity due to periodic lockdowns and other forms of restrictions in response to the emergence of new COVID-19 variants.

A slow rollout of vaccines, resulting in the continuance of weak economic activity and the possible decline in international commodity prices could also result in lower inflation, as would capacity constraints in implementing the ERTP initiatives. Real Gross Domestic Product (GDP) for Botswana grew by 4.9 percent in the twelve months to June 2021, compared to a contraction of 5.1 percent in the corresponding period in 2020.

The increase in output is attributable to the expansion in production of both the mining and non-mining sectors, resulting from an improved performance of the economy from a low base in the corresponding period in the previous year. Mining output increased by 3 percent in the year to June 2021, because of a 3.2 percent increase in diamond mining output, compared to a contraction of 19.3 percent in 2020. Similarly, non-mining GDP grew by 5.4 percent in the twelve-month period ending June 2021, compared to a decrease of 0.7 percent in the corresponding period in 2020.

The increase in non-mining GDP was mainly due to expansion in output for construction, diamond traders, transport and storage, wholesale and retail and real estate.  Projections by the Ministry of Finance and Economic Development and the International Monetary Fund (IMF) suggest a rebound in economic growth for Botswana in 2021. The Ministry projects a growth rate of 9.7 percent in 2021, moderating to a growth of 4.3 percent in 2022.  On the other hand, the IMF forecasts the domestic economy to grow by 9.2 percent in 2021; and this is expected to moderate to a growth of 4.7 percent in 2022. The growth outcome will partly depend on success of the vaccine rollout.

According to the October 2021 World Economic Outlook (WEO), global output growth is forecast at 5.9 percent in 2021, 0.1 percentage point lower than in the July 2021 WEO update.  The downward revision reflects downgrades for advanced economies mainly due to supply disruptions, while the growth forecast for low-income countries was lowered as the slow rollout of COVID-19 vaccines weigh down on economic recovery.  Meanwhile, global output growth is anticipated to moderate to 4.9 percent in 2022, as some economies return to their pre-COVID-19 growth levels.

The South African Reserve Bank, for its part, projects that the South African GDP will grow by 5.3 percent in 2021, and slow to 1.7 percent in 2022.  The MPC notes that the short-term adverse developments in the domestic economy occur against a growth-enhancing environment.  These include accommodative monetary conditions, improvements in water and electricity supply, reforms to further improve the business environment and government interventions against COVID-19, including the vaccination rollout programme.

In addition, the successful implementation of ERTP should anchor the growth of exports and preservation of a sufficient buffer of foreign exchange reserves, which have recently fallen to an estimate of P47.9 billion (9.8 months of import cover) in September 2021.  Overall, it is projected that the economy will operate below full capacity in the short to medium term and, therefore, not creating any demand-driven inflationary pressures, going forward.

The projected increase in inflation in the short term is primarily due to transitory supply-side factors that, except for second-round effects and entrenched expectations (for example, through price adjustments by businesses, contractors, property owners and wage negotiations), do not normally attract monetary policy response. In this context, the MPC decided to continue with the accommodative monetary policy stance and maintain the Bank Rate at 3.75 percent.  Governor Moses Pelaelo noted that the Bank stands ready to respond appropriately as conditions warrant.

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SEZA to boost investment through Mayors forum

25th October 2021
SEZA-CEO-Lonely-Mogara

The Special Economic Zones Authority (SEZA) recently launched the Mayor’s forum. The Authority will engage with local governments to improve ease of doing business, boost investment, and fast track the development of Botswana’s Special Economic Zones (SEZs).

The Mayors Forum was established to recognise the vital role that local authorities play in infrastructure development; as they approve applications for planning, building and occupation permits. Local authorities also grant approvals for industrial licenses for manufacturing companies.
SEZA Chief Executive Officer (CEO) Lonely Mogara explained that the Mayor’s Forum was conceptualised after the Authority identified local authorities as critical partners in achieving its mandate and improving the ease of doing business. SEZA intends to develop legal instructions for different Ministries to align relevant laws with the SEZ Act, which will enable the operationalisation of the SEZ incentives.

“Engaging with local government will bring about the much-needed transformation as our SEZs are located in municipalities. For us, a good working relationship with local authorities is the special ingredient required for the efficient facilitation of SEZ investors, which will lead to their competitiveness and ultimate growth,” Mogara stated.

The Mayors Forum will focus on the referral of investors for establishment in different localities, efficient facilitation of investors, infrastructure and property development, and joint monitoring and evaluation of the SEZ programme at the local level. SEZA believes that collaborating with local authorities will bring about much-needed transformation in the areas where SEZs are located and ultimately within the national economy. Against this background, the concept of hosting a Mayors Forum was birthed to identify and provide solutions to possible barriers inhibiting ease of doing business.

One of the key outcomes of the Mayors Forum is the free flow of information between SEZA and local authorities. Further, the two will work together to change the business environment and achieve efficiency and competitiveness within the SEZs. Francistown Mayor Godisang Rasesigo was elected as the founding Chairman of the Mayors Forum. The forum will also include the executive leadership of all city, town and district councils, among them Mayors, City or Council Chairpersons, Town Clerks and District Commissioners.

Mogara explained that initial efforts would engage the local government in areas that host SEZA’s eight SEZs: Gaborone, Lobatse, Selebi Phikwe, Palapye, Francistown, Pandamatenga and Tuli Block. Meanwhile, Mogara told WeekendPost that they are confident that a modest 150 000 jobs could be unleashed in the next two to five years through a partnership with other government entities. He is adamant that the jobs will come from all the nine designated economic zones.

This publication gathers that the Authority is currently sitting on about P30 billion worth of investment. The investment, it is suggested, could be said to be locked up in government bureaucracy, awaiting the proper signatures for projects to take off. Mogara informed this publication that the Authority onboard investors who are bringing P200 million and above. He pointed out that more are injecting P1 billion investments compared to the lower stratum of their drive.

SEZA’s mandate hinges on the nine Special Economic Zones – being Gaborone (SSKIA), whose focus is of Mixed-use (Diamond Beneficiation, Aviation); Gaborone (Fairgrounds) for Financial services, professional services and corporate HQ village; Lobatse for Beef, leather & biogas park; Pandamatenga designated for Agriculture (cereal production); Selibe Phikwe area which is also of a Mixed-Use (Base metal beneficiation & value addition), Tuli Block Integrated coal value addition, dry port logistics centre, coal power generation and export; Francistown is set aside for International Multimodal logistics hub/ Mixed Use (Mining, logistics and downstream value-adding hub); whilst Palapye is for Horticulture.

The knowledge economy buzz speaks to SEZA’s agenda, according to Mogara. The CEO is determined to ensure that SEZA gets the buy-in from the government, parastatals and the private sector to deliver Botswana to a high economic status. “This will ensure more jobs, less poverty, more investment, and indeed wealth for Batswana,” quipped the enthusiastic Mogara. SEZA was established through the SEZ Act of 2015 and mandated with establishing, developing and managing the country’s SEZs. The Authority was tasked with creating a conducive domestic and foreign direct investment, diversifying the economy and increasing exports to facilitate employment creation.

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De Beers Q3 production up 28 %

25th October 2021
De-Beers

De Beers rough diamond production for the third quarter of 2021 increased by 28% to 9.2 million carats, reflecting planned higher Production to meet more robust demand for rough diamonds. In Botswana, Production increased by 33% to 6.4 million carats, primarily driven by the planned treatment of higher-grade ore at Jwaneng, partly offset by lower Production at Orapa due to the scheduled closure of Plant 1.

Namibia’s Production increased by 65% to 0.4 million carats, reflecting the marine fleet’s suspension during Q3 2020 as part of the response to lower demand at that time. South Africa production increased by 34% to 1.6 million carats due to the planned treatment of higher grade ore from the final cut of the Venetia open pit and an improvement in plant performance. Production in Canada decreased by 13% to 0.8 million carats due to lower grade ore being processed.

Demand for rough diamonds continued to be robust, with positive midstream sentiment reflecting strong demand for polished diamond jewellery, particularly in the key markets of the US and China. Rough diamond sales totalled 7.8 million carats (7.0 million carats on a consolidated basis) from two Sights, compared with 6.6 million carats (6.5 million carats on a consolidated basis) from three Sights in Q3 2020 and 7.3 million carats (6.5 million carats on consolidated basis) from two Sights in Q2 2021.

De Beers tightened Production guidance to 32 million carats (previously 32-33 million carats) due to continuing operational challenges, subject to the extent of any further Covid-19 related disruptions. Commenting on the production figures, Mark Cutifani, Chief Executive of De Beers parent company Anglo American, said: “Production is up 2%(1) compared to Q3 of last year, with our operating levels generally maintained at approximately 95%(2) of normal capacity.

The increase in Production is led by planned higher rough diamond production at De Beers, increased output from our Minas-Rio iron ore operation in Brazil, reflecting the planned pipeline maintenance in Q3 2020, and improved plant performance at our Kumba iron ore operations in South Africa. “We are broadly on track to deliver our full-year production guidance across all products while taking the opportunity to tighten up the guidance for diamonds, copper, and iron ore within our current range as we approach the end of the year.

“Our copper operations in Chile continue to work hard on mitigating the risk of water availability due to the challenges presented by the longest drought on record for the region, including sourcing water that is not suitable for use elsewhere and further increasing water recycling.”
On Wednesday, De Beers announced the value of rough diamond sales (Global Sightholder Sales and Auctions) for the eighth sales cycle of 2021. The company raked in US$ 490 million for the cycle, a slight improvement when compared to US$467 million recorded in 2020 cycle 8.

Owing to the restrictions on the movement of people and products in various jurisdictions around the globe, De Beers Group has continued to implement a more flexible approach to rough diamond sales during the eighth sales cycle of 2021, with the Sight event extended beyond its normal week-long duration.   As a result, the provisional rough diamond sales figure quoted for Cycle 8 represents the expected sales value from 4 October to 19 October. It remains subject to adjustment based on final completed sales.

Commenting on the cycle 8 sales De Beers Group Chief Executive Officer Bruce Cleaver said that: “As the diamond sector prepares for the key holiday season and US consumer demand for diamond jewellery continues to perform strongly, we saw further robust demand for rough diamonds in the eighth sales cycle of the year ahead of the Diwali holiday when demand for rough diamonds is likely to be affected by the closure of polishing factories in India.”

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