Statistics headache
Business
Statistics Botswana has fallen short of the World Bank Statistics Index, adding to the downward trajectory since 2004. Dr Burton Mguni, Deputy General Statistician, revealed at the Statistics Botswana seminar that Botswana scored 45.5 points out of 100, putting it below the Sub Saharan African average.
The decline in the ratings of Statistics Botswana is not so much to do with data collection but rather the dissemination of it. This comes after the country failed to report part of statistics to UNESCO. Of the required data, health survey and poverty survey also ranked the country low.
Statistics Botswana is the principal data collecting, processing and disseminating agency responsible for coordinating, monitoring and supervising the National Statistical System. The organisation is currently undertaking the health survey and the poverty survey with results expected to be released before end of 2018. Dr Mguni said the release of the results will place Botswana above the Southern African Development Committee (SADC) average.
Statistics Botswana has caught flak for lack of comprehensive data which some believe is outdated and out of touch with the reality on the ground. As part of efforts to improve the frequency and quality of the country’s statistics, the organisation has partnered with Ministry of Finance and Development Planning as well as the country’s central bank, Bank of Botswana, to form Statistics Producer Committee which will provide a framework for addressing challenges facing the country.
The organisation recently released the Consumer Price Index (CPI) which showed that inflation rate for July was at 2.7%, the same rate it was the previous month. While most of the group indexes that constitute the CPI remain unchanged, this was partly offset by price increases in the Food and Non-Alcoholic Beverages group index after recording a 0.3% increase following notable price increases in bread and cereals, fruits, coffee, tea and cocoa.
The Food and Non-Alcoholic Beverages group is the main constituent of the CPI at 21.84%. In the last 6 months the group’s overall price increased by 1.8%. The core inflation, which excludes items that are prone to volatile price movements such as food, petrol and electricity, remained unchanged at 3.8%. Core inflation is thought to be an indicator of underlying long-term inflation.
According to Dr Mguni, the country used to do well in the consumer price index but that changed last year when it used 2004 as the base year instead of the required 10 year base. Furthermore, it was revealed that the manual used by the government was not up to date. He said the CPI would be rebased this year which would add more points for Botswana and improve its ranking. The rebasing of the CPI will ensure that the index gives an updated reflection of inflation.
Botswana has the second lowest inflation rate in Southern Africa after Mauritius. Zimbabwe is the only exception with its negative inflation rate. Southern African countries were hit the most by the El Nino phenomenon which affected agricultural production from late 2015 and extending into 2016. The drought brought upon by El Nino affected the production of Southern Africa’s staple crops such as maize, pushing up prices. These forced Southern African governments to engage in tight monetary policies to rein in inflation.
Meanwhile in Botswana, the Bank of Botswana has been bucking the trend of increasing bank rates, and instead opted for loose monetary policy to spur economic growth. The lowest inflation rate in more than 3 years has given the country’s central back room to manoeuvre unlike its regional peers.
The bank rate was recently cut by 50 basis points to 5.5% following a Monetary Policy Committee meeting. The recent cut means that Botswana now has the second lowest bank rate in Southern Africa, coming second to Mauritius again.
“The current state of the economy and both the domestic and external economic outlook as well as the inflation forecast provide scope for easing monetary policy to support economic activity without undermining maintenance of inflation within the Bank’s medium-term objective range of 3 –6 percent.
Accordingly, the Monetary Policy Committee decided to reduce the Bank Rate by half a percentage point to 5.5 percent.2Monetary policy is also aligned with the need to safeguard financial stability. In this respect, credit growth is considered to be at a sustainable level and poses no threat to financial stability,” read part of the Monetary Policy Committee statement.
In Southern Africa, Zambia’s economy is struggling as the copper producing country is devastated by low commodity prices, putting the country’s inflation rate as the fourth highest in the region at 20%. The country’s bank rate is currently at 15.5%.
Malawi, which declared a state of national disaster earlier this year over the worsening food crisis, has the second highest inflation rate at 22.6% and the bank rate is the highest at 27%. Mozambique’s inflation is the third highest at 20.68% due to higher food prices, while the interest rate is the second highest in the region at 17.25%.
The biggest oil producer, Angola, is still reeling from the fall of oil prices with the country’s inflation rate at 35.30% and interest rate at 16%. The region’s economic powerhouse and the largest economy in Africa, South Africa, is also trying to contain its inflation which at 6.30% is above the South Africa Reserve Bank’s target range of 3-6%. In efforts to control the spiralling inflation, the reserve bank has since raised the bank rate by 200 basis points since 2014, leaving the current rate at 7%.
Business
Moody’s Reaffirms African Trade Insurance’s A3 Rating & Revises Outlook to Positive
Moody’s Investors Service (“Moody’s”) has affirmed the A3 insurance financial strength rating (IFSR) of the African Trade Insurance Agency (ATI) for the fifth consecutive year and changed the outlook from stable to positive.
Moody’s noted that the change in outlook to positive reflects the strong growth in ATI’s membership base – that has resulted in improved portfolio diversification, strengthened capital adequacy, and the good profitability despite the challenging operating environment. In addition, ATI benefits from its preferred creditor status (PCS) amongst sovereign member states which protects it from the risk of default by member sovereigns through securing recoveries against claims paid on guarantees.
The strong membership and equity growth are some of the key considerations for the consistent reinstatement of ATI’s A/Stable rating by Standard & Poor’s and Moody’s rating, over the years. Also supporting the rating affirmation are; consistent improvement in financial performance, commitment of its shareholders who continue to uphold the preferred creditor status, its high quality and conservative investment portfolio as well as strong relationships with a number of global reinsurers that provide significant risk-bearing capacity.
With the change in outlook to “positive”, ATI is now better placed to provide enhanced support to its member countries, attract additional shareholding and grow its portfolio. The positive outlook is an indication that if ATI continues to demonstrate its strong underwriting performance and ability to recover claims under the preferred creditor arrangements, among other factors, an upward pressure towards an upgrade may be generated. The Moody’s press release can be accessed from here
Commenting on the rating, Africa Trade Insurance Chief Executive Officer Manuel Moses said: “This positive revision is in line with our 2023 – 2027 strategic objectives in which we set to improve our rating outlook to positive in the first year, and achieve an upgrade of at least “AA”/Stable rating by both Moody’s and S&P within this Strategic Plan period. We aim to achieve this by doubling our exposures and increasing our capital to more than USD1 billion.”
ATI’s mandate is to provide trade-credit and political risk insurance, as well as other risk mitigation products to its member countries and related public and private sector actors. These insurance products not only directly encourage and facilitate foreign direct investment as well as local private sector investment in our member countries, but also contribute to intra- and extra-African trade.
About The African Trade Insurance Agency
ATI was founded in 2001 by African States to cover trade and investment risks of companies doing business in Africa. ATI predominantly provides Political Risk, Credit Insurance and, Surety Insurance. Since inception, ATI has supported US$78 billion worth of investments and trade into Africa. For over a decade, ATI has maintained an ‘A/Stable’ rating for Financial Strength and Counterparty Credit by Standard & Poor’s, and in 2019, ATI obtained an A3/Stable rating from Moody’s, which has now been revised to A3/Positive.
Business
Moody’s Reaffirms African Trade Insurance’s A3 Rating & Revises Outlook to Positive
Moody’s Investors Service (“Moody’s”) has affirmed the A3 insurance financial strength rating (IFSR) of the African Trade Insurance Agency (ATI) for the fifth consecutive year and changed the outlook from stable to positive.
Moody’s noted that the change in outlook to positive reflects the strong growth in ATI’s membership base – that has resulted in improved portfolio diversification, strengthened capital adequacy, and the good profitability despite the challenging operating environment. In addition, ATI benefits from its preferred creditor status (PCS) amongst sovereign member states which protects it from the risk of default by member sovereigns through securing recoveries against claims paid on guarantees.
The strong membership and equity growth are some of the key considerations for the consistent reinstatement of ATI’s A/Stable rating by Standard & Poor’s and Moody’s rating, over the years. Also supporting the rating affirmation are; consistent improvement in financial performance, commitment of its shareholders who continue to uphold the preferred creditor status, its high quality and conservative investment portfolio as well as strong relationships with a number of global reinsurers that provide significant risk-bearing capacity.
With the change in outlook to “positive”, ATI is now better placed to provide enhanced support to its member countries, attract additional shareholding and grow its portfolio. The positive outlook is an indication that if ATI continues to demonstrate its strong underwriting performance and ability to recover claims under the preferred creditor arrangements, among other factors, an upward pressure towards an upgrade may be generated. The Moody’s press release can be accessed from here
Commenting on the rating, Africa Trade Insurance Chief Executive Officer Manuel Moses said: “This positive revision is in line with our 2023 – 2027 strategic objectives in which we set to improve our rating outlook to positive in the first year, and achieve an upgrade of at least “AA”/Stable rating by both Moody’s and S&P within this Strategic Plan period. We aim to achieve this by doubling our exposures and increasing our capital to more than USD1 billion.”
ATI’s mandate is to provide trade-credit and political risk insurance, as well as other risk mitigation products to its member countries and related public and private sector actors. These insurance products not only directly encourage and facilitate foreign direct investment as well as local private sector investment in our member countries, but also contribute to intra- and extra-African trade.
About The African Trade Insurance Agency
ATI was founded in 2001 by African States to cover trade and investment risks of companies doing business in Africa. ATI predominantly provides Political Risk, Credit Insurance and, Surety Insurance. Since inception, ATI has supported US$78 billion worth of investments and trade into Africa. For over a decade, ATI has maintained an ‘A/Stable’ rating for Financial Strength and Counterparty Credit by Standard & Poor’s, and in 2019, ATI obtained an A3/Stable rating from Moody’s, which has now been revised to A3/Positive.
Business
BoB confident inflation will return to objective range in Q2 2024
Bank of Botswana anticipate that inflation will normalise in the second quarter of the year 2024 after staying above the central bank’s objective range for over a year now. Governor Moses Pelaelo said when launching the monetary policy statement for 2023 on Wednesday.
Inflation was above the Bank of Botswana’s inflation objective range of 3 – 6 percent in 2022, against the background of improved domestic demand, upward adjustment in administered prices, as well as higher foreign inflation.
Inflation increased significantly from an average of 6.7 percent in 2021 to an average of 12.2 percent in 2022, thus remaining above the Bank’s 3 – 6 percent objective range since May 2021.
The high inflation in 2022 was mainly due to significant upward adjustment of administered prices, which added 5.2 percentage points to inflation during the year and associated second-round effects.
However, inflation generally trended downwards from September 2022 and was 12.4 percent in December 2022, higher than the 8.7 percent in December 2021. Food price inflation also increased from 7.2 percent in December 2021 to 16.9 percent in December 2022, in the context of significant domestic price increases for bread and cereals, oils and vegetables.
Regarding core inflation measures, the 16 percent trimmed mean inflation increased from 8 percent in December 2021 to 11.2 percent in December 2022, while inflation excluding administered prices increased from 7.1 percent to 8.7 percent in the same period.
Inflation has generally been on a downward trend since September 2022. It is projected that the downward trend will be sustained and that inflation will revert to within the Bank’s 3 – 6 percent medium-term objective range in the second quarter of 2024.
According to Governor Pelaelo this will be mainly on account of the dissipating impact of the earlier increases in administered prices, the recent reduction in domestic fuel prices, the expected decrease in international commodity prices and implementation of a smaller downward annual rate of crawl for the Pula exchange rate.
The projection also considers the anticipated increase in economic activity supported by both fiscal policy and relatively accommodative monetary conditions; the impact of the recent increase in private school fees in January 2023; the impact of the price increase in Kgalagadi Breweries Limited (KBL) products effective February 1, 2022; the expected upward adjustment of Botswana Housing Corporation (BHC) rentals and electricity tariffs in April 2023 and April 202411; as well as the possibility of higher prices due to resumption of the 14 percent VAT following implementation of the Government’s temporary inflation relief measures introduced on August 1, 2022.
Pelaelo said in the 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; the adverse economic and price effects of the protracted Russia-Ukraine war; the uncertain COVID-19 profile; and ongoing tension between China and the United Sates over South China Sea and Taiwan.
On the domestic front, the risks for higher inflation than currently projected relate to possible annual adjustments in administered prices not included in the forecast; short term consequences of import restrictions; prospective fiscal developments, namely implementation of potentially expansionary two-year TNDP.
The possibility of a higher than projected impact of the resumption of the 14 percent VAT (from 12 percent) in the second quarter of 2023; upward pressure on wages across the country emanating from the 5 percent increase in public service salaries effective April 1, 2023; were also highlighted as some of the factors that could lead to higher general price adjustments.
Pelaelo also added that there is also a likelihood of an upward adjustment in domestic fuel prices, in response to any increase in international oil prices.
He said these risks are, however, moderated by the possibility of weaker-than-anticipated domestic and global economic activity due to geo political tensions and possible restrictions in response to any emergence of new COVID-19 variants.
Lower international commodity prices than currently projected could also result in lower inflation, as would capacity constraints in project implementation. Meanwhile, according to the December 2022 Bank’s Business Expectations Survey, the business community expects inflation to remain above the Bank’s objective range in 2023.