BSE’s DCI losses spark
The Botswana Stock Exchange’s Domestic Company Index (DCI) lost 95 points during the last three months to end the second quarter at 10,107.12 points, reflecting a decline of 0.93%. The decline in the second quarter follows the 3.8% decline experienced in the first quarter, therefore in the past 6 months the DCI has lost 4.74% and 5.45% in the last 12 months. In this quarter, as in the first quarter, the rally was led by property and tourism stocks while retail and the financial stocks have been most hit.
It has been a rough start for global equities worldwide following a global markets rout that wiped trillions worth of equities valuation early in 2016 as the world’s largest economy fumbled. The precipitous fall in the Chinese equities led to a global contagion resulting in major markets taking a hit and sparking fresh concerns that a financial crisis is looming.
While the global markets were still reeling from the shock, the United Kingdom voted to leave the European Union, the aftermath was a shakeup in the financial markets that saw leading indices shedding off points. The turmoil in the financial markets has sparked fears that another financial crisis similar to the one experienced in 2008 is looming large in the horizon.
The BSE’s DCI opened the year at 10,610.14 points and from there on the DCI has been in decline. The first quarter ended at 10,2o2.64, representing a decline of 3.8%. The losses were extended in the second quarter with the DCI failing to find a footing, causing concerns amongst investors that their investments this year might be lower than the previous year. The index has been put under pressure by retail and financial stocks which are seen as being more risky given the prevailing market conditions.
The second quarter picks up from the first quarter with both sides of the coin, the gainers and losers, comprising mostly of the same companies that featured in the previous quarter. The trend further continues with property stocks outperforming the DCI index, with the exception of Letlole La Rona.
The travel and leisure (tourism) stocks maintained their favourability amongst investors as they continue to appreciate in value. The financial stocks continue to struggle, with only the exception of Botswana Insurance Holdings Limited and Barclays, as the two financial giants managed to post gains in both quarters. Big retailers also suffered losses signalling that investors are worried about the companies’ profitability given the stubbornly low inflation.
The top 5 gainers in the second quarter of the year were led by Cresta, the leading hotel operator in the country. Its share price has appreciated by 6.5% in the second quarter, bringing its yearly gains to 13%. New African Properties which broke records two weeks back after a single day trading of 26% of its issued shares worth P457.3 million has impressed with year to date returns of 10.6% after gaining 6.2% in the last three months. The Botswana Insurance Holdings Limited remained in the top five performers after a good showing in the first quarter. It retained third position in the second quarter after advancing by 3.8%, totalling its yearly returns to 9%. Chobe, a tourism outfit which operates luxurious lodges saw its share price jump by 5.28% in the quarter under review while its year to date gains is at 8.4%. Turnstar Holdings wrapped up our top five gainers as the real estate developer managed an impressive 6.2% increase in share price, bringing its yearly returns to 5.9%.
Other notable positive movements in the second quarter include RDC properties which brought in 3.13% while its year to date returns stand at 5.20%. Wilderness Holdings gained 5.2%, extending its yearly gains to 3.1%. Primetime moved by 1.3% resulting in 3.8% of year to date returns. Meanwhile Barclays remains the only bank so far this year to deliver share price gains as it locked in 2.9% in yearly returns.
Botswana Telecommunications Corporation Limited listed in April. The company on the first day of trading closed atP1.30, an incredible 30% surge from P1. However, it the shares quickly retreated and briefly traded for around P1.20 until settling for the current P1.10 price, which is still a win to the shareholders as it represent a 10% premium on the initial P1 they paid during the Initial Public Offering(IPO).
On the losing side, Standard Chartered Bank which is the oldest bank to operate in Botswana was the biggest loser as its share price plunged to new lows as it lost 19% and bringing the yearly losses to 24%. The embattled bank is having a bad year in the stock market after it posted profit which was 85% lower than the previous period. Letshego, the pan-African financial services provider continues to struggle despite its highly liquid stock. Letshego has seen its share price plummet by as much as 2.4% in the second quarter, bringing the yearly losses to 14%. The financial stocks continued the downward trend as First National Bank Botswana dropped 5% resulting in year to date loss of 11%. Choppies Enterprises had its share price tank by 2.4% in the last 3 months, extending its yearly losses to 9%. The furniture shop giant, Furnmart, lost 3% in the second quarter, delivering year to date loss of 4.4%.
The oldest companies in the stock market in terms of listing, Sefalana and Sechaba have had subdued share movements, in the end the two giants are still yet to post positive gains, with Sefalana down by 3.62% in yearly returns while Sechaba is trailing behind by yearly losses of about 1.7%.
The usually inactive Foreign Domestic Index has been on a winning streak as the index recorded positive growth of about 1.1%, pushing the FCI year to date gains by 1.5%.
The index was rallied by Botswana Diamonds which delivered 143% returns in the second quarter, while its yearly gains are at an impressive 162%. Lucara Diamond Corporation has not only impressed so far with its exceptional diamonds as its share price has been soaring since the discovery of Lesedi La Rona. The yearly returns stand at 70% after gaining about 45% in the second quarter. While companies trading under the foreign counter remained largely flat, Shumba Energy share price slid down by 9%, bringing its yearly losses to 10%.
With the first half of the year dusted, the question on many investors’ minds is whether the stock markets will improve without any further shocks or go through another crisis. In Botswana’s case, the probability of the DCI turning around to deliver good returns remains shaky. According to analysts at Trading Economics, they estimate it to trade at 9980.00 points in the third quarter, a further 1.3% decline.
“Botswana Stock Market (BSI DCI) Forecasts are projected using an autoregressive integrated moving average (ARIMA) model calibrated using our analysts’ expectations. We model the past behaviour of Botswana Stock Market (BSI DCI) using vast amounts of historical data and we adjust the coefficients of the econometric model by taking into account our analysts assessments and future expectations. The forecast for – Botswana Stock Market (BSI DCI) – was last predicted on Thursday, June 30, 2016,” they revealed in a research note.
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Botswana ranks most attractive for investment in mining
The Canadian research entity, Fraser Institute has ranked Botswana as the most attractive country for investment in mining in Africa.
In a new survey the entity assessed mineral endowments and mining related policies for 62 mining jurisdictions including Botswana.
The entity noted that in addition to mineral potential for mining jurisdictions, policy factors examined during the survey include uncertainty concerning the administration of current regulations, environmental regulations, regulatory duplication, the legal system & taxation regime, uncertainty concerning protected areas, disputed land claims, infrastructure, socio-economic & community development conditions, trade barriers, political stability, labor regulations, quality of the geological database, security, as well as labor & skills availability.
According to the survey Botswana is the highest ranked jurisdiction in Africa and the second-highest in the world for investment in mining, as a result of its favorable mining policy when compared to other jurisdictions. The survey report noted that Botswana increased its score in policy perception index and added that the score reflects decreased concerns over uncertainty concerning protected areas infrastructure, political stability, labor regulations & employment agreements. â€śBotswana is also the most attractive jurisdiction in Africa and top 10 in the world when considering policy and mineral potential. With the exception of Botswana, policy scores decreased in all African jurisdictions featured in the survey report.
The survey shows that Morocco is the second most attractive jurisdiction in Africa both for investment and when only policies are considered. However, Moroccoâ€™s policy perception index score decreased by almost 18 points and globally the country ranks 17th out of 62 mining jurisdictions this year, dropping out of the top 10 jurisdictions after ranking 2nd out of 84 jurisdictions in 2021 in terms of policy. The survey report noted that investors recently expressed increased concerns over the uncertainty of administration and enforcement of existing regulations, labor regulations & employment agreements, uncertainty concerning disputed land claims, socio economic agreements, community development conditions and trade barriers in the country.
The top jurisdiction in the world for investment in mining is Nevada, which moved up from 3rd place in 2021. At 100, Nevada has the highest policy perception index score this year, displacing the Republic of Ireland as the most attractive jurisdiction in terms of policy. Botswana ranked 31st last year, climbed 29 spots and now ranks 2nd. South Australia ranks 3rd, entering the top 10 jurisdictions in terms of policy after ranking 16th in 2021. Along with Nevada, Botswana, and South Australia, the top 10 ranked jurisdictions based on policy perception index scores are Utah, Newfoundland & Labrador, Alberta, Arizona, New Brunswick, Colorado, and Western Australia. â€śNevada ranked first this year with the highest PPI score of 100. Botswana took the second spot held by Morocco. The top 10 ranked jurisdictions are Nevada, Botswana, South Australia, Utah, Newfoundland & Labrador, Alberta, Arizona, New Brunswick, Colorado, and Western Australia. The United States is the region with the greatest number of jurisdictions (4) in the top 10 followed by Canada (3), Australia (2), and Africa (1).â€ť
In the survey report Fraser Institute noted that this year, Angola, Ivory Coast, Mozambique, South Sudan, and Zambia received enough responses to be included in the report. Eight African jurisdictions are ranked in the global bottom 10. Out of 62 mining jurisdictions, Zimbabwe ranks (62nd), Mozambique (61st), South Sudan (60th), Angola (59th), Zambia (58th), South Africa (57th), Democratic Republic of Congo (55th), and Tanzania (53rd). Zimbabwe has consistently ranked amongst the bottom 10 and has held that position for the previous nine years, according to the institute.
The institute noted that considering both policy and mineral potential Zimbabwe ranks the least attractive jurisdiction in the world for investment. â€śThis year, Mozambique, South Sudan, Angola, and Zambia joined Zimbabwe as among the least attractive jurisdictions. Also in the bottom 10 are South Africa, China, Democratic Republic of Congo (DRC), Papua New Guinea, and Tanzania. Zimbabwe, China, Democratic Republic of Congo, and South Africa were all in the bottom 10 jurisdictions last year. The 10 least attractive jurisdictions for investment based on policy perception index rankings are; (starting with the worst) Zimbabwe, Guinea (Conakry), Mozambique, China, Angola, Papua New Guinea, Democratic Republic of Congo (DRC), Nunavut, Mongolia, and South Africa.â€ť
The Fraser Institute on annual basis conducts an annual survey of mining and exploration companies to assess how mineral endowments and public policy factors affect exploration investment.
Over half of the respondents who participated in the recent survey (57 percent) are either the company President or vice-president, and 25 percent are either managers or senior managers. The companies that participated in the survey reported exploration spending of US$1.9 billion in 2022, according to the institute. The institute indicated that as part of the survey, questionnaires were sent to managers and executives around the world in companies involved in mining exploration, development, and other related activities, to assess their perceptions about various public policies that might affect mining investment.
The institute noted that the purpose of the survey is to create a report card that governments can use to improve their mining-related public policy in order to attract investment in their mining sector to better their economic productivity and employment.
The institute noted that while geologic and economic evaluations are always requirements for exploration, in todayâ€™s globally competitive economy where mining companies may be examining properties located on different continents, a regionâ€™s policy climate has taken on increased importance in attracting and winning investment. â€śThe Policy Perception Index or PPI provides a comprehensive assessment of the attractiveness of mining policies in a jurisdiction, and can serve as a report card to governments on how attractive their policies are from the point of view of an exploration manager.â€ť
Inflation drops to 7.9 percent in April
Botswanaâ€™s inflation rate dropped to 7.9 percent in April 2023, a 2.0 percentage drop 9.9 percent in March 2023, Statistics Botswanaâ€™s consumer price index reported on Monday.
The main contributors to the annual inflation rate in April 2023 were Transport (2.7 percent), Food & Non-Alcoholic Beverages (2.2 percent), and Miscellaneous Goods & Services (0.9 percent).
The inflation rates for regions between March 2023 and April 2023 indicated a decline of 2.3 percentage points for Cities & Townsâ€™, from 9.9 percent in March to 7.6 percent in April.
The Urban Villagesâ€™ inflation rate registered a drop of 1.8 percentage points, from 9.7 percent in March to 7.9 percent in April, whereas the Rural Villagesâ€™ inflation rate was 8.6 percent in April 2023, recording a decrease of 1.8 percentage points from the March rate of 10.4 percent.
The national Consumer Price Index realised a rise of 1.1 percent, from 128.2 in March 2023 to 129.7 in April 2023. The Cities & Towns index was 129.7 in April 2023, recording a growth of 1.2 percent from 128.2 in March.
The Urban Villages index registered an increase of 1.2 percent from 128.4 to 130.0 during the period under review, whilst the Rural Villages index rose by 0.9 percent from 127.9 in March to 129.0 in April 2023.
Four (4) group indices recorded changes of at least 1.0 percent between March and April 2023, specially; Miscellaneous Goods & Services (5.5 percent), Alcoholic Beverages & Tobacco (1.8 percent), Food & Non-Alcoholic Beverage (1.2 percent), and Recreation & Culture (1.2 percent).
The Miscellaneous Goods & Services group index registered an Increase of 5.5 percent, from 125.5 in March to 132.5 in April 2023. The rise was largely due to a growth in the constituent section indices of Insurance (11.2 percent) and Personal Care (2.1 percent).
The Alcoholic Beverages & Tobacco group index rose by 1.8 percent, from 126.5 in March 2023 to 128.7 in April 2023. The increase was owing to the rise in the constituent section indices of Alcoholic Beverages (1.9 percent) and Tobacco (1.1 percent).
The Food & Non-Alcoholic Beverages group index increased by 1.2 percent, from 136.6 in March to 138.2 in April 2023. The rise in the Food group index was attributed to the increases of; Vegetables (3.9 percent), Fish (Fresh, Chilled & Frozen) (1.7 percent), Coffee, Tea & Cocoa (1.5 percent), Milk, Cheese & Milk Products (1.5 percent) Fruits (1.4 percent) Meat (Fresh, Chilled & Frozen) (1.1 percent), Mineral Waters, Soft Drinks, Fruits & Vegetables Juices (1.1 percent) and Food Not Elsewhere Classified (1.0 percent).
The Recreation & Culture group index registered a growth of 1.2 percent, from 108.9 in March to 110.2 in April 2023. The rise was owed to the general increase in the constituent section indices, particularly; Recreational & Cultural Services (8.2 percent).
The All-Tradeables index recorded an increase of 0.9 percent in April 2023, from 134.2 in March 2023 to 135.4. The Non-Tradeables Index went up by 1.5 percent, from 120.1 in March to 121.8 in April 2023. The Domestic Tradeables Index moved from 131.8 in March to 133.3 in April 2023, registering a rise of 1.1 percent.
The Imported Tradeables Index realised a growth of 0.8 percent over the two periods, from 135.0 in March to 136.2 in April 2023. The All-Tradeables inflation rate was 10.3 percent in April 2023, registering a drop of 2.4 percentage points from the March 2023 rate of 12.7 percent.
The Imported Tradeables inflation rate went down by 3.1 percentage points from 12.4 percent in March to 9.3 percent in April 2023. The Non-Tradeables inflation was 4.6 percent in April 2023, a decline of 1.4 percentage points from the March 2023 rate of 6.0 percent. The Domestic Tradeables inflation rate registered a drop of 0.3 of a percentage point, from 13.4 percent in March to 13.1 percent in April 2023.
The Trimmed Mean Core inflation rate went down by 2.1 percentage points, from 9.2 percent in March 2023 to 7.1 percent in April 2023. The Core Inflation rate (excluding administered prices) was 8.3 percent in April 2023, a decrease of 0.6 of a percentage point from the March 2023 rate of 8.9 percent.
IMF warns of GDP decline in Sub Saharan Africa
A new report by International Monetary Fund (IMF) has warned that countries in Sub Saharan Africa including Botswana could record significant losses in Gross Domestic Product (GDP) as a result rising geo-political tensions among major economies in global trade.
Recent trends show that there is a deepening fragmentation in global economy, following US-led NATO war against Russia in Ukraine and trade war between US and China.
According to some local trade analysts the fragmentation of global economy leading to competing (US/EU bloc and China bloc could result with Sub Saharan Africa losing markets for some of its export commodities. The trade analysts noted that US & China are failing to implement an agreement, intended to stop the trade war and address some of the US fundamental concerns that instigated the war. USD34 billion worth of Chinese goods intended for the US market reportedly expired in July 2022 while US President Joe Biden administration was still reviewing import tariffs while another USD16 billion worth of goods expired in August, and a third batch of goods worth approximately USD100 billion expired in September. The analysts indicated that as a result of the trade war, the manufacturing sector at the US and China could lower production of goods, resulting with subdued demand for exports of raw materials and other commodities such as minerals from Botswana and other Sub Saharan countries.
In its April 2023 regional economic outlook report titled, â€śGeo-economic Fragmentation: Sub-Saharan Africa Caught between the Fault Linesâ€ť IMF indicated that recent data shows that rising geo-political tensions among major economies is intensifying economic and financial fragmentation in the global economy. The IMF cautioned that countries in Sub Saharan Africa could lose the most as a result of fragmented world.
The IMF stated that while countries in Sub-Saharan region benefited from increased global integration during the last two decades, the emergence of geo-economic fragmentation has exposed potential downsides. â€śSub-Saharan Africa has benefited from the expansion of economic ties over the past two decades. The region has formed new economic ties with non-traditional partners in the past two decades. Riding on the tailwinds of Chinaâ€™s globalization since the early 2000s, the value of exports from Sub-Saharan Africa to China increased tenfold over this period, largely driven by oil exports, according IMF adding that China has also emerged as an important source of external financing. Â The US and EU still supply most of the regionâ€™s foreign direct investment (FDI) stock, with China accounting for only 6 percent of it as of end-2020, according to IMF.
IMF stated that overall, the expansion and diversification of economic linkages with the major global economies benefited the region. â€śThe regionâ€™s trade openness measured as imports plus exports as share of GDP doubled from 20 percent of GDP before 2000 to about 40 percent. This doubling, together with buoyant commodity prices, among other factors, contributed to the growth take-off during this period, boosting living standards and development.â€ť
IMF noted that overall, sub-Saharan Africa is now almost equally connected with traditionally dominant (US and EU) and newly emerging (China, India, among others) partners and warned that the downside of increased economic integration is that sub-Saharan Africa has become more susceptible to global shocks. â€śSub-Saharan Africa stands to lose the most in a severely fragmented world compared to other regions. In the severe scenario of a world fully split into two isolated trading blocs, sub-Saharan Africa would be hit especially hard because it would lose access to a large share of current trade partners. About half of the regionâ€™s value of current international trade would be affected in a scenario in which the world is split into two trading blocs: one centered on the US and the EU (US/EU bloc) and the other centered on China.â€ť
IMF indicated that under a severe â€śgeo-economic fragmentationâ€ť scenario, trade flows would adjust over time. â€śBut as the region loses access to key export markets and experiences higher import prices, the median sub-Saharan African country would be expected to experience a permanent decline of 4 percent of real GDP after 10 years. Estimated losses are smaller than the losses during the COVID-19 pandemic but larger than those during the global financial crisis.â€ť
IMF warned that disruptions to capital flows and technology transfer could bring additional losses. â€śSeparately from the trade simulation results, in a world where countries were to cut off their capital flow ties with either bloc consistent with the preceding severe scenario, the region could lose about $10 billion of Foreign Direct Investment (FDI) and official development assistance inflows, equivalent to about half a percent of GDP a year, based on an average 2017â€“19 estimate. In the long run, trade restrictions and a reduction in FDI could also hinder much needed export-led growth and technology transfers.â€ť
IMF meanwhile said not all is bleak as some milder scenarios of shifting geopolitics may create new trade partnerships for the region. â€śIn a scenario in which ties are cut only between Russia and the US/EU while sub-Saharan African countries continue to trade freely (referred to as â€śstrategic decouplingâ€ť), trade flows would be diverted partly towards the rest of the world and intra-regional trade in sub-Saharan Africa may increase.â€ť
IMF recommended that countries in Sub Saharan Africa should build resilience that requires strengthening regional integration and expanding the pool of domestic resources to counter potential external shocks: According to IMF trade experts strengthening the ongoing regional trade integration under the African Continental Free Trade Area could help build resilience amid external shocks. Greater integration will require reducing tariff and non-tariff trade barriers, strengthening efficiency in customs, leveraging digitaliÂzation, and closing the infrastructure gaps, according to the experts.
The experts also recommended that countries in the region should deepen domestic financial markets as that can broaden the sources of financing and lower the volatility associated with excessive reliance on foreign inflows. â€śBy upgrading domestic financial market infrastrucÂture including through digitalization, transparency and regulation, and expanding financial product diversity, sub-Saharan African countries can expand financial inclusion, build a broader domestic investor base. Improving domestic revenue mobilization is critical to reducing the share of commodity-linked fiscal revenues.â€ť