The Bank of Botswana (BoB) has left the benchmark lending rate unchanged at 6 percent citing the medium-term outlook for inflation and domestic growth were within its targets.
The Central Bank says the current state of the economy and both the domestic and external economic outlook; including the inflation forecast suggest that the prevailing monetary policy stance is consistent with maintaining inflation within the Bank’s medium-term objective range of 3 – 6 percent.
Garry Juma, an investment analyst with Motswedi Securities said maintaining the rate at 6 percent is in line with expectations considering the low interest environment.
It’s not surprising that BoB has maintained the interest rate because the interest rates are at an all-time low. Credit growth was slow and any further reduction would affect banks thereby destabilizing the financial system,” Juma pointed out before adding that, “any reduction was not going to have an impact on credit growth considering there has been a sharp decline in the business sector credit and banks upgraded their lending criteria. They are not keen to lend to the mining sector even sectors related to mining.”
He highlighted that reducing the bank rate would not add up considering there hasn’t been any corresponding growth to interest cuts made last year.
“Any reduction would have put banks under pressure. Already First National Bank, Standard Chartered, Barclays have cautioned that they are expecting lower results,” he said.
Looking ahead he said they expect BoB not to change the bank rate because any increase will have a detrimental effect on the economy.
In Botswana, GDP growth is estimated at 1.2 percent in the twelve months to September 2015 compared to the revised 4.1 percent in the corresponding period in 2014, thus reflecting the contraction of 11.8 percent in mining production. Non-mining output increased by 3.7 percent.
Meanwhile data released by Statistics Botswana indicates that Inflation fell from 3.1 percent in December to 2.7 percent in January 2016. The decline has been attributed to the low domestic demand pressures and subdued foreign price developments contribute to the positive inflation outlook in the medium term.
“This outlook is subject to downside risks arising from sluggish global economic activity and the resultant weakening commodity prices. It could, however, be adversely affected by any unanticipated large increase in administered prices and government levies as well as international oil and food prices beyond current forecasts,” reads the statement.
Despite interest rates being at a 26 year low of 6.0 percent, annualised credit growth slowed from 12.4 percent in January 2015 to 9.8 percent in April, the lowest in four years.
The decline was mostly driven by a slowdown in the growth of credit to firms, which fell from 18.9 percent in January 2015 to 11.8 percent in April.
The Monetary Policy Committee concluded that the medium-term outlook for price stability remains positive, with inflation forecast to be close to the lower bound of the 3 – 6 percent medium-term objective range.
Inflation fell for several commodity groups, including: alcoholic beverages and tobacco (from 6.2 to 3.9 percent, in the absence of any further increase in the alcohol levy.
However, this was partly offset by rising inflation for: food and non-alcoholic beverages (from 0.7 to 1.2 percent. Inflation was unchanged for: housing, water, electricity, gas and other fuels (9.7 percent); and communication (0.5 percent).
This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.
“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.
Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.
A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.
Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.
A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.
Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.
In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.
The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.
In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.
Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.
The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”
In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.
Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.
The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.