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ESP value addition remains foggy

The value addition of the Economic Stimulus Programme (ESP) remains hazy with the recent budget failing to breakdown the estimated injection of P3billion over the two year period.

The rationale behind the ESP is to support domestic economic activities in the short-term while providing a foundation for sustainable growth for the economy in the long-term through investment in infrastructural development.

Presenting the 2016/17 budget speech, the minister of Finance and development planning Kenneth Matambo noted that the implementation of the ESP is scheduled to start in earnest in the 2016/2017 financial year.

However the expectation was for Matambo to explicitly reveal how much is going to be spent under the stimulus package, how many jobs will be created and then give estimates on its contribution to the deteriorating economic growth.

The minister proposed about P37 billion for the recurrent budget .From the P14 billion proposed under the development budget for the coming financial year, Matambo only mentioned a handful of projects under the stimulus programme amounting to a total of a mere P1.3 billion.

Sharing his views on the ESP, Research Manger at First National Bank (FNB) Moathlodi Sebabole said “the estimated value of over P3billion towards ESP over a 2-year period is not broken down into new money and existing money within the budgetary process and thus it is difficult to estimate the value add of ESP over and above the projects which will have been budgeted for in anyway.”

Sebabole highlighted that that the likelihood of job creation exists, however, more temporal as opposed to sustainable in nature. The targeted sectors include tourism development, agricultural production, construction and manufacturing.

“This is primarily due to the nature of most of the established ESP jobs which will involve construction and maintenance contracts both of which are finite in nature,” he said.

Further, Sebabole said even though the economy remains healthy, it is under pressure just like a lot of emerging markets economies. “It is worth noting that there are levers to pool for combination of savings drawdown and debt utilization in order to finance the envisaged deficits,” he said.

The economy is now expected to have grown around 1% in 2015, as supply side shocks of water and electricity continue to negate growth, whereas mining downturns also affect the overall health of the economy.

“At FNBB, we expect growth to remain below trend even in 2016 at sub-3% levels as mining recovery is expected to remain mild, while non-mining private sector will remain under pressure due to supply side shocks of water and electricity,” he said.

After three years of fiscal budget surpluses since 2011/12, the fiscal budget is now expected to undergo deficits in the current fiscal year and fiscal year 2016/17. This is on the back-drop of declining mineral revenue as commodity prices remain low and diamond sales are not as robust as prior years.

Additionally, the downturn in South African economy, as well as a weak rand has affected the SACU revenue which consists over 26% of the revenue. On the other hand, expenditure is expected to gradually grow for supplementary financing of backlog of projects and quasi-government organizations which are loss making such as BPC, WUC – coupled with some relief measures for drought and welfare.

The deficits are expected to total over P10billion in the two years, with FY15/16 deficit estimated at -2.8% of GDP, while the FY16/17 deficit is estimated at -3.2% of GDP – against threshold of budget deficit of -4% of GDP.

As stated in the budget speech, the deficits are expected to be financed from a combination of drawdown on government savings which total P35bio and debt participation as the total debt-to-GDP levels remain below threshold of 40%.

Sebabole said the deficits show a counter-cyclical cycle that the economy is currently running. “The risks in the medium term will arise if global recoveries do not come sooner, and thus government revenue remains under pressure for a while. Extended global volatilities might result in extended deficits, which might force government to enforce some fiscal austerities,” he stated.

He emphasized the need for government to effectively implement the projects as there is still underutilization of allocated funds, despite projects needs and backlogs. Sebabole said the untimely delivery of projects and quality of infrastructure projects raises need to accelerate active public-private-partnership in delivery of projects.

In his view the low debt-to-GDP ratios provide an opportunity for government to issue more bonds to finance the deficit, as well as engage private sector institutions to finance and act as advisory for some of the mega projects.

Total revenues and grants for 2016/17 are estimated at P48.40 billion, a decrease of P3.36 billion compared to the revised budget of P51.76 billion for 2015/16 due to a projected fall of 6.9 per cent in mineral revenues and 23.8 per cent in customs and excise receipts.

Mineral revenue contributes 35.2 per cent of the total revenues, followed by Customs and Excise at 24.3 per cent. Non-Mineral Income Tax and Value Added Tax come third and fourth at 21.2 per cent and 12.4 per cent respectively.

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Stargems Group establishes Training Center in BW

20th March 2023

Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.

The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.

“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.

In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices.  Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.

“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.

Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy,  Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.

“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.

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Food import bill slightly declines

20th March 2023

The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.

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Moody’s Reaffirms African Trade Insurance’s A3 Rating & Revises Outlook to Positive

13th March 2023

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.

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