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Botswana maintains A2 rating or both foreign and domestic bonds

It could be a while before Botswana hits the ‘high’ mark under the Moody’s sovereign credit rankings, as the country retained the A2 rating for both foreign and domestic bonds together with the stable outlook in 2015.

The rating is based on the assessment that weighs the Government’s relatively strong balance sheet, net external creditor position and low public debt against potential challenges associated with the middle income status and a small economy.

The ratings agency notes that the key factor affirming Botswana’s rating is the fiscal resilience, supported by the sovereign wealth fund’s large net assets, at more than 35% of GDP, low and declining public debt currently at 15% of GDP.

“Government's fiscal resilience, supported by the Pula Fund's large assets  which amounted to more than US$5 billion (or 36.9% of GDP forecast for 2015) at end-September 2015 — and the expectation that the track record of responsible fiscal policy will continue. In this context, Moody's expects that the economic stimulus package the government considers will be limited in size and hence will neither significantly reduce the Pula Funds's large assets, nor raise Botswana's government debt-to-GDP ratio”.

The country's strong institutional framework, with forward-looking and transparent monetary policy as well as credible and rule-based fiscal policy is another factor that impelled the ratings agency to maintain the A2 rating.

The government has also recently introduced multi-year budgeting and is in the process of adopting a medium-term expenditure framework. “The ability to use Botswana's high level of sovereign wealth fund assets as a cushion together with policy credibility give the government enough space to implement counter-cyclical fiscal and monetary policy without jeopardizing macroeconomic stability and debt sustainability,” stated the Agency.

Moody’s added that the A2 government bond rating also captures Botswana's adherence to the rule of law and progress with respect to control of corruption.

The third factor behind Moody's decision to affirm Botswana's A2 rating and to maintain the stable outlook is the country's constrained economic strength  namely in light of a lack of diversification, a slowing real GDP trend growth, and the absence of a vibrant private sector that would drive growth and generate jobs.

“The economy relies on a 'natural resource-public sector' growth model, which induces constraints. The production potential of the diamond mining sector has been extended, but at increased cost, eroding profit margins,” stated the report.

Botswana is also grappling with persistently high unemployment, wide income inequality, high child and maternal mortality, and one of the highest HIV rates in the world, which together reduce the country's productive capacity.

Nonetheless, the ratings agency has bemoaned Botswana’s constrained ratings prompted by its low economic strength and especially by its high dependence on the diamond industry for economic growth, fiscal revenues and export proceeds.

“The country's economic strength is further diminished by very high unemployment, inequality and HIV rates”.

“The main area of concern regarding the institutional strength is the lack of government effectiveness, with a large  albeit declining  public sector that deliver social outcomes health, education indicators below those typical for an upper-middle income country,” the agency noted.

Botswana's local currency bond and deposit ceilings remain at Aa3, foreign currency deposit ceiling at A2/P-1, and foreign-currency bond ceiling at Aa3/P-1, unchanged.

The economy’s heavy reliance on the dominant diamond industry and the relatively slow pace of economic diversification remain key weaknesses for the rating over the long term. As in previous years, Moody’s noted that, given the healthy financial position and the stable political and financial environment, the risks that could put renewed pressure on the ratings are judged to be low.

In order to change the rating upwards,  Moody’s  has advised that  successful economic diversification over the medium term, combined with efficiencyenhancing public sector reforms could exert positive pressure on the rating. Lasting reduction in unemployment and inequality would also exert upward pressures on Botswana's creditworthiness.

The agency warned that a significant deterioration in the net asset position as well as the lack of structural reforms and diversification would exert downward pressure on the rating over the medium term. In the near term, expansionary fiscal policies that would lead to marked reduction of foreign exchange reserves would also put downward pressure on Botswana's creditworthiness.

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China’s GDP expands 3% in 2022 despite various pressures

2nd February 2023
China’s Gross Domestic Product (GDP) expanded by 3% year-on-year to 121.02 trillion yuan ($17.93 trillion) in 2022 despite being mired in various growth pressures, according to data from the National Bureau Statistics.

The annual growth rate beat a median economist forecast of 2.8% as polled by Reuters. The country’s fourth-quarter GDP growth of 2.9% also surpassed expectations for a 1.8% increase.

In 2022, the Chinese economy encountered more difficulties and challenges than was expected amid a complex domestic and international situation. However, NBS said economic growth stabilized after various measures were taken to shore up growth.

Industrial output rose 3.6% in 2022 over the previous year, while retail sales slightly shrank by 0.2% data show that fixed-asset investment increased 5.1% over 2021, with a 9.1% hike in manufacturing investment but a 10% fall in property investment.

China created 12.06 million new jobs in urban regions throughout the year, surpassing its annual target of 11 million, and officials have stressed the importance of continuing an employment-first policy in 2023.

Meanwhile, China tourism market is a step closer to robust recovery. Tourism operators are in high spirits because the market saw a good chance of a robust recovery during the Spring Festival holiday amid relaxed COVID-19 travel policies.

On January 27, the last day of the seven-day break, the Ministry of Culture and Tourism published an encouraging performance report of the tourism market. It said that domestic destinations and attractions received 308 million visits, up 23.1% year-on-year. The number is roughly 88.6% of that in 2019, they year before the pandemic hit.

According to the report, tourism-related revenue generated during the seven-day period was about 375.8 billion yuan ($55.41 billion), a year-on-year rise of 30%. The revenue was about 73% of that in 2019, the Ministry said.

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Jewellery manufacturing plant to create over 100 jobs

30th January 2023

The state of the art jewellery manufacturing plant that has been set up by international diamond and cutting company, KGK Diamonds Botswana will create over 100 jobs, of which 89 percent will be localized.

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Investors inject capital into Tsodilo Resources Company

25th January 2023

Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.

According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.

The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.

Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.

Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.

Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana.  The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.

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