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Strong Pula boosts BSE gains

The Botswana Stock Exchange (BSE) has so far continued to impress in terms of USA dollar (USD) returns to local and foreign investors. As majority of African currencies tumble due to the rout in commodity prices amid weak demand in China, the BSE which is the sixth largest stock exchange in Africa, has returned gains of 0.91% in USD terms, thanks largely to the resilient strong pula.

According to the African Alliance weekly report, as of 26 October, the biggest gainer in USD terms was Namibia at 6.21% followed by Botswana. While all various African stock exchanges lost considerably in USD terms despite gains in local currencies. The biggest loser so far has been Zambia at -50%. The Zambian Kwacha has been on downward spiral as the copper producing country grapples with weak copper prices that have seen several mines close down due to prices below the production cost.

It was a busy week for the BSE, particularly on Wednesday as the markets traded 1 570 915 of shares to make the day’s revenue of over P5 million. The biggest trader on that day was Choppies, whose trade amounted to 28% of traded volume of shares. As the year approaches the end, investors will look back at their portfolios with a smile as they realise the gains they have made so far. The Year to date(YTD) percentage change show that 16 companies out of 23 listed in the domestic counter have seen impressive gains.

The biggest winners so far have been Wilderness Safari, Sefalana, Chobe, Turnstar Holdings, Botswana Insurance Holdings Limited and Barclays. Investors are not going to be impressed with losers such as Furnmat, Engen, Stanchart and G4S. As their YTD% has been on the negative side.

On Wednesday 28, Letshego renewed its cautionary note warning investors to trade with caution, as the leading micro lending business announced that it has concluded negotiations and commercial terms with a third party in Nigeria to acquire a100% shareholding in a deposit taking financial institution that specializes in micro finance.

The deal remains subject to regulatory approval. Despite this, Letshego’s share price has fallen from P3.05 to close at P3.01, by end of week. It’s not certain whether investors are reacting to this deal due to Letshego venturing in Africa’s largest economy which is experiencing sluggish growth as the oil producing country grapples with falling oil prices.

In other related market news, MTN was left gobsmacked as its Nigerian subsidiary was fined $5.2 billion for failing to disconnect subscribers with unregistered sim cards. Nigeria is MTN’s biggest market with over 60 million subscribers. The report has left some investors scuttling for cover as they cashed on their investment, signalling their doubts about the management of the company and its future.

The panic selling led to MTN’s share prices dropping by more than 18 percent.  MTN could also face a potential investigation of insider trading, this stems from the announcement of the fine which was only released early afternoon on Monday despite its announcement in Nigeria on Sunday.

Questions are being asked as to why MTN didn’t release the grim news early morning, further more damning was the furious trade of MTN stocks early Monday morning as if the sellers were privy to the information before it was released to other shareholders.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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