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Why the economic outlook is gloomy

The precipitous drop in commodity prices will most likely cause a budget deficit, this is according to Econsult, a local consultancy firm. In their quarterly economic review, they point to struggling emerging markets, particularly China, Brazil and Russia, which are experiencing sluggish economic growth as the cause of the problems. The negative impacts will be largely felt by resource based economies such as Botswana, which has failed to diversify its diamond led economy.


The weak demand for diamonds has resulted in DeBeers reducing prices as much as 10% to stimulate demand, which proved to be a futile move as manufacturers have already enough in their inventories. The slump in diamond sales is expected to persist until 2016, putting pressure on government revenues due to lowered mineral exports.


“Lower exports and government mineral revenues will most likely lead to balance of payments and fiscal deficits in the second half of the year, perhaps extending into 2016,” read part of the review, before adding that “As a result, our revised forecast for real GDP growth for 2015 is now only 1%, lower than the revised projection of 2.6% released by the Ministry of Finance and Development Planning in its Budget Strategy Paper in September.”


Despite the slump in diamond sales, the economy has noted growth in non-mining private sectors which impressed at a robust growth rate of 5%. The pula remained strong compared to its neighbouring countries which have seen their currencies tumbling on the face of falling commodity prices. This has provided relief as it put aside any fears of immediate crisis.


The Econsult review warns that the fall in commodity prices is not the only problem policymakers in Botswana should be concerned with. Instead they point to a series of maladies which continue to cast a dark shadow on the economic prospects of the country.

These include, the water and electricity crisis, lack of transparency in immigration, slow progress in implementing promised reforms to improve business climate, slow progress in establishing a framework for public private partnerships and no implementation of privatisation commitments. “All of these add up to an environment of increasing economic uncertainty, which is a deterrent to investment both local and foreign, and job creation,” warned the consultancy firm.


The Econsult quarterly economic report has indicated that the government’s effort to stimulate the economy through the Economic Stimulus Package would have a two pronged outcome. In the short term it will boost economic activity and some job creation, particularly in the construction sector. In the long term “it seems unlikely that the stimulus package will address underlying constraints or help move the economy onto a higher long-term growth path. The real causes of slowing growth are not a lack of government spending, but a lack of competitiveness,” noted Econsult.


The consultancy firm further noted that the stimulus package should be met with caution as it could make things worse. They pointed out that the package will move the budget to larger deficits, therefore government spending should be efficient and accompanied by proper project management that will ensure money is invested in projects that could justify the financial investment through high returns.


“A rush to implement projects under the stimulus package is unlikely to see these fundamental issues addressed. It is essential that a focus on additional short-term spending does not distract attention from the need for fundamental structural reforms that will addresses competitiveness and productivity issues, which are essential for sustainable long-term growth and job creation,” advised Econsult.


In another report that corroborates Econsult’s dim view on Botswana’s growth prospects, the International Monetary Fund (IMF) has painted a gloomy picture of weaker growth in Sub Saharan countries, including Botswana.  Through their latest Regional Economic Outlook, titled Dealing with the Gathering Clouds, the IMF said growth in Sub-Saharan Africa has weakened markedly, and is now expected at 3.75 percent this year and 4.25 percent in 2016, from 5 percent in 2014.


“Of the three factors that have underpinned the region’s solid performance of the last decade or so—a much improved business and macroeconomic environment, high commodity prices, and highly accommodative global financial conditions — the latter two have become far less supportive. As a result, while activity remains more solid than in many other developing and emerging regions of the world, the strong growth momentum evident in the region in recent years has dissipated,” read part of the report.


The report goes on to note considerable variations across the region, with the region’s low-income countries experiencing growth due to ongoing infrastructure investment and solid private consumption. In contrast, the hardest hit has been on the region’s eight oil exporters — which together account for about half of the region’s GDP and include the largest producers, Nigeria and Angola — as falling export incomes and resulting sharp fiscal adjustments is taking their toll on activity.


The IMF warns that the situation could get worse before it gets better therefore a need for some fiscal and monetary policy adjustments. On the fiscal policy side, some countries might find it difficult to manoeuvre as they try to stimulate economy due to lack of access to cheaper capital. On the monetary policy front, IMF suggests that countries whose currency is not pegged should allow for the exchange rate depreciation to absorb the shock caused by decline in trade.

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Banking on Your Terms: Exploring the World of Self-Service Banking

23rd February 2024

In today’s digital age, banking is no longer just about visiting a branch during business hours. It’s about putting you, the customer, in the driver’s seat of your financial journey. But what exactly is self-service banking, and how do you stand to benefit from it as a customer?

Self-service banking is all about giving you the power to manage your finances on your terms. Whether you want to check your account balance at midnight, transfer money while on vacation, or deposit cash without waiting in line, self-service banking makes it possible. It’s like having a virtual branch at your fingertips, ready to assist you 24/7.

This shift towards self-service banking was catalyzed by various factors but it became easily accessible and accepted during the COVID-19 pandemic. People of all ages found themselves turning to digital channels out of necessity, and they discovered the freedom and flexibility it offers.

Anyone with a bank account and access to the internet or a smartphone can now bank anywhere and anytime. Whether you’re a tech-savvy millennial or someone who’s less comfortable with technology, you as the customer have the opportunity to manage your finances independently through online banking portal or downloading your bank’s mobile app. These platforms are designed to be user-friendly, with features like biometric authentication to ensure your transactions are secure.

Speaking of security, you might wonder how safe self-service banking really is. Banks invest heavily in encryption and other security measures to protect your information. In addition to that, features like real-time fraud detection and AI-powered risk management add an extra layer of protection.

Now, you might be thinking, “What’s the catch? Does self-service banking come with a cost?” The good news is that for the most part, it’s free. Banks offer these digital services as part of their commitment to customer satisfaction. However, some transactions, like wire transfers or expedited bill payments, may incur a small service fee.

At Bank Gaborone, our electronic channels offer a plethora of services around the clock to cater to your banking requirements. This includes our Mobile App, which doesn’t require data access for Orange and Mascom users. We also have e-Pula Internet Banking portal, available at https://www.bankgaborone.co.bw as well as Tobetsa Mobile Banking which is accessible via *187*247#. Our ATMs also offer the flexibility of allowing you to deposit, withdraw cash, and more.

With self-service banking, you have the reins of your financial affairs, accessible from the comfort of your home, workplace, or while you’re on the move. So why wait? Take control of your finances today with self-service banking.

Duduetsang Chappelle-Molloy is Head: Marketing and Corporate Communication Services

 

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Botswana records over P6 billion trade deficit

7th February 2024

Botswana has recently recorded a significant trade deficit of over P6 billion. This trade deficit, which occurred in November 2023, follows another deficit of P4.7 billion recorded in October of the same year. These figures, released by Statistics Botswana, highlight a decline in export revenues as the main cause of the trade deficit.

In November 2023, Botswana’s total export revenues amounted to P2.9 billion, a decrease of 24.3 percent from the previous month. Diamonds, a major contributor to Botswana’s exports, experienced a significant decline of 44.1 percent during this period. This decline in diamond exports played a significant role in the overall decrease in export revenues. However, diamonds still remained the leading export commodity group, contributing 44.2 percent to export revenues. Copper and Machinery & Electrical Equipment followed, contributing 25.8 percent and 10.1 percent, respectively.

Asia emerged as the leading export market for Botswana, receiving exports worth P1.18 billion in November 2023. The United Arab Emirates, China, and Hong Kong were the top destinations within Asia, receiving 18.6 percent, 14.2 percent, and 3.8 percent of total exports, respectively. Diamonds and Copper were the major commodity groups exported to Asia.

The Southern African Customs Union (SACU) received Botswana’s exports worth P685.7 million, with South Africa being the main recipient within SACU. The European Union (EU) received exports worth P463.2 million, primarily through Belgium. Australia received exports worth P290 million, while the United States received exports valued at P69.6 million, mostly composed of diamonds.

On the import side, Botswana imported goods worth P9.5 billion in November 2023, representing an increase of 11.2 percent from the previous month. The increase in imports was mainly driven by a rise in Diamonds and Chemicals & Rubber Products imports. Diamonds contributed 23.3 percent to total imports, followed by Fuel and Food, Beverages & Tobacco at 19.4 percent and 15.0 percent, respectively.

The SACU region was the top supplier of imports to Botswana, accounting for 77.7 percent of total imports. South Africa contributed the largest share at 57.2 percent, followed by Namibia at 20.0 percent. Imports from Asia accounted for 9.8 percent of total imports, with Diamonds, Machinery & Electrical Equipment, and Chemicals & Rubber Products being the major commodity groups imported. The EU supplied Botswana with imports worth 3.2 percent of total imports, primarily in the form of Machinery & Electrical Equipment, Diamonds, and Chemicals & Rubber Products.

Botswana’s recent trade deficit of over P6 billion highlights a decline in export revenues, particularly in the diamond sector. While Asia remains the leading export market for Botswana, the country heavily relies on imports from the SACU region, particularly South Africa. Addressing the trade deficit will require diversification of export markets and sectors, as well as efforts to promote domestic industries and reduce reliance on imports.

 

 

 

 

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Business sector optimistic about 2024

7th February 2024

The business sector in Botswana is optimistic about the year 2024, according to a recent survey conducted by the Bank of Botswana (BoB). The survey collected information from businesses in various sectors, including agriculture, mining, manufacturing, construction, and finance, among others. The results of the survey indicate that businesses expect trading conditions to improve in the first quarter of 2024 and remain favorable throughout the year.

The researchers found that firms anticipate improvements in investment, profitability, and goods and services exported in the fourth quarter of 2023 compared to the previous quarter. These expectations, combined with anticipated growth in all sectors except construction and real estate, contribute to the overall confidence in business conditions. Furthermore, businesses expect further improvements in the first quarter of 2024 and throughout the entire year.

Confidence among domestic market-oriented firms may decline slightly in the first quarter of 2024, but overall optimism is expected to improve throughout the year, consistent with the anticipated domestic economic recovery. Firms in sectors such as mining, retail, accommodation, transport, manufacturing, agriculture, and finance are driving this confidence. Export-oriented firms also show increased optimism in the first quarter of 2024 and for the entire year.

All sectors, except agriculture, which remains neutral, are optimistic about the first quarter of 2024 and the year ending in December 2024. This optimism is likely supported by government interventions to support economic activity, including the two-year Transitional National Development Plan (TNDP) and reforms aimed at improving the business environment. The anticipated improvement in profitability, goods and services exported, and business investment further contributes to the positive outlook.

Firms expect lending rates and borrowing volumes to increase in the 12-month period ending in December 2024. This increase in borrowing is consistent with the expected rise in investment, inventories, and goods and services exported. Firms anticipate that domestic economic performance will improve during this period. Domestic-oriented firms perceive access to credit from commercial banks in Botswana to be relaxed, while export-oriented firms prefer to borrow from South Africa.

During the fourth quarter of 2023, firms faced high cost pressures due to increased input costs, such as materials, utilities, and transport, resulting from supply constraints related to conflicts in Ukraine-Russia and Israel-Hamas. According to the survey report, the firms noted that cost pressures during the fourth quarter of 2023 were high, mainly attributable to increase in some input costs, such as materials, utilities, and transport arising from supply constraints related to the Ukraine-Russia and Israel-Hamas wars. “However, firms’ expectations about domestic inflation decreased, compared to the previous survey, and have remained within the Bank’s 3 – 6 percent objective range, averaging 5.4 percent for 2023 and 5.4 percent for 2024. This suggests that inflation expectations are well anchored, which is good for maintenance of price stability,” reads the survey report in part.

However, firms’ expectations about domestic inflation decreased compared to the previous survey, and inflation expectations remained within the Bank’s objective range of 3-6 percent. This suggests that inflation expectations are well anchored, which is beneficial for maintaining price stability.

In terms of challenges, most firms in the retail, accommodation, transport, manufacturing, construction, and finance sectors considered the exchange rate of the Pula to be unfavorable to their business operations. This is mainly because these firms import raw materials from South Africa and would prefer a stronger Pula against the South African rand. Additionally, firms in the retail, accommodation, transport, and mining sectors cited other challenges, including supply constraints from conflicts in Russia-Ukraine and Israel-Hamas, as well as new citizen economic empowerment policies that some firms considered unfavorable to foreign direct investment.

On the positive side, firms highlighted factors such as adequate water and electricity supply, a favorable political climate, an effective regulatory framework, the availability of skilled labor, and domestic and international demand as supportive to doing business in Botswana during the fourth quarter of 2023.

Overall, the business sector in Botswana is optimistic about the year 2024. The anticipated improvements in trading conditions, supported by government interventions and reforms, are expected to drive growth and profitability in various sectors. While challenges exist, businesses remain confident in the potential for economic recovery and expansion.

 

 

 

 

 

 

 

 

 

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