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FDI on a downward trend

Dr Keith Jefferis

Foreign Direct Investment in Botswana shows a downward movement when compared to the size of the economy, according to a third quarter review by Econsult.

An economic review compiled by economists, Dr Keith Jefferis, Brandon Basele, and Sethunya Sejoe has revealed that FDI inflows for the past ten year period from 2005-2014 has been on a downward trend.

“The trend over this ten year period is clearly downward,” stated the report.

The economists have attributed the downward trend to the dominance of mining in FDI in Botswana. Over the years the mining sector’s performance has been mutable.

“The performance of the mining sector has been highly variable in recent years, and is subject to major variations in global demand, which in turn impacts on economic growth as evidenced by the revision in official growth projections for 2015 from 4.9 percent to 2.6 percent as a result of softened rough diamond demand,” reads the report.

 The report states that using the IIP data over the period 2005-2014, in Pula terms, FDI inflows vary considerably from year to year. Notably, after increasing slowly between 2005 and 2008, FDI decreased significantly in 2009 – 10 before recovering sharply in 2011, then dropping back since then. During these periods, Botswana was hit by the 2008-9 global financial crisis, which was felt by the global economy and caused investment flows everywhere to decline.

The peak in 2011 is attributable to economic activity in the mining sector, particularly investments associated with Debswana’s “Cut 8” project to extend the life of the Jwaneng mine. Other notable economic activities included the relocation of the Diamond Trading Centre (DTC) to Gaborone and investment in sectors like finance.

Apart from the peak in 2011, FDI has declined from nearly 5% of GDP in 2006 to only 2.5% of GDP in 2014 – a fall of almost 50%.

“Overall, Botswana’s investment policy has not been as successful as it should have been, despite the government’s efforts to make the business environment competitive to attract direct investment,” the economists highlighted.

Data published by the BoB shows that FDI in Botswana is dominated by the mining sector, followed by banking and finance.

In addition the economists note that the structure of the economy has over the years shifted away from mining, manufacturing and agriculture towards services and many service activities require relatively little fixed capital, as compared to mining and manufacturing.

“Nevertheless, the downward trend is a concern, Botswana should be attracting increased FDI inflows if export-led economic diversification is to be achieved,” reads the report.

Foreign Direct Investment (FDI) has been found to be one of the factors that promote economic diversification. They further note that, Botswana’s low FDI may be due to the high costs of doing business and also the country’ success with the trade surplus and balance of Payment created by the high valued diamond export.

Several studies on FDI and competitiveness to asses Botswana’s performance, such as the Global Competitiveness report ranked Botswana 4th in Africa after Mauritius, South Africa and Rwanda and 74th in the World Bank doing Business Report, which also ranked Botswana 4th in Africa and 56th in the world on the ease of doing business.

The economists have underscored the need for better data to enable improved monitoring of FDI trends in different sectors of the economy.

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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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