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Analysts endorse Khama stimulus plan

The move by President Ian Khama to use part of $8.5 billion in foreign exchange reserves to stimulate the economy after a drop in diamond prices hit growth has been endorsed by economic analysts, however they cannot measure to what extent this plan might have on the economy.


President Khama said Botswana will use some of its foreign currency reserves to fund an economic stimulus program after growth slowed. Khama said the objective is to stimulate the economy for accelerated employment creation and diversification. The stimulus plan will target tourism, farming, the construction of buildings and roads and manufacturing.


The country will be “bringing back part of our funds which are managed in other countries for use here at home,” he said in the broadcast. “We have built up sufficient reserves and the time has come to use these reserves.”


Diamonds account for around 75 percent of Botswana's foreign exchange earnings and 30 percent of GDP, but gem demand has slowed since late 2014 as middlemen who buy rough stones struggle with a stronger dollar and liquidity problems.


The program includes fast-tracking the provision of services to 37,000 plots of land, building 4,480 houses and accommodation for teachers and nurses. The government plans to build 144 school classrooms and more than 90 laboratories, plus new roads in the towns of Lobatse, Molepolole and Francistown.


The stimulus package is not peculiar to Botswana only.  Different countries around the world have unleashed various forms of stimulus packages to shore up their economy as these times we are in needs solutions that are outside the box.
Research manager with First National Bank, Moatlhodi Sebabole noted that the targeted sectors have been experiencing slow growth and are aligned to the identified areas in the special economic zones. 

He said there are opportunities to boost tourism sector especially with more of our tourism sites gaining world heritage status; agriculture is vulnerable to drought and disease plagues but potential remains to boost the sector further beyond just the beef exports; manufacturing & construction allow for capacity and therefore focusing on stimulating those areas could be based on their potential to play a bigger role in the economy.


“Whether the sectors will be revived, rests entirely on the successful implementation, allocation and monitoring of the package in creating sustainable jobs; industries and proceeds that will benefit the country,” he said.


However, the stimulus plan is only as good as emphasis on return on investment because tapping into reserves means we reduce the cushion that we have against economic volatilities and therefore the emphasis should be on the value that will be derived from using these reserves at this economic turbulent time.


Sebabole highlighted the need for both the supplementary budget and implementation plan. “There has to be a needs-analysis to identify the best case scenario for allocation of these funds as well as how much of the reserves we want to tap on,” he said.  


He said government has an alternative to boost economic activity through debt participation by using its P15billion bond programme which is currently at around 60% utilization and one of its bond, BW003 maturing end of this month at a quantum of P1.6billion.


“Given the favourable sovereign ratings and appetite to lend to government, there needs to be a robust analysis on the pros and cons of tapping on reserves vs. borrowing so as to argue the case for what best serves the interest of proper stimulus,” he noted.


Sebabole cautioned that reserves act as an insurance and buffer against disturbances that can hurt the country’s growth, should we aggressively tap on our reserves and we will leave the economy vulnerable to shocks which might force as to borrow to unprecedented levels.


Investment analyst with Motswedi Securities Garry Juma said any stimulus package will have an effect over the economy. “However to what extent this will have on the economy depends on the size of the stimulus package of which we are still to get more colour on that,” said Juma.


Juma added that the move to have stimulus package will in no way affect inflation. “Our inflation is mostly exogenous; hence we don’t see this move causing any significant inflationary pressures.  In any case inflation is at an all-time low of around 3% thanks to lower fuel prices and relatively stable food prices as well as the appreciation of the BWP against the ZAR,” he said.  


 Juma said International standards require any country  to have at least 6months import cover, of which in Botswana’s  case there is  up to 20 months of import cover.  “This leaves us with enough ‘breathing space’ to utilise the money for other developmental expenditure which will have a positive effect on the economy,” he said.


Botswana in September slashed its 2015 growth forecast from 4.9 percent to 2.6 percent and said the southern African country would post a budget deficit this year and next. Botswana forecasts that its budget will swing to shortfall of 4.03 billion pula in the year ending March 2016 from a surplus of 3.67 billion pula in the previous year, due largely to slower sales of rough diamonds and lower metals prices.

The economy expanded by 2.5 percent in the second quarter, compared with 3.4 percent growth a year earlier, the central statistics office said.


 “Therefore, a balance has to be maintained, together with the debt management strategy as well as the management of the reserve funds to ensure the maintenance of the financial stability of the country,” he said.

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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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