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Reforms needed: BoB agrees with IMF

Linah Mohohlo, Governor at the central bank

Bank of Botswana, has concurred with Brettonwoods institution, International Monetary Fund (IMF), that Botswana has to make reforms, albeit moderate adjustments, if the country is to see itself graduate from middle income status to high income status.


Matthew Wright, Deputy Director, Monetary and Financial Stability at Bank of Botswana, said at an engagement between the Bank and the local media that the success rate for middle-income countries to graduate to the high-income category is low, with only 20 percent overcoming the trap.


For the current 2015 fiscal year, low-income economies are defined as those with a GNI per capita, calculated using the World Bank Atlas method, of $1,045 or less in 2013; middle-income economies are those with a GNI per capita of more than $1,045 but less than $12,746; high-income economies are those with a GNI per capita of $12,746 or more.

Lower-middle-income and upper-middle-income economies are separated at a GNI per capita of $4,125.Wright said that since 1960, about 51 percent of low-income countries have graduated to middle-income status but have since stagnated in that category.


He noted that in order to avoid staying in middle-income trap, the economic agenda must be inclusive but remain tightly focused. This includes financial inclusion which he said is a key element of inclusive growth.
Wright said there must be focus on binding constraints, saying “making modest adjustments can be effective.”


He also noted inefficient bureaucracy is an obstacle to economic progress. Wright said there is a need to strike a balance of social safety net programmes , that are sustainable, and well targeted to reach the right people, while ensuring that a dependency situation is created.


The IMF also noted in a seminar held in Mauritius, in November 2014, that Botswana and other countries in the sub Saharan African region such as Cabo Verde, Lesotho, Mauritius, Namibia, Seychelles, and Swaziland run the risk of being remaining in the income bracket of middle income countries.


Among the aspects touched on by IMF are: building sufficient policy buffers to absorb external shocks—especially since official financing flows for these countries will fall over time but At the same time, being aware of significant opportunity costs of buffers such as holding large reserves, especially in view of important infrastructure gaps that restrain long-term growth in such countries; promote diversification with policies to reduce the skills mismatch, If done right, these policies could help “crowd in” private sector employment, and also to implement public employment and wage policies that will improve labour market outcomes, and to avoid the government becoming the “employer of last resort”; boosting productivity with the quality of public spending.


The IMF noted the need to create “reform champions” that are insulated from short-term political cycles.


On the issues of financial inclusion, the IMF said “financial inclusion is crucial for structural transformation and inclusive growth—while noting that small middle-income countries have some of the most uneven distributions of income in the world.”


“Building on past success, small middle-income countries in sub-Saharan Africa have now set themselves the challenge of reaching high-income status and avoiding the middle income trap. While still positive, growth has slowed, as previous growth drivers weaken and the rise in per capita income wanes,” wrote the IMF, after the Mauritius seminar.


NDB, PRIVATISATION
While the standard response to the slow pace of the envisaged privatisation drive is that it has to be done in a pragmatic manner, the central bank posits that privatisation has been disappointing.


Matthew Wright, Deputy Director, Monetary and Financial Stability at Bank of Botswana said that privatisation the private sector must lead the next stage of development in Botswana.


Government adopted a Privatisation Policy in 2000 as part of a strategy to improve the efficiency of the public sector.


This strategy included the sale of public assets and outsourcing the non-core public services. However, Botswana Telecommunications Corporation Limited (BTCL), whose privatisation process has hit a snag while in the advanced stages.


The move to turn the National Development Bank (NDB) into a commercial bank kicked off with commencement of the transition Act in June 2014. NDB would become the first indigenous bank in Botswana, if it were to go public with Government remaining as a shareholder and citizens getting 49 percent, the same model proposed by BTCL.


Linah Mohohlo, Governor at the central bank, noted that NDB’s loss position is an example of why privatisation should be done in a pragmatic manner.


Mohohlo said that BoB has no control over NDB as it is a statutory body and is under the Ministry of Finance and Development Planning.  Mohohlo however revealed that NDB had breached a statutory requirement to submit its financials to Bob within six months after its March 2014 year end, only doing so early in 2015, citing a new core banking platform that it had introduced, as the reason for the delay.

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Business

BITC assisted companies rake in P2.96 billion in export earnings

21st June 2022
BITC-CEO-Keletsositse-Olebile

Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.

In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.

The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.

With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.

Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.

BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.

During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.

BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.

As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.

In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.

BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.

Another tool used for export development by BITC is the Botswana Trade Portal, which has experienced some growth in terms of user acceptance and utilisation globally. The portal provides among others a catalogue of information on international, regional and bilateral trade agreements to which Botswana is a party, including the applicable Rules, Regulations and Requirements and the Opportunities for Botswana Businesses on a product by product basis.

The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.

BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.

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Business

Inflation up 2.3 percent in May

21st June 2022
Inflation

Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.

According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).

With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.

In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.

Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.

The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.

The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.

The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.

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Global high inflation, slow growth bad news for Botswana

21st June 2022
World Bank President: David Malpass

In the latest June 2022 global economic prospects, released last week the World Bank has warned that low global economic growth and economic activity in global commodity markets such as China and Europe could negatively affect export revenues for Botswana and other Sub Saharan countries.

Recent data from Statistics Botswana show that Botswana’s exports destined to the global markets such as Asia and the European Union (EU) on monthly basis accounts for around 60.1 percent and 20.1 percent respectively.

The World Bank last week lowered its 2022 projections of global economic growth and indicated that the new forecasts could be bad news for countries like Botswana who are dependent on export mineral revenues. The Bank noted that just over two years after COVID-19 caused the deepest global recession since World War II, the world economy is again in danger and stated that this time it is facing high inflation and slow growth at the same time.

In the recent June projections, the bank lowered its forecast of global economic growth from the January 4.1 percent to 2.1 percent. “Our June forecasts reflect a sizable downgrade to the outlook: global growth is expected to slow sharply from 5.7 percent in 2021 to 2.9 percent this year. This also reflects a nearly one-third cut to our January 2022 forecast for this year of 4.1 percent,” a team of World Bank economists noted in the June 2022 Global Economic Prospects.

The World Bank indicated that exports from Botswana and other Sub Saharan countries could suffer from a substantial deceleration of activity in China and Europe. The Bank noted that exporters of industrial metals, crude oil, and ores such as Angola, Democratic Republic of Congo, Republic of Congo, South Africa, and Zambia could suffer from a substantial deceleration of activity in China.

On the other hand a sharp contraction of growth in the euro area could hurt exporters of agricultural products such as beef, coffee, tea, tobacco, cotton, and textiles from Botswana, Ethiopia, Madagascar and Malawi. “The faster-than-expected deceleration of the global economy and increased volatility of commodity prices could hurt many SSA commodity exporters,” said World Bank President David Malpass.

Malpass indicated that subdued growth in the global markets for Botswana and other Sub Saharan exports will likely persist throughout the decade because of weak investment in most of the world.

He noted that with inflation now running at multi-decade highs in many countries and supply expected to grow slowly, inflation could remain higher for longer than currently anticipated. “Even if a global recession is averted, the pain of stagflation could persist for several years— unless major supply increases are set in motion. Amid the war in Ukraine, surging inflation, and rising interest rates, global economic growth is expected to slump in 2022. Several years of above-average inflation and below-average growth are now likely,” said Malpass.

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