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No liquidity crisis, No credit crunch – Mohohlo

The Governor of the Bank of Botswana, Linah Mohohlo

The Governor of the Bank of Botswana, Linah Mohohlo has said the banks were solid and under control, this follows misinformed reports that have been circulating suggesting that there is a liquidity crisis and bank customers face a credit crunch. “The banking sector in Botswana is sound and profitable; a tightening of the bank liquidity is what is evident,” Mohohlo said.


The Governor noted that though the banks are sound, profitability has declined as expenses increased faster than income however the situation varies from bank to bank.


Describing the prevailing liquidity situation with the banking sector Mohohlo said the banking sector has been faced with a situation of excess liquidity which saw banks dishing out loans at the same time charging higher interest rates on credit. Be that as it may, the reserve bank had been in communication with the banks that measures could be put in place to absorb the excess liquidity at any given point hence they should manage their risks.

A warning that most banks did not take heed off, hence they are grappling with tight liquidity problems. As result this has resulted in a period of rapid credit growth by commercial banks, compared to slower increase in deposits thus resulting in a sharp increase in the intermediation ratio, which is simply a ratio of bank loans to deposits.


“They are crying now because they did not manage their risk properly. I believe risk is something they are beginning to learn now. Banks were not taken by surprise it’s something that we have been warning them about to avoid a Laissez-faire approach in their operations,” Mohohlo said.  The Governor underscored the need for banks to impart skills to their staff.


“You can’t afford to be reckless banks should be mindful of how they remunerate their depositors and how they charge their credit,” Mohohlo said.


In the past five years, excess liquidity in the banking system as represented by outstanding BoBCs has declined from P17, 7 billion as at end 2010 to P4.6 billion in February 2015.


 “The main cause was the BoB phased reduction of the excess money that is continuously mopped by way of auctioning of BoBCs. The cap for this excess money currently is P5 Billion and it was put in place to encourage productive lending by banks as well as to moderate the cost of mopping up excess liquidity,” Mohohlo said.


She added that the recent economic and market developments have had no adverse impact on levels  of capital in banking industry, with the aggregate capital adequacy ratio at 19 percent  as at January 2015 and above the prudential limit of 15 percent.


In the 12 month period to January 2015, the aggregate industry balance sheet grew healthily by 11 percent, with deposits growing by 7 percent and credit growing by 13 percent.


The ratio increased from 53.1 percent at the end of 2010 to 87.6 percent in the period of four years to the need of 2014. Mohohlo said as  such funds  previously held  in BoBCs  have been diverted  to loans  by banks  and more  than doubled  growing by 104.3 percent from P22.1 billion in December 2010 to P45.2 billion in January 2015.


During the same period deposits increased at a slower pace of 31.7 percent from P40.4 billion to P53.2 billion in the same year period. “The slower growth in deposits is possibly due to sluggish growth in incomes, inadequate financial inclusion, more streamlined procedures for government funding of parastatals   and very low interest rates paid by banks on deposits,” she explained.


She highlighted that comparing with rest of Africa banks in Botswana are more profitable.


Mohohlo said the excess liquidity has been effectively absorbed by the economy to benefit businesses and households.


As funds available for lending income exhausted, it is inevitable that credit expansion would slow down. However credit has continued to grow to robust pace as evidenced by January 2015 annual growth rate of 13 percent, which is higher than nominal economic growth.


She said the fuss over the tightened lending criteria at banks is normal saying in situation of tighter liquidity banks tend to tighten lending criteria, while taking measures to boost deposits. “Even then current developments do not suggest that new lending will cease completely as growth in deposits remains positive,” said the Governor.


Mohohlo said it is imperative that banks undertake measures to attract deposits and focus on productive use of more limited funds available for lending.


“More emphasis on deposit mobilization and improved financial inclusion would be steps in the right direction towards a more mature banking sector,” she said.


The Governor said in situations like this of tight liquidity there are more complementary measure that there BoB stands ready to undertake in support of banks as they review their operations in an environment of reduced liquidity. These include reduction of the Primary Reserve Requirement and enhanced access to BoB lending facilities.


The BoB has since reduced the Primary Reserve Requirement from the current 10 percent to 5 percent with effect from April 1, 2015. This will release a total of P2.3 billion to augment the banks loanable funds. Mohohlo underscored that the reduction of Primary Reserve Requirement should not be mistaken as a bailout to the banks rather it’s just a measure adopted in moments of reduced liquidity.

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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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