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Inflation breaches lower bound of inflation target

February’s year-on-year consumer inflation rate moderated further to 2.8%. This deceleration was faster than the 4.6% that was recorded during the same month of 2014. As stated previously, this deceleration was largely to be expected, as the significantly lower fuel prices dragged it to its lowest level in over 20 years.

On a monthly basis, overall prices fell by 0.8% after dropping by a smaller margin in January of 0.2%.

The transport category, which accounts for about 19% of the Consumer Price Index (CPI) fell by 4.3% during February largely driven by a decline of 7.3% in the sub-category ‘Operation of Personal Transportation’ which comprises the fuel and associated costs. On a year-on-year basis, transport costs declined 5.5% taking away about 1.04 percentage points from overall inflation.

Clothing and footwear realised the most inflation of 7.3% over the one year period followed by Alcoholic Beverages, Tobacco & Narcotics at 7.0%. All other groups recorded inflation in prices over the year. The Food & Non Alcoholic beverages group recorded an inflation of 2.2% on a year-on-year basis adding about 0.5% to inflation.

The long awaited reduction in the fuel prices in the domestic economy started being filtered into the numbers and our expectations are in line with those of the Central Bank of Botswana to have a full effect of about 1% reduction in inflation over 2015. We expect some stimulus to disposable income to also come from the zero rating of certain foodstuffs that was recently implemented by the government, this could however be offset in spending in other non-zero rated foods.

Core inflation, which excludes food and fuel, remained unchanged from the previous month at 4.8%, implying a downwards bias by the two CPI heavyweights; Food and Fuel.

The recent reduction in the bank rate by 100 basis points we believe was meant to counter the decline of inflation below the 3% mark; unfortunately it came a bit late to have given the desired result. The magnitude of the rate cut was a surprise to us but in hindsight, we believe that there will need to be stronger demand to maintain the 3 – 6% inflation from the current levels of demand in the local economy which is mostly restricted by the restrained growth in personal income.

Looking ahead, we believe that a further drop in inflation is now limited, but will remain dependent on the local demand. Threats to the upside are around the increasing food prices (as evidenced in South Africa) and administered prices. We think that inflation will start trending upwards (although at a moderate pace) in the second quarter of 2015. Overall, inflation outlook remains benign. This will likely persuade the Bank of Botswana to keep rates low.

Tshephang Loeto, is an analyst at Investec Asset Management

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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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