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Botswana can breathe easy as US leads global growth


Botswana’s major export partner, United States has once again affirmed its position as the economic powerhouse of the globe, leading economic growth while Europe emerges as the global weak spot and China struggles to stabilise its growth.

The Chief Investment Officer at asset management firm, Afena Capital, Alphonse Ndzinge, in an interview with BusinessPost, shared the firm’s views on the domestic and global economic prospects, saying “the US economy has emerged as a growth leader, while the rest of the world economy is operating at a sub trend growth rate. The Eurozone  is the weak spot and China is still struggling to stabilise growth.”

As a major trading partner, the US revival as an economic powerhouse bodes well for Botswana and her exports. “The US has to deliver growth in 2015 and consensus upward revisions for growth suggest growing confidence that this will happen,” said Ndzinge.

The United States dollar appreciated by 13 percent in trade weighted terms in 2014 and there is “bullish sentiment driven by relative monetary policy dynamics between the US and the rest of the world. The US is intent on raising interest rates later this year while the Eurozone and Japan will be implementing further policy easing” The Rand depreciation against the Pula of about 2% in 2014 was muted by the weakness of other SDR currencies, particularly the Euro and Yen.

“Europe needs to get its much needed economic stimulus right because it will pull back global growth; non-commodity export emerging markets such as India and China still look encouraging.”

Despite Prime Minister Shinzo Abe’s tireless cheerleading, economic indicators show that the gap between regular and temporary workers is only getting bigger under his deflation-busting economic programme dubbed “Abenomics”.

Meanwhile, on asset allocation, Ndzinge says: “Equities were in a corrective phase at the end of last year but we are increasingly bullish on risk assets, adding exposure to global equities. Particularly US, Europe and Japan.”

On currencies, he mentioned that: “the US dollar should maintain its strength with safe haven demand; the euro is oversold and could rebound, while there are still potential risks for major currency upheavals in 2015.”

With regard to global inflation and rates, they see, “Cheaper oil, lower inflation and monetary easing; a further drop in inflation expectations could spur central banks to become even more dovish this year.”

On commodities, Afena is of the view that “a steep fall in global commodity demand expectations in the past few months is the main factor driving the price declines; supply cuts are urgently needed to rebalance markets, especially in oil.”  

The growth of the domestic economy will however remain constrained by the power interruptions as a result of possible challenges at Morupule B power station as well as supply challenges emanating from South Africa’s power authority, Eskom, while drought subsequent caused Gaborone Dam to completely dry up, resulting in intermittent water rationing by the Water Utilities Corporation (WUC).

Real Gross Domestic Product (GDP) for Q3 of 2014, which stood at 5,4 percent year on year, was attributable to trade, Hotels and restaurants, Mining and business service sectors which all increased by 7.8, 7.4, and 6.9 respectively. The contribution to GDP by the Water and electricity sector, however, decreased by 57 percent.

Afena expects moderate global growth to drive the recovery of mining related exports and domestic GDP growth. Household consumption growth remains below trend with low real wage growth and high unemployment, currently estimated at 17.8%. The slowdown in fixed investment spending is one of their concerns for economic growth prospects this year. “The stimulus for fixed investment spending will be public sector driven spending as FDI levels remain low”.

Turning to price levels, domestic headline inflation has now remained comfortably within the Bank of Botswana objective range of 3-6% for the last 18 months. Afena expects this trend to continue in 2015 driven by stable prices for commodities, especially the main components of Transport, and Food & Non-Alcoholic beverages.

2015 will undoubtedly be another interesting year for capital markets both at home and abroad with many opportunities and risks for investors. Afena believes five themes will be the key to navigating the markets this year. They include: Whether the global economy can break out of its low growth trap; The impact of cheap oil on the global macro outlook; The prospects of a decent revival in euro area growth; A recovery for emerging markets recent underperformance; and whether US assets remain the investment of choice globally.
 

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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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Business

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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