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Falling Oil Prices: Why we not so lucky!


The benefits that most countries are currently enjoying due to the plunging oil prices are likely not to be felt by Batswana due to various factors that include the recently hiked alcohol levy, replenishment of the National Petroleum Fund as well as high likelihood of tariffs going up.


Oil has been dealt a massive blow in recent months, the prices collapsed over 50 percent in the past six months amid feeble global demand compounded by strong supply growth. Analysts expect prices will fall further from current levels due to a variety of supply factors including increased oil exports out of the U.S. and record production levels from Iraq and Russia.


Botswana is a net importer of oil which constitute over 60% of the total imports. Surely the falling prices are a plus for the country as it reduces the import bill hence improving the country’s current account. In December 2014 the Government reduced the retail pump prices of petrol, diesel and illuminating paraffin. Retail prices for petrol decreased by 60 thebe per litre, while diesel was reduced by 50 thebe per litre.


While countries like South Africa have experienced numerous fuel reductions in recent months due to the plunging fuel prices, this has not been the case for Botswana.


Moatlhodi Sebabole, a Research Manager with Rand Merchant Bank (RMB) Botswana said the falling oil prices are good news, however the immediate benefits may not be felt by the ordinary consumer.


“Government is likely not to reduce the fuel prices to replenish the backup nest egg that cushions the motorists from fuel hikes the National Petroleum Fund (NPF). It might take longer before we witness a reduction in oil prices like what’s happening in South Africa and the rest of the countries,” said Sebabole.


The National Petroleum Fund is used by government to pay petroleum retailers the difference between the administered and prevailing fuel prices. “The NPF was now under pressure because the oil prices skyrocketed and maintained above $100 the fund cushioned the consumer. Hence the trickle effect from the dropping oil prices is taking long for the gasoline consumer,” he said.

He added that with the plummeting oil prices inflation would be expected to go down however the recent hike in the alcohol levy might upset that. “We would expect inflation to slow down to around 4, 9% beginning of the year due to reduction in transportation inflation rates. However the 10% hike of the alcohol levy to 55% may disturb the trend,” he said.


Sebabole observed that there are high chances that power and water tariffs may be hiked which again rip the consumer of the benefits that they would have enjoyed from the falling oil prices.


 “Botswana Power Corporation (BPC) is currently grappling with power supply woes and chances are high the tariffs will go up. The same goes for water, there are serious water shortages and tariffs may go up in a bid to solve the water shortages,” he said.


The price of Brent crude oil has fallen below $50 a barrel for the first time since May 2009.  It fell more than a dollar to $49.92 a barrel in early trading on Wednesday before edging back above the $50 mark.


“The benefits from the falling oil prices could translate to overall growth of the country GDP and lower inflation rate however factors cited above are likely to erode the benefits,” said Sebabole. He however noted that despite these factors it doesn’t mean the consumer cannot enjoy some of the benefits.


Many observers expect the price of oil to fall further as North American shale producers continue to supply increasing quantities of oil and gas, and the oil-producing group Opec resists calls for cuts in production to support prices.


Analysts observe that with no sign that Opec will do anything about over-production, it seems likely that further declines towards $40 in the coming weeks should be expected.
 

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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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