Botswana inflation will remain subdued through 2015 allowing policy makers to keep interest rates at present levels or lower for an extended period rate, economic analysts have said.
Inflation is expected to remain within the 3-6% range throughout 2015 slowing down to 3,5% by midyear thus falling within the Bank of Botswana target range.â€¨â€¨Head of Research, Garry Juma at Motswedi Securities, a local brokerage firm said Inflationary pressure next year will likely be in check, while the Bank Rate is expected to remain at 7,5%. â€¨â€¨
Motswedi’s dovish inflation forecast view is supported by the stable fuel prices owing to the remarkably declining oil prices in the international market recently.
â€¨â€¨“The major causes of inflation on the local economy have largely been, rising food and oil prices on the international market, of which we don’t have much control,” said Jumaâ€¨â€¨“
Against this background, we expect food prices, which have largely been stable on the international market to remain generally unchanged going into 2015.Oil prices are declining and are expected to decline further,” he added.
â€¨â€¨Juma said the continued appreciation of the Pula against the Rand will also help moderate imported inflation. The Pula has firmed by 1.2 percent against the Rand.
â€¨Motswedi forecast headline inflation will stand at 3.8 and rise to 4.4 percent still within the BoB target bands of 3-6 percent.
â€¨The 3-6% Inflation forecasts took into account movements in administered prices which are expected to remain benign in the near term. The higher inflation forecast could be attributed to drought in Botswana and across the region.â€¨â€¨Nevertheless Juma was quick to say, any large increase in administered prices on the local economy such as electricity, water and also the alcohol levy might exert some inflationary pressures on the economy.
Inflation in 2014 fell within the BoB target range of 3-6%. Despite rise in fuel, commodities and energy prices, inflation remained under check. For December 2014, inflation is expected to average at 4.4%.
Research Manager with Rand Merchant Bank (RMB) Botswana Moathlodi Sebabelo cemented Juma’s view saying inflation in 2015 will average between 4-5%.
“Europe is already HYPERLINK "http://uk.businessinsider.com/europe-and-deflation-2014-10" hovering right on the edge of deflation, and a further drop in oil prices would shove the eurozone right over the edge. Our major import is oil and the slumping oil prices are a good indicator that inflation remains subdued as well as the deflation in Europe,” said Sebabelo.
By end of last week, crude oil’s benchmark North Sea Brent had fallen below $70 a barrel, its lowest close since May 2010, while U.S. crude fell to a low of $65.84 a barrel. Prices have slumped after OPEC’s November 27 decision not to crimp production, with prices diving by nearly 40 percent over the past five months.
He added that even if the government increases the alcohol levy, the increase won’t put much pressure on the inflation. “If anything the inflation will be pushed at 0.2% rate,” said Sebabelo.
He expects the bank rate to be kept at low rates considering that banks are already facing a liquidity problem. “Definitely there won’t be any hike of bank rate already Bank of Botswana (BoB) is very wary that its exerting pressure on households. If anything there might be a decrease” said Sebabelo.
The analysts anticipate an accommodative monetary policy stance to support the domestic economic recovery.
Meanwhile, the International Monetary Fund (IMF) has encouraged Botswana to continuously look for opportunities to further strengthen the operational aspects of the exchange rate framework and deepen the money and foreign currency markets.
Business Monitor International forecast real GDP growth to be at 4.5% in 2015, a downwards revision from its previous forecast of 5.2%. Falling diamond exports, diminishing base effects and ongoing power issues are expected to constrain real GDP growth.â€¨â€¨BMI forecasts Botswana monetary policy to remain accommodative through in 2015. The think tank expects inflation to remain contained in 2015 owing to the pula's appreciation against the rand and slowing domestic economic growth.â€¨â€¨
“We predict that Botswana's current account surplus will narrow from7.0% in 2014 to 5.9% in 2015. Having declined in 2014 we forecast that both goods imports and exports will return to growth in 2015,” says BMI.â€¨â€¨
This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.
“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.
Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.
A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.
Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.
A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.
Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.
In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.
The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.
In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.
Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.
The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”
In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.
Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.
The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.