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Mohohlo explains banks liquidity


Bank of Botswana Governor, Linah Mohohlo has dismissed suggestions that there is excess liquidity in the banking system. Speaking at the National Business Conference in Maun this week, the Governor informed participants that liquidity currently stands at approximately P3 billion.

She dispelled the apparent perception that the banking system is experiencing an overall tight liquidity situation.

Mohohlo said it is important to correct the liquidity misconception further explaining that in order to alleviate the perceived liquidity shortage; the Bank of Botswana needs to inject liquidity into the banking system.

“The fact is that liquidity in the banking system is not tight,” she said.

Mohohlo insisted that banks continue to hold excess funds over and above the statutory liquid assets requirements. However she revealed that what is not disputable is that there has been significant decrease in excess liquidity in the last two to three years, which she attributed to a combination of factors.

She said excess liquidity declined as banks increased their lending while at the same time the Bank of Botswana decreased the amount of its certificates. She also added that it is also the case that the laudable efforts by government to streamline the disbursement of funds to parastatals and local authorities also helped to reduce excess liquidity.

“Banks will recall that in the past, some of the funds disbursed by the central government to parastatals and local authorities could remain unspent for some time. These funds would be passively held on deposit as banks (earning very low interests rates) and ultimately finding their way into BoBCs,” she explained.

Mohohlo said this is no longer the case, at least not on a scale of yester years, adding that the efficiency achieved in remitting tax revenues through the Real Time Gross Settlement (RTGS) system and electronic funds transfers (EFTs) has also reduced the period of time funds in customer deposit accounts before being credited to government accounts at the Bank of Botswana.

It is reported that these factors have contributed to the overall reduction of BoBCs from  a peak of P20 billion in October 2010 to the current level of about P6 billion. Similarly, the proportion of deposits that were on lent increased markedly, as reflected in the intermediation ratio, which is reported to have increased from 46 percent in 2007 to about 80 percent currently.

According to the BoB Governor, after operating for over two decades in the market with substantial liquidity surpluses, Botswana banks are now in a transitional phase towards a more normal banking environment when they can no longer afford to turn away deposits, as it was the case before the introduction of BoBCs in 1991.

“Going forward, banks will need to be more innovative in attracting and appropriately remunerating deposits. Banks are also transiting from a high interest rate environment, rapid balance sheet growth and relatively high profits on the back of high interest rate spreads, to a period of low interest rate environment and a more competitive market. The resultant reduction in interest rate margins is indeed a welcome development for bank customers.”

Mohohlo was speaking at a welcome cocktail dinner at the recent BOCCIM’s biennial National Business Conference 2014 held in Maun themed “Opening Botswana to the world; attracting (Foreign Direct Investment) FDI and ensuring that Botswana’s firms can compete in the Global Economy.”

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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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