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Inflation to bounce back to BoB objective range by Q2 2020

Bank of Botswana (BoB) says Headline inflation will revert back to the Bank’s 3-6 percent medium term objective range from the second quarter of 2020 going forward. This was revealed by the BoB Governor Moses Pelaelo when delivering the Monetary Policy Statement this week.

Inflation was below the lower bound of the Bank’s inflation objective range of 3 – 6 percent for most of 2019, against the background of modest domestic demand, the relative strength of the Pula against the South African rand which resulted in lower import prices. Lower inflation was also bolstered by limited range of increase in administered prices, as well as moderate foreign inflation resulting in decrease domestically from an average of 3.2 percent in 2018 to 2.8 percent in 2019, breaching the lower bound of the Bank’s 3 – 6 percent objective range for most of the year.

BoB says this was mainly because the increase in administered prices, in particular, fuel prices, public transport fares and electricity tariffs effected in 2018 was not repeated in 2019. Inflation decreased from 3.5 percent in December 2018 to 2.2 percent in December 2019. Meanwhile, food price inflation increased from -0.4 percent in December 2018 to 3 percent in December 2019 as a result of significant price increases for meat, fish and cereals.

Regarding core inflation measures, the 16 percent trimmed mean inflation decreased from 3.6 percent in December 2018 to 1.8 percent in December 2019, while inflation excluding administered prices increased from 1.8 percent to 2.5 percent in the same period. Pelaelo revealed that headline inflation is forecast to revert to within the Bank’s 3 – 6 percent medium-term objective range from the second quarter of 2020.

He explained that the projection takes into account the possibility of an increase in electricity and water tariffs in the second quarter of 2020, as well as the previously announced increase in public service salaries in the 2020/21 financial year. The projection also incorporates the effect of the 1.51 percent downward rate of crawl that is being implemented for the year 2020, which should potentially see inflation gravitating towards 4.5 percent in the midterm.

In October 2019 Bank of Botswana revised its inflation forecasts from the August 2019 forecasts to reflect the downward revision in both international food and fuel prices as well as the downward revision of South African inflation in the short-term. The Bank reiterated that this was because domestic fuel prices were no longer expected to increase in the last quarter of 2019 and the first quarter of 2020 as was previously anticipated.

This week BoB explained that the expected increase in government spending by 10.1 percent for 2019/20 financial year and the 13.8 percent increase in credit to households in 2019 are not expected to have any significant influence on domestic demand, hence inflation because of possible leakages in the form of payments for imports. Upside risks to the inflation outlook relate to any unanticipated substantial upward adjustment in administered prices and government levies and/or taxes, as well as the potential increase in international commodity prices beyond current forecasts.

These risks are moderated by continuing subdued global economic activity, the tendency of technological progress to lower costs and prices or dampen the rate of increase and the potential fall in international commodity prices. Domestically, the continuance of modest economic growth contributes to moderate domestic inflation. Meanwhile, according to the December 2019 Survey by Bank of Botswana, the business community expects inflation to be within the Bank’s objective range in 2020, suggesting that inflation expectations are well-anchored.

Bank of Botswana underscored that an evaluation of the determinants of inflation and factors affecting financial stability suggests maintenance of a continuation of low and predictable level of inflation into the medium term, and stable financial system. The modest domestic demand pressures and the restrained increase in foreign prices contribute to the positive inflation outlook in the medium term. The Bank says the current state of the economy and the outlook for both domestic and external economic activity suggests that the prevailing accommodative monetary policy stance is consistent with inflation being within the objective range of 3 – 6 percent in the medium term.

Since inflation is projected to be around the lower end of the Bank’s inflation objective range in 2020, amidst sluggish economic activity, BoB observed that the economy could benefit from a measured depreciation of the Pula against trading partners in order to boost exports and promote diversification; while there is no upside inflationary threat to the objective, hence the implementation of the 1.51 percent downward rate of crawl.

BoB Executives highlighted that the Bank’s formulation and implementation of monetary policy will focus on entrenching expectations of low and sustainable inflation, through timely response to price developments, while ensuring that credit and other market developments are in line with durable stability of the financial system.

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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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Global CEOs Back Plan to Unlock $3.4 Trillion Potential of Africa Free Trade Area

23rd January 2023

African heads of state and global CEOs at the World Economic Forum Annual Meeting backed the launch of the first of its kind report on how public-private partnerships can support the implementation of the African Continental Free Trade Area (AfCFTA).

AfCFTA: A New Era for Global Business and Investment in Africa outlines high-potential sectors, initiatives to support business and investment, operational tools to facilitate the AfCFTA, and illustrative examples from successful businesses in Africa to guide businesses in entering and expanding in this area.

The report aims to provide a pathway for global businesses and investors to understand the biggest trends, opportunities and strategies to successfully invest and achieve high returns in Africa, developing local, sub-regional and continental value chains and accelerating industrialization, all of which go hand in hand with the success of the AfCFTA.

The AfCFTA is the largest free trade area in the world, by area and number of participating countries. Once fully implemented, it will be the fifth-largest economy in the world, with the potential to have a combined GDP of more than $3.4 trillion. Conceived in 2018, it now has 54 national economies in Africa, could attract billions in foreign investment, and boost overseas exports by a third, double intra-continental trade, raise incomes by 8% and lift 50 million people out of poverty.

To ease the pain of transition to its new single market, Africa has learned from trade liberalization in North America and Europe. “Our wide range of partners and experience can help anticipate and mitigate potential disruptions in business and production dynamics,” said Børge Brende, President, and World Economic Forum. “The Forum’s initiatives will help to ease physical, capital and digital flows in Africa through stakeholder collaboration, private-public collaboration and information-sharing.”

Given the continent’s historically low foreign direct investment relative to other regions, the report highlights the sense of excitement as the AfCFTA lowers or removes barriers to trade and competitiveness. “The promising gains from an integrated African market should be a signal to investors around the world that the continent is ripe for business creation, integration and expansion,” said Chido Munyati, Head of Regional Agenda, Africa, World Economic Forum.

The report focuses on four key sectors that have a combined worth of $130 billion and represent high-potential opportunities for companies looking to invest in Africa: automotive; agriculture and agroprocessing; pharmaceuticals; and transport and logistics.

“Macro trends in the four key sectors and across Africa’s growth potential reveal tremendous opportunities for business expansion as population, income and connectivity are on the rise,” said Wamkele Mene, Secretary-General, AfCFTA Secretariat.

“These projections reveal an unprecedented opportunity for local and global businesses to invest in African countries and play a vital role in the development of crucial local and regional value chains on the continent,” said Landry Signé, Executive Director and Professor, Thunderbird School of Global Management and Co-Chair, World Economic Forum Regional Action Group for Africa.

The Forum is actively working towards implementing trade and investment tools through initiatives, such as Friends of the Africa Continental Free Trade Area, to align with the negotiation process of the AfCFTA. It identifies areas where public-private collaboration can help reduce barriers and facilitate investment from international firms.

About the World Economic Forum Annual Meeting 2023

The World Economic Forum Annual Meeting 2023 convenes the world’s foremost leaders under the theme, Cooperation in a Fragmented World. It calls on world leaders to address immediate economic, energy and food crises while laying the groundwork for a more sustainable, resilient world. For further information,

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Electricity generation down 15.8%

9th January 2023

Electricity generation in Botswana during the third quarter of 2022 declined by 15.8%, following operational challenges at Botswana Power Corporation’ Morupule B power plant, according to Statistics Botswana Index of Electricity Generation (IEG) released last week.

The index shows that local electricity generation decreased by 148,243 MWH from 937,597 MWH during the second quarter of 2022 to 789,354 MWH during the third of quarter of 2022.

This decrease, according to the index, was mainly attributed to a decline in power supply realized at Morupule B power station. The index shows that as a result of low power supply from the plant, imported electricity during the third quarter of 2022 increased by 76.3 percent (123,831 MWH), from 162,340 MWH during the second quarter of 2022 to 286,171 MWH during the current quarter and Statistics Botswana added that the increase was necessitated by the need to augment the shortfall in generated electricity.

In the index Statistics Botswana stated that Eskom was the main source of imported electricity at 42.0 percent of total electricity imports. “The Southern African Power Pool (SAPP) accounted for 38.4 percent, while the remaining 10.1, 9.1 and 0.5 percent were sourced from Electricidade de Mozambique (EDM), Cross-border electricity markets and the Zambia Electricity Supply Corporation Limited (ZESCO), respectively. Cross-border electricity markets are arrangements whereby towns and villages along the border are supplied with electricity from neighbouring countries such as Namibia and Zambia.”

The government owned statistics entity stated that distributed electricity decreased by 2.2 percent (24,412 MWH), from 1,099,937 MWH during the second quarter of 2022 to 1,075,525 MWH during the third quarter of 2022. The entity noted that electricity generated locally contributed 73.4 percent to electricity distributed during the third quarter of 2022, compared to a contribution of 85.2 percent during the third quarter in 2022 and added that this gives a decline of 11.8 percentage points. “The quarter-on-quarter comparison shows that the contribution of electricity generated to electricity distributed decreased by 11.8 percentage points compared to the 85.2 percent contribution during the second quarter of 2022.”

Statistics Botswana meanwhile stated that the year-on-year analysis shows some improvement in local electricity generation. Recent figures from entity show that the physical volume of electricity generated increased by 36.3 percent (210,319 MWH), from 579, 036 MWH during the third quarter of 2021 to 789,354 MWH during the current quarter. According to Statistics Botswana electricity generated locally contributed 73.4 percent to electricity distributed during the third quarter of 2022, compared to a contribution of 57.7 percent during the same quarter in 2021. This gives an increase of 15.7 percentage points.


The entity noted that trends also show an increase in physical volume of electricity distributed from 2013 to the third quarter of 2022, thereby indicating that there are ongoing efforts to meet the domestic demand for power. “There has been a gradual increase of distributed electricity from the first quarter of 2013 to the third quarter of 2022, even though there are fluctuations. The year-on-year perspective shows that the amount of distributed electricity increased by 7.2 percent (71,787 MHW), from 1,003,738 MWH during the third quarter of 2021 to 1,075,525 MWH during the current quarter.”

The statistics entity noted that year-on-year analysis show that during the third quarter of 2022, the physical volume of imported electricity decreased by 32.6 percent (138,532 MWH), from 424,703 MWH during the third quarter of 2021 to 286,171 MWH during the third quarter of 2022. “There is a downward trend in the physical volume of imported electricity from the first quarter of 2013 to the third quarter of 2022. The downward trend indicates the country’s continued effort to generate adequate electricity to meet domestic demand, hence the decreased reliance on electricity imports.”

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