Some observers have seen an even bigger picture for a local consumer in the current oil price warfare; when oil prices go down, transportation of any commodity from Botswana’s main exporter South Africa will ease hence the cost of food subsequently falling.
Opening this week on Monday, history was made as the global oil price for crude skidded to its lowest level since 1991, a barrel was under $32 as international regulator of oil prices and production OPEC led by Saudi Arabia are entangled in a price war with the world’s biggest oil player- Russia.
Now superpowers Saudi Arabia and Russia are fighting over how much should be produced and how far prices should go. After the increase in the intensity of coronavirus, OPEC decided to decrease production by one million barrels per day and wanted even non-OPEC members including their leader Russia, to follow suit. But Russian President Vladimir Putin has stated this week that the country would not cut production, Saudi Arabia responded by shedding prices of oil while the market is swamped by cheap produce.
Motswedi Securities on Monday explained that the decline in prices came as OPEC+ member, Russia, went against efforts made by de facto leader, Saudi Arabia, to cut production to curb the coronavirus effects on demand. Saudi Arabia retaliated by evoking a price war against Russia by cutting its prices from $14 to $8. When commenting on the oil price war on Forbes magazine this week Ellen Wald wrote that, “the oil collapse this week is the result of two powerful oil producers reacting in their own best interests during a global demand crisis.”
On Tuesday Motswedi Securities said the price slash by OPEC's de facto leader Saudi Arabia on Monday evoked a price war with non-OPEC member Russia. The commodity climbed by almost 10% in the day (Tuesday), coming back slightly from a year to date loss of just above -50% to about -43%. According to Motswedi it announced at the beginning of the week that it would be increasing its production levels, which would be its first increase in over ten years. Output in the country will increase from 12mn barrels per day to 13mn barrels per day, with the commodity's price trading around 3% lower at US$36.09/bbl, at the time of writing.
But some observers see the good in this, Batswana will to go to South Africa for a huge shopping spree. Botswana gets most of its oil imports from South Africa, the country accounts for 64.4 percent of this country’s total imports according to latest statistics. In 2018 Botswana’s import bill from South Africa was US$ 3. 87 billion while the mineral fuels, oils and distillation products accounted for $4763.48 in the same year. Furthermore statistics suggests Botswana imports from South Africa of Oils and Other Products of Distillation of High Temperature Coal Tar was US$208.98 according to recent statistics.
According to Statistics Botswana, Commodities that were imported mostly in December 2019 were Diamonds; Food, Beverages & Tobacco and Fuel with contributions of 25.7 percent, 17.0 percent and 16.6 percent respectively. Out of all that is being put on paper, Botswana will buy everything in South Africa cheaper as fuel prices are lowered for transportation of goods, commodities will be even lower.
A private player, 100 percent citizen-owned company in the energy industry Boswa Energy CEO, Tumelo Sealetsa told BusinessPost in an interview that he expects food prices to decrease responding to the current oil price crash. He said decrease in oil means Boswa Energy will benefit and highlighted that food prices will eventually go down as diesel prices, a commodity used in farming and many other agriculture activities, fell this week. Retailers will ease food prices hence consumers paying a lot lesser than what they took out of their pockets few months ago.
According to Statistics Botswana price statistics, the Food & Non-Alcoholic Beverages group index registered an increase of 0.7 percent, moving from 103.0 in December 2019 to 103.7 in January 2020. The statistics was attributed to the increase in major constituent section indices of Meat (1.6 percent), Fruits (0.9 percent) and Bread & Cereals (0.6 percent). Botswana imports most of these commodities from South Africa. Many experts expect the April inflation to have a huge fall in food prices for Botswana due to what transpired after the oil crash. Batswana consumers may have to face mask their SA spree as COVID-19 awaits
Another big headline for the oil’s Blue Monday crash, the South African Rand was also not without its woes, plunging by 8 percent against the American dollar this Monday. The Rand fell on its knees, a very big knock since January 1980, as a result of this it is reported that investors are fleeing from riskier assets. Adding more salt to the Rand’s wound is the tumbling oil prices which further put weight on the coronavirus spread scare. On Monday morning, the same day of the oil crash, as the rand fell R16.75 to the US dollar. To the Pound Sterling the Rand reflected R21 on Monday.
Economist Othata Batsetswe said the bubble or excitement that Batswana should go shopping because coronavirus does not hold enough air, because the Rand fall and oil crash would not affect the local economy that much. South Africa has so far reached 13 numbers of coronavirus cases and the numbers seem to be growing with time.
“Because the oil crash and Rand fall is against a backdrop of another economic impediment, the coronavirus outbreak, which will also affect Batswana or the local economy. Whatever might seem to be advantageous to Batswana may be economically inconsequential. Even though the oil crash and the rand fall, Batswana will still stay home because of coronavirus. Also if South Africa goes into recession, expect it to pull economies that are dependent on it like Botswana to go down with it. So there will be business as usual,” said Batsetswe.
Strategic partnership offers inherent benefits of global knowledge, African insights, and local expertise and commitment
Minet Group and Africa Lighthouse Capital today announced that they have received regulatory approval and fulfilled all requirements to acquire Aon’s shareholding in Aon Botswana, and consequently will begin the process to rebrand to Minet Botswana.
Minet Group is a well-known and trusted pan-African risk advisory firm and Aon’s largest Global Network Correspondent and has been rapidly expanding its African footprint since 2017 through the acquisition of operations from global professional services firm Aon in Kenya, Lesotho, Malawi, Mozambique, Namibia, Tanzania, Uganda, and Zambia. Minet has been delivering world class products and services across Africa for over 70 years.
Africa Lighthouse Capital (ALC) is a leading Botswana citizen-owned private equity firm focused on investing in Botswana companies and propelling them into regional champions, with over BWP 500 million in funds under management.
The new entity will be rebranded to Minet and will inherit deeply rooted respect by its clients for their innovative and locally relevant solutions, responsiveness, and efficient processes. Furthermore, it shall have the benefit of consistency in leadership and staffing, with Barnabas Mavuma, previously Managing Director of Aon Botswana, continuing to lead the business as the MD supported by the local management team.
“The addition of Minet Botswana to our growing African network affirms our belief in the great opportunities for growth that Africa offers, driven by rising consumer demand, huge investment in infrastructure and quick adoption of new technology,” says Joe Onsando, CEO at Minet Group.
“This transaction significantly adds to the diversity and skills base of our team and will have a positive impact on the range of products and services we provide. Our Correspondent agreement with Aon gives us access to global expertise and data driven insights and uniquely positions us to deliver risk advisory solutions that reduce volatility, thus driving improved performance for our clients. This is a very exciting time to be Minet in Africa.”
“The significantly increased Botswana citizen shareholding effected by this transaction gives rise to an exciting era of local market focus and growth for Minet Botswana,” says Bame Pule, Founder and CEO of Africa Lighthouse Capital. “We intend to work with Minet Botswana’s local management team to further localise the business in terms of product development, while at the same time investing in local skills development and business development. We look forward to this exciting journey, which will result in a significantly enhanced service offering for Minet Botswana’s clients.”
Consequently, and similar to the other members of the Minet Group, Minet Botswana becomes an Aon Global Network Correspondent, retaining its access to Aon’s resources, technology, and best practises, combined with the benefit of independent, local agility. This transaction furthermore significantly increases local shareholding, enabling operations to become even nimbler and better positioned to unlock new and existing growth opportunities.
Clients of Minet Botswana will experience continuity of product and service delivery standards in the short term. In the near future, they can expect an enhanced offering that combines agility with technology and product innovation, tailormade for their specific needs.
Together, Minet and ALC bring a sound understanding of local market conditions, strong governance, and an established track record in the region. These qualities, combined with Aon’s global capabilities and expertise, will bring clear benefits for clients.
This transaction vastly increases citizen ownership with shareholders who are going to be active in the business. The transfer of equity interests in Botswana to investors with local and regional expertise, presence and commitment will allow the businesses to move quickly in line with market movements, and to introduce products that are tailored to the local market.
“Minet’s commitment and drive to incessantly adapt to changing market conditions, and to innovate to meet the unique insurance demands of the African continent, while maintaining the high standards customers have come to expect – Onsando concludes – will continue to grow and give Minet a powerful competitive edge within the African market”.
French President Emmanuel Macron received 21 Heads of state and government officials from Africa during the recent summit on the Financing of African Economies that focused on Africa to take full advantage of the tectonic shifts in the global economy and the call for a joint effort for financial and vaccination support for the continent.
President Emmanuel Macron stressed that “Most regions of the world are now launching massive post-pandemic recovery plans, using their huge monetary and fiscal instruments. But most African economies suffer the lack of adequate capacities and such instruments to do the same. We cannot afford leaving the African economies behind.
We, the Leaders participating to the Summit, in the presence of international organizations, share the responsibility to act together and fight the great divergence that is happening between countries and within countries.
This requires collective action to build a very substantial financial package, to provide a much-needed economic stimulus as well as the means to invest for a better future. Our ambition is to address immediate financing needs, to strengthen the capacity of African governments to support a strong and sustainable economic recovery and to reinforce the vibrant African private sector, as a long-term growth driver for Africa.”
For her part, International Monetary Fund (IMF) Managing Director Kristalina Georgieva highlighted that “there is urgency to focus on financing Africa. Last year, the pandemic-caused recession shrank the GDP of the Continent by 1.9 percent – the worst performance on record. This year, we project global growth at 6 percent, but only half that 3.2 percent for Africa.” Adding that Africa needs to grow faster than the world at 7 to 10 percent to meet the aspirations of its youthful populations, and become more prosperous and more secure.
Georgieva revealed that the price tag on the shot is estimated to be “$285 billion through 2025. Of this $135 billion is for low-income countries. This is the bare minimum. To do more – to get African nations back on their previous path of catching up with wealthy countries – will cost roughly twice as much. These are large numbers. They may seem out of reach. But to quote Nelson Mandela: impossible until it is done.”
The main areas of interest to achieve this include; first, end the pandemic everywhere, 40 percent of the population of all countries is targeted to get vaccinated by the end of 2021, and at least 60 percent by mid-2022.
Second, bilateral and multilateral developmentfinancing grants and concessional loans ought to go up. Over the last year, the IMF have swiftly ramped their financing for the Continent, including providing 13 timestheir average annual lending to sub-Saharan Africa. And are working to do much more. The IMF has also received support to increase access limits so they can scale up their zero-interest lending capacity through the Poverty Reduction and Growth Trust.
The IMF has also devised exceptional measures. Their membership backs an unprecedented new allocation of Special Drawing Rights (SDR) of $650 billion, by far the largest in their history.Once approved, which is intended to be achieved by the end of August, it will directly and immediately make about $33 billionavailable to African members. It will boost their reserves and liquidity, without adding to their debt burden.
Over the course of the last year, the IMF has built experience in facilitating the on lending of SDRs – thus managing to triple their concessional lending capacity as a result.
The Third being, actions at home. According to Georgieva “a crisis is an opportunity for transformational domestic reforms that increase domestic revenue, improve public services, and strengthen governance. For instance, digitalization can improve tax administration and revenue collection, and the quality of public spending. And with radical transparency, Africa can tap into new sources of finance – such as carbon offsets.
There is ample scope for countries to encourage private investment, including in social and physical infrastructure. New IMF research, published today, highlights that domestic and international investors could provide at least 3 percent of GDP per yearof additional financing by the end of this decade.”
Reforms of international taxation can also support Africa’s growth. For a long time, the IMF has been in favor of minimum corporate tax rates to reduce the race to the bottom and tax avoidance. And they strongly support an international agreement on digital tax, something France has been a leading voice for. It is important to secure fair distribution of tax revenues, so they can contribute to closing Africa’s financial gap.
Georgieva called on to each and every one to step up. Reminding the attendees that from history they are all familiar with what a shock of this magnitude can do if not countered forcefully and effectively.
De Beers’ Group, the world’s number one diamond producer by value, this week attributed the downfall of its sales for the fourth cycle week to the second wave of the Covid-19 variant (B.1.617.2) which was first discovered in India.
Diamond trading conditions have been hit by the Covid-19 crisis in India which is a major cutting and polishing centre for the world’s diamond trade.
The outbreak of the new variant has led to a humanitarian crisis with 280, 284 fatalities of the disease reported.
The London headquartered company said the sales in its fourth cycle fell to $380m (about P4.1 billion) down from $450m (about P4.8 billion) in the third cycle though it was higher than the fifth cycles of last year when the group shifted only $56m (P600 million).
De Beers emphasized that they continued to implement a more flexible approach to rough diamond sales during the fourth sales cycle of 2021, with the Sight event extended beyond its normal week-long duration.
The De Beers group Chief Executive Officer (CEO), Bruce Cleaver said the company continues to see robust demand for diamond jewellery in the key US and China consumer markets.
“However, the scale of the second wave of Covid-19 in India, where the majority of the world’s diamonds are cut and polished, has led to reduced midstream capacity and subsequently lower rough diamond demand, during what is already a seasonally slower time of year for midstream purchases,” said Cleaver.
Meanwhile Botswana health officials have confirmed the new Covid-19 variant in Botswana. The Ministry of Health and Wellness -through a press statement- informed members of the public that the variant (B.1.617), was confirmed in Botswana on 13th May 2021.
According to Christopher Nyanga, spokesperson at the Ministry, this followed a case investigation within Greater Gaborone, involving people of Indian origin who arrived in the country on the 24th April 2021.
Moreover the World Health Organization (WHO) recently announced that the Indian Covid-19 variant was a global concern, with some data suggesting that the variant has “increased transmissibility” compared with other strains.
The India variant (B.1.617.2) – is one of four mutated versions of the coronavirus which has been designated as being “of concern” by transitional public health bodies, with others first being identified in Kent, South Africa and Brazil.
Nevertheless when speaking at Bank of America Global Metals and Mining conference, Anglo American Chief Executive Officer, Mark Cutifani said the company portfolio is increasingly tilted towards future enabling products and those that need to decarbonise energy and transport in order to meet consumers’ needs – from home appliances, electronics and infrastructure, to food and luxury goods.
“We see material opportunity for Anglo American to continue to set itself apart in terms of the performance of our diversified business, further enhanced through sector-leading 25% volume growth over the next four years, led by copper and the platinum group metals,” said Cutifani.
“Most importantly, as the supplier of such critical materials, it is the duty of our industry to ensure that in everything we do, we act responsibly and deliver enduring value for our full breadth of stakeholders, including our planet.”