Batswana to buy food cheap amid oil price turmoil
Business
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.
Business
Botswana financial sector safe despite high unsecured household loans – IMF
Botswana’s financial sector has been deemed safe and resilient by the International Monetary Fund (IMF), despite the presence of high levels of unsecured household loans. The IMF’s 2023 report on the country’s financial sector highlights the robustness of Botswana’s banking system and its ability to withstand various shocks.
According to the report, credit risk is the largest risk in Botswana’s banking system, with a significant portion of total assets comprising loans concentrated in the household sector. Specifically, 70 percent of bank loans to households in Botswana are personal loans, primarily in the form of unsecured consumer credit. However, the IMF notes that a large share of lenders collect repayments through direct salary deduction, resulting in a generally low level of non-performing household loans.
The IMF’s assessment confirms that most banking entities in Botswana have strong capital buffers, which would enable them to survive even in the event of an increase in non-performing loans in the household sector. While a 20 percent transition of performing loans into non-performing loans would result in some banks experiencing a significant capital shortfall, the majority of banks possess robust total capital buffers and would remain unaffected by severe shocks to household loans.
Furthermore, the IMF team conducted Bank Solvency Stress Tests, which demonstrated that Botswana’s banking system remains profitable and resilient to severe macro-financial shocks. The stress tests revealed that the aggregate capital depletion in an adverse scenario is relatively small, amounting to less than 0.02 percent of GDP. Although credit risk increases significantly under the adverse scenario, the impact on the capital ratio from rising non-performing loans is outweighed by the increase in net interest income.
The IMF’s assessment also indicates that Botswana’s financial sector weathered the Covid-19 pandemic well. The authorities have made notable progress in strengthening financial supervisory and regulatory frameworks since 2007. The financial sector is deemed stable, sound, and resilient, with risks primarily related to banks’ high concentration of short-term deposits from retirement funds and insurance companies, volatility in diamond prices, geopolitical developments, and tightening global financial conditions. However, the financial system remains resilient to a wide range of shocks associated with these risks, although some vulnerabilities exist.
The Financial Stability Council (FSC), a statutory body led by the Governor of the Bank of Botswana, also recently affirmed the resilience and safety of the domestic financial system. The FSC’s assessment found that the financial sector in Botswana is robust, safe, and unconstrained in providing a range of financial services to support the economy. This resilience is attributed to strong capital and liquidity buffers, profitability, continuous innovation and adaptability, and a robust regulatory environment. The FSC believes that the macroeconomic environment, characterized by positive economic growth, well-managed government fiscal position, and modest inflation, further supports financial stability. Stress tests conducted on banks validate their strong solvency and resilience.
IMF concludes that Botswana’s financial sector remains safe and resilient, despite the presence of high levels of unsecured household loans. The IMF’s assessment highlights the strong capital buffers of banking entities, their ability to withstand shocks, and the overall stability of the financial system. The country’s financial sector has also demonstrated its resilience during the Covid-19 pandemic. The Financial Stability Council further affirms the safety and effectiveness of the financial system in providing financial services to support the economy.
Business
Botala Energy debuts on the BSE
Botala Energy, an Australian energy company, recently made its debut on the Botswana Stock Exchange (BSE), joining a growing number of energy development companies trading on the exchange. The company, established in 2018, is focused on exploring and developing natural gas and renewable energy opportunities in Botswana, particularly in the Serowe Gas Project and Solar Opportunities.
The listing of Botala Energy on the BSE was welcomed by Mr Tsamatse Mamola, the Head of Listings & Tradings at the exchange. He recognized the company as a pioneering force in the field of gas exploration and development. Mamola also highlighted the company’s commitment to clean energy production, which aligns with the global movement towards sustainable practices. By harnessing the potential of coal bed methane in the Serowe Project and integrating it with solar power generation, Botala Energy is not only innovating in the energy sector but also contributing to a greener and more sustainable future.
Mamola emphasized the significance of Botala Energy’s decision to list all of its issued shares on the BSE. This move demonstrates the company’s confidence in the exchange as a strategic partner in its corporate journey. The listing provides Botala Energy with access to diverse sources of capital, which will be instrumental in advancing its exploration and development projects, fostering technological innovation, and achieving its clean energy production goals. The BSE, as a facilitator of capital raising, plays a crucial role in supporting ambitious initiatives and fostering growth.
The listing of Botala Energy also brings benefits to the broader Botswana economy. It increases investor interest, contributing to the liquidity and vibrancy of the market. Botswana, traditionally reliant on diamonds, recognizes the importance of diversifying its economic base. The inclusion of a dynamic and forward-looking company like Botala Energy on the exchange reflects the evolving economic landscape of the nation.
In the pursuit of economic diversification, the Botswana Stock Exchange serves as a bridge connecting visionary companies with investors who share their commitment to progress. By providing a marketplace for a diverse range of industries, from traditional sectors to emerging technologies, the exchange becomes a catalyst for economic resilience and sustainability.
Peter Grant, the Non-Executive Director of Botala Energy, shared some insights into the company’s operations. Since commencing exploration in Botswana, Botala has made significant progress, drilling exploration wells and pilot production wells. The company expects to become a modest producer of commercial gas within 12 months and increase production rapidly. Botala Energy has independently certified gas reserves and prospective resources within its project area, which have the potential to supply significant amounts of gas for power generation.
Grant also mentioned Botala Energy’s focus on delivering Liquefied Natural Gas (LNG) to off-grid communities, providing them with reliable and affordable electricity and gas. The company is exploring the commercial option of establishing an Energy Hub and Industrial Park near Palapye, where it aims to produce energy for Botswana and export it to neighboring South Africa. Additionally, Botala Energy plans to establish a solar/gas hybrid plant in Serowe to feed into the local grid, in collaboration with the Ngwato Development Trust.
Market analysts say the listing of Botala Energy on the Botswana Stock Exchange marks an important milestone for the company and the energy sector in Botswana. It provides the company with access to capital, fosters economic growth and diversification, and contributes to the global movement towards sustainable energy practices. Botala Energy’s innovative approach to gas exploration and development, combined with its commitment to clean energy production, positions it as a key player in shaping a greener and more sustainable future for Botswana.
Business
Beverages dominate Botswana’s food imports
Beverages dominate Botswana’s food imports for August 2023, according to the latest figures released by Statistics Botswana. The country imported beverages, spirits, and vinegar worth approximately P332 million during this month. This is a significant increase from the previous month, where the food import bill slightly rose from P1,063,990,477.2 in July 2023 to P1,233,702,300.4 in August 2023.
The total imports for Botswana in August 2023 were valued at P6,995,115,623.2, compared to P6,897,364,155.2 recorded in July 2023. Food imports accounted for 15.9 percent of this amount, contributing P1,233,702,300.4. Among the food items imported, beverages, spirits, and vinegar accounted for the majority at 26.9 percent. Cereals and sugars followed with 13.4 percent and 8.8 percent, respectively.
Within the category of beverages, spirits, and vinegar, the most imported commodities were mineral waters and aerated waters containing sugar or other sweetening matter or flavored, contributing 47.0 percent. Beer made from malt accounted for 16.7 percent, while fermented beverages and non-alcoholic beverages accounted for 15.9 percent. The import bill for beverages, spirits, and vinegar shows that the country imported mineral waters and aerated waters containing added sugar or other sweetening matter or flavored worth approximately P156 million. Beer made from malt accounted for around P55 million, while fermented beverages and non-alcoholic beverages were valued at around P79.1 million. Wine and liqueurs and cordials were also imported, with values of P12.6 million and P6.4 million, respectively.
In terms of cereals, dried maize excluding seed and other wheat and muslin accounted for 42.3 percent and 27.4 percent, respectively. Rice imports contributed 21.2 percent. The country spent approximately P165 million on cereal imports, with dried maize accounting for around P70 million, wheat around P45 million, and rice around P44.7 million.
Other food imports included preparations of cereals, flour, starch, or milk; pastry cooks’ products, which amounted to around P89 million. Preparations of vegetables, fruit, nuts, or other parts of plants accounted for around P88 million, while sugars and sugar confectionery were valued at around P108 million. Miscellaneous edible preparations, animal or vegetable fats and oils, dairy produce, prepared animal fodder, coffee, tea, and spices, fruits and nuts, meat, vegetables and certain roots and tubers, and products of the milling industry such as malt, starches, and wheat gluten were also imported, with values ranging from P13 million to P74.6 million.
In conclusion, beverages, particularly mineral waters and aerated waters containing sugar or other sweetening matter or flavored, dominate Botswana’s food imports for August 2023. The country also imports a significant amount of cereals, sugars, and other food products. These figures highlight the country’s reliance on imported food items and the need for strategies to promote domestic production and reduce dependence on imports.