Banks are now offering Bank of Botswana (BoB) a knife to slice down interest rates during the end of April Monetary Policy Committee meeting, this comes in the wake of the COVID-19 outbreak which brought lower growth in the global economic activity, hence presenting downside risks to the outlook and bringing anxiety to the local economy.
The upcoming BoB Monetary Policy Committee (MPC) meeting on 30 April 2020 will not come without discussion of the now notorious global pandemic coronavirus-but the main anticipated action is for the central bank to shed the interest rate in an effort to cushion financial stability and maintaining a sound economic environment.
The last time BoB cut the interest rate was in last year’s August MPC meeting, when it was cut by 25 basis points from 5 percent to 4.75 percent. After observing an inflation which remained weak given subdued demand pressures in the economy, Governor Moses Pelaelo took a knife of monetary ruling and sliced the rate by a quarter percentage point to 4.75 percent. That time inflation rate increased from 2.8 percent in June to 2.9 in July and Pelaelo stated that the inflation was still low albeit closer to the lower bound of the Bank’s objective range of 3 to 6 percent.
An interest rate is a benchmark rate used by banks and other financial institutions as a guide to what they pay savers or charge some borrowers. It could happen that a sudden cut in the Bank rate will immediately reduce the mortgage bill of a minority of homeowners. Reduction of Bank rate may allow banks to freely lend money to households and businesses, hence protection of an economy.
After feeling the COVID-19 economic affliction, the central bank of the most influential and the benchmark world economy, the US, Federal Reserve System (The Fed), got fed up and reduced its target interest rate near zero or by 1.00 percent to a range of 0-0.25 percent. According to experts central bankers in five key sub-Saharan African countries will meet on interest rates in the next ten days as the focus turns to them for measures to shore up their economies that are expected to be hit by the novel coronavirus. Recently business media outlet Bloomberg has made a survey from 21 economists, from the figure 11 predict a cut of 50 basis points while 10 expect a reduction of 25 basis points.
One of the leading financial institutes First National Bank Botswana (FNBB) Chief Economist Moatlhodi Sebabole said in an interview with BusinessPost that the bank anticipates that there will be cumulative rate cut of around 75basis points in the second half of 2020 (2h20). He noted that the plausible timing of the cuts should start by 50 basis points which could be by the next Monetary Policy Meeting in April.
“At FNBB, we expect the rate cut to come as early as April due to: Anticipated lower domestic growth environment and downward pressures on the already low inflation projection (oil prices now at multi-decade lows) alongside heightened global risk factors. We expect rate cuts because inflation will remain low and below the central bank’s lower inflation objective of 3.00 percent through to 2h20 – as consumer demand remains muted; and supply side pressures remain subdued with lower oil price outlook,” said Sebabole.
Sebabole who is also Chairperson of government’s National Transformation Strategy Team added that FNBB want the rate to be slashed because of the disruption in the supply value chain which will mostly impact foreign earnings on tourism and mining – as well as impacting manufacturing, construction, logistics sectors. He said the factors mentioned will negatively impact business and consumer confidence; as well as consumption and investment levels. The FNBB chief economist, when explaining the need for a rate, said a wider budget deficit is anticipated as healthcare budget will have to be augmented to deal with testing; preventive; protective and treatment (should a covid-19 case be reported in Botswana) of the virus and potentially some fiscal packages to support a fragile economy.
“The US FED has cut rates to close to 0.00 percent (150bp cut in 1Q20 alone); while for South Africa it is anticipated to go by over 50bp in the next few months. These creates more space for Bank of Botswana to cut rates without substantially reducing Botswana’s interest rate gap with its major trading partners. This is in line with group view for SARB (cuts expected in 1H20 to support ailing economy and rising yields); FED has been bold and reduced the rates to 0.00 percent- 0.25 percent already,” Sebabole told BusinessPost.
Sebabole said from April there should be another shed of interest rates in the 18 June 2020 meeting by 25 percent, while maintaining the rate at 4.00 percent to the second half of 2020. Another leading bank, Absa Botswana expects the bank rate to be cut as soon as next month’s MPC meeting. In an interview with BusinessPost this week, Absa Botswana economist Naledi Madala said the central bank is likely to cut the bank rate by 50basis points in April to support domestic economic activity.
“We believe that headline inflation will likely rise hereon as favourable base effects in transport inflation fade. Though inflation is expected to move higher, it would be increasing from record low levels and is expected to remain within the target band. We forecast a year-end inflation rate of 3.4 percent year on year. This gives the MPC room to stimulate the economy,” said Madala.
Madala said with the Covid-19 outbreak spreading across the global economy and working its way through to the real economy via weakening sentiment, supply-chain disruptions and financial market turmoil, headwinds to growth are picking up. As a small and open country that depends heavily on volatile export segments, Botswana is vulnerable to swings in global economic growth and commodity prices, said Madala.
Former Deputy Governor of BoB Keith Jeffries said the central bank might take a decision to cut interest rates, but is sceptical of the move as an effective policy intervention. Jeffries said monetary policy easing is unlikely to be very effecting, government should rather focus on fiscal expenditure based measures to offset the impact and in particular at how to relieve the pressure on businesses experiencing cash-flow stress.
Minister of Presidential Affairs, Governance and Public Administration, Kabo Morwaeng together with Permanent Secretary to the President (PSP) Elias Magosi, this week refused to name and shame the worst performing Ministries and to disclose the best performing Ministries since beginning of 12th parliament including the main reasons for underperformance.
Of late there have been a litany of complaints from both ends of the aisle with cabinet members accused of providing parliament with unsatisfactory responses to the questions posed. In fact for some Botswana Democratic Party (BDP) backbenchers a meeting with the ministers and party leadership is overdue to address their complaints. Jwaneng-Mabutsane MP, Mephato Reatile is also not happy with ministers’ performance.
Bokamoso Private Hospital is battling a P10 million legal suit for a botched fibroids operation which resulted in a woman losing an entire womb and her prospects of bearing children left at zero.
The same suit has also befallen the Attorney General of Botswana who is representing the Ministry of Health and Wellness for their contributory negligence of having the unlawful removal of a patient, Goitsemang Magetse’s womb.
According to the court papers, Magetse says that sometimes in November 2019, she was diagnosed with fibroids at Marina Hospital where upon she was referred to Bokamoso Private Hospital to schedule an appointment for an operation to remove the fibroids, which she did.
Magetse continues that at the instance of one Dr Li Wang, the surgeon who performed the operation, and unknown to her, an operation to remove her whole womb was conducted instead. According to Magetse, it was only through a Marina Hospital regular check-up that she got to learn that her whole womb has been removed.
“At the while she was under the belief that only her fibroids have been removed. By doing so, the hospital has subjected itself to some serious delictual liability in that it performed a serious and life changing operation on patient who was under the belief that she was doing a completely different operation altogether. It thus came as a shock when our client learnt that her womb had been removed, without her consent,” said Magetse’s legal representatives, Kanjabanga and Associates in their summons.
The letter further says, “this is an infringement of our client‘s rights and this infringement has dire consequences on her to the extent that she can never bear children again”. ‘It is our instruction therefore, to claim as we hereby do, damages in the sum of BWP 10,000,000 (ten million Pula) for unlawful removal of client’s womb,” reads Kanjabanga Attorneys’ papers. The defendants are yet to respond to the plaintiff’s papers.
What are fibroids?
Fibroids are tumors made of smooth muscle cells and fibrous connective tissue. They develop in the uterus. It is estimated that 70 to 80 percent of women will develop fibroids in their lifetime — however, not everyone will develop symptoms or require treatment.
The most important characteristic of fibroids is that they’re almost always benign, or noncancerous. That said, some fibroids begin as cancer — but benign fibroids can’t become cancer. Cancerous fibroids are very rare. Because of this fact, it’s reasonable for women without symptoms to opt for observation rather than treatment.
Studies show that fibroids grow at different rates, even when a woman has more than one. They can range from the size of a pea to (occasionally) the size of a watermelon. Even if fibroids grow that large, we offer timely and effective treatment to provide relief.
The Alliance for Progressives (AP) President Ndaba Gaolathe has said that despite major accolades that Botswana continues to receive internationally with regard to the state of economy, the prospects for the future are imperilled.
Delivering his party Annual Policy Statement on Thursday, Gaolathe indicated that Botswana is in a state of do or die, and that the country’s economy is on a sick bed. With a major concern for poverty, Gaolathe pointed out that almost half of Botswana’s people are ravaged by or are about to sink into poverty. “Our young people have lost the fire to dream about what they could become,” he said.