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.
In a classic and shocking case of disgrace and dishonour to this country, the law enforcement agencies are currently struggling to cover up a damaging and humiliating scandal of having conspired to forge the signature of a Palapye Chief Magistrate, Rebecca Motsamai in an unlawful acquisition of the much-publicised 2019 warrant of arrest against Isaac Kgosi, the former director of the Directorate of Intelligence Services (DIS).
The cloak-and-dagger arrest was led by the DIS director, Brigadier Peter Magosi supported by the Botswana Police, Botswana Defence Force (BDF), with the Botswana Unified Revenue Services (BURS) which accused Kgosi of tax evasion, in the backseat.
Umbrella for Democratic Change (UDC) constituent members are struggling to reach an agreement over the allocation of wards for the imminent ward by-elections across the country.
Despite a Memorandum of Understanding (MoU) between Umbrella for Democratic Change (UDC), Botswana Patriotic Front (BPF) and Alliance for Progressives (AP) are said to be active, but the nitty-gritties are far from being settled.
The eight bye-elections will be a precursor of a somewhat delayed finalisation of the brittle MoU. The three parties want to draw a plan on how and who will contest in each of the available wards.
This publication has gathered that the negotiations will not be a run off the mill because there is already an impasse between the Botswana Congress Party (BCP) which is a UDC constituent and AP (currently negotiating to join umbrella).
The by-elections joint committee met last week at Cresta President Hotel in a bid to finalise allocation but nothing tangible came out of the gathering, sources say.
The cause of the stalemate according to those close to events, is the Metsimotlhabe Ward which the two parties have set their eyes on.
In 2019, he ward was won by Botswana Democratic Party’s (BDP) Andrew Sebobi who unfortunately died in a tragic accident in February last year.
Sebobi had convincingly won by 1 109 votes in the last elections; and was trailed by Sephuthi Thelo of the UDC trailed him with 631 votes; while Alliance for Progressives’ Innocent Moamogwe got 371 votes.
Thelo is a BCP candidate and as per UDC norm, incumbency prevails meaning that the BCP will contest since they were runners up. On the other hand, AP has also raised its hand for the same.
“AP asked for it on the basis that they have a good candidate but BCP did not agree to that request also arguing they have a better contestant,” one UDC member confided to this publication.
Notwithstanding Metsimotlhabe Ward squabble, it is said the by-election talks are almost a done deal, with Botswana National Front (BNF) tipped to take Boseja South ward in Mochudi East constituency. Botswana Patriotic Front (BPF) will be awarded Tamasane Ward in Lerala/Maunatlala constituency, sources say.
“But the agreement has to be closed by National Executive Committee (NEC),” emphasized the informant.
The NEC is said to have been cautioned not to back the wrong horse but rather rate with reason and facts.
UDC President, Duma Boko has told this publication that, “allocation is complete with two wards already awarded but with only one yet to be finalized,” he could not dwell into much details as to which party got what and the reasons for the delay in finalisation.
Chairperson of the by-elections committee, Dr. Phenyo Butale responded to this publication regarding the matter: “As AP we contested and as you may be aware we signed the MoU with UDC and BPF to collaborate on bye-elections. The opposition candidate for all bye-elections will be agreed by these parties and that process is still ongoing,” he said when asked if AP is interested on the ward and how far with the talks on bye-elections.
Butale, a former Gaborone Central Member of Parliament, who is also AP Secretary General continued to say, “As the chairperson of the bye-elections committee we are still seized with that matter. We should also do some consultations with the local structures. Once the process is complete we will issue a notice for now we cannot talk about the other two while the other is still pending the other one”.
Butale further clarified: “There is no such thing as AP and BCP not in agreement. It is an issue of signatories discussing and determining the opposition candidates across the three wards.”
Apart from the three wards, there are five more council wards that UDC is yet to allocate to cooperating partners.
FROM PALAPYE MEET: BPP CAUTION NEC MEMBERS
With the UDC cheerful from last weekend’s meeting in Palapye, the meeting however was very tense on the side of both BCP and BNF, with only BPP flexing its muscle and even lashing out.
BCP going into the meeting, had promised to ask difficult questions to the UDC NEC.
BCP VP and also acting Secretary General, Dr. Kesitegile Gobotswang, presented their qualms which were addressed by UDC Chairperson Motlatsi Molapisi, informants say.
It is said Molapisi is fed up and concerned by some UDC members especially those in the NEC who ‘wash party’s dirty linen in public’.
Insiders say the veteran politician cautioned the NEC members that they “will not expel any party but individuals who tarnish the image of the UDC.”
It is not the first time BPP play a paternalistic role as it once expressed its discontent with BCP in 2020, saying it should never wash UDC linen in public.
At first it is said, BPP, the oldest political formation in Botswana, claims disappointment on BCP stance that UDC should be democratised especially by sharing their stand with the media. Again, BPP was not happy with BCP leader Dumelang Saleshando’s decision to air his personal views on social media regarding the merger of UDC party.
Botswana Police Service (BPS) Commissioner, Keabetswe Makgophe, has of late been dousing raging fires from various quarters of society following the infiltration of the police fingerprint system by the Directorate on Intelligence and Security (DIS), WeekendPost has learnt.
Fresh information gleaned from a number of impeccable sources, points to a pitiable working relationship between the two state organs. Cause of concern is the DIS continuous big brother role to an extent that it is now interfering with other institutions’ established mandates.
BPS which works closely with the DIS has been left exasperated by the works of the institution formed in 2008. It is said, the DIS through its Information Technology (IT) experts in collusion with some at BPS forensics department managed to infiltrate the Fingerprint system.
The infiltration, according to those in the know, was for the DIS to “teach a lesson” to some who are on their radar. It is said the DIS is playing and fighting dirty to win the fights they have lost before.
By managing to hack the police finger print system, a number of renowned businessmen and other politically exposed persons found their fingers in the system. What surprised the victims is the fact that they have never been charged of any wrongdoing by the police and they were left reeling in shock to learn that their fingers are on the data-base of criminals.
In fact, some of those who their fingerprints were falsely included in the records of those on the wrong side of law learnt later when other errands demanded their fingerprints.
“We learnt later when we had to submit and buy some documents and we were very shocked,” one politician who is also a businessman confided to this publication this week.
“We then learn that there are some fabricated criminality recorded for us, as to when did we commit those remained secret to the police, but then we had to engage our lawyers on the matter and that is when we were cleared,” said the politician-cum- tenderpreneur.
The lawyers have confirmed engaging the police and that the matters were settled in a gentlemen’s agreement and concluded.
All these happened behind the scenes with the police top brass oblivious only to be confronted by the irked lot, police sources also add. The victimized group who most of them have been fighting lengthy battles with the DIS read malice and did not blink when it was revealed that these were done by the DIS.
“And it was clear that they (DIS) are the ones in this dirty war which we don’t understand. Remember when we sue, it will be the Police at the courts not the DIS and that is why we agreed to a ceasefire more so they also requested that be kept under carpet,” said the victim.
Nonetheless, the Police through its spokesperson Assistant Commissioner, Dipheko Motube, briefly said: “we do not have any system that has been hacked.” On the other hand DIS mouthpiece Edward Robert was not in office this week to comment on the matter.
Reports however say DIS boss, Peter Magosi, who most of the victims accuse of the job, is said to have met his police counterpart Makgophe to put the matter to bed.
COVID-19 RAVAGES POLICE
As frontline workers, Police have not escaped the wrath of Covid-19. Already the numbers of those infected has reached the highest of high and they suggest that they be priorities on vaccine rollout.
“Our job is complicated, firstly we arrest including those who are non-compliant to Covid protocols and we go to accidents and many more. These put us at risk and it seems our superiors are not bothered,” said one police officer this week.
The cops further complain about that working spaces are small, as such expose them to contact the virus.
“Some tests positive and go for quarantine while the rest of the unit will be left without even test carried out. If at all the bosses are serious all the police officers should every now and then be subjected to testing or else we will be no more because of the virus,” added another officer based in Gaborone.
The government has since placed teachers on the priority list for the vaccines, it remains to be seen whether the police, who also man road blocks, will be considered.
“But our bosses should convince the country leadership about this, if not then we are doomed,” concluded a more senior officer.