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We will not rush to external borrowing – Matsheka

COVID-19 global pandemic has adversely impacted Botswana’s economy, pushing the country into unprecedented disruption in flow of government revenue, resulting in suspension of implementation of some developmental plans.

The pandemic has halted international travels thus putting Botswana’s tourism industry to a standstill. Tourism is the second largest foreign income earner. Trade in the diamond industry which is the country’s economic engine has also been suspended due to travel restrictions, lockdown and closure of manufacturing & jewelry stores worldwide.

This has nullified and reversed all positive growth prospects projected for the year 2020. The 4.4 % expected growth rate has been overturned completely, now the economy will move into a steep deceleration, projected to be in the region of 13 %, worse than 7.7 % registered during the 2008/09 global financial crisis.

Against initial projected revenue of P62.4 billion, it is now anticipated that the economy will only generate revenue of about P48 billion. Government has trimmed its budget from P67.6 billion to P59.6 billion. Botswana’s budget deficit which was projected around P5 billion for the 2020/21 financial year has now ballooned to P10.8 billion.

This will now be around 5.4 % of GDP, breaking the set threshold of 4 % -GDP deficit. Quizzed on how government will finance the budget deficit Minister of Finance & Economic Development Dr Thapelo Matsheka said Botswana was contemplating engaging global funders, but will not rush into such a decision.

“We have not reached any decision as to how much we would borrow externally from institutions such as International Monetary Fund (IMF), World Bank and African Development Bank, any other funding institution or foreign country,” he said.

Dr Matsheka added that, “My office is currently in talks with Botswana representatives at these institutions and we will look at a number of factors before coming to a decision of who we going to borrow from and how much we going to borrow.”

The Minister underscored that Botswana would borrow only to invest in developmental projects halted by COVID19 revenue crisis.

“We don’t want to borrow money for food hampers, we want to borrow for solely development purposes that can fuel economic activity and cultivate exponential growth so that we realize economic recovery and return on investment,” he said.

To finance budget deficits government can either draw down from cash balances held by Bank of Botswana, borrow from external funders or internally from local capital market. As at end of 2019/2020 financial year, total government debt was P27.8 billion, roughly 28% of GDP.

To borrow from local markets Government through Bank of Botswana issues bonds and treasury bills on Botswana Stock Exchange. At the latest Government Bonds and Treasury Bill auction held on the 28 February, Bank of Botswana (BoB), on behalf of the Government offered additional tranches to existing and listed bonds.

BW013 was reopened and P300 million was allotted, increasing BW013 total nominal amount in issue to P1,576.00 Million. BW014 was also reopened and P400.0 Million was allotted, increasing its total nominal amount in issue to P2,140.00 Million.

Furthermore BW015 was also reopened and P95.0 Million was allotted, increasing its total nominal amount in issue to P746 Million. Currently Government issued Bonds stands at market capitalization of P12.7 billion. Government limit on borrowing from local capital market currently is set at P15 billion.

However Bank of Botswana is currently lobbying for Ministry of Finance to push the limit a bit higher in a bid to cultivate more activity in the local capital market in turn also reducing the risks of drawing down from reserves and borrowing externally at exorbitant interest and foreign exchange rates.

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Jewellery manufacturing plant to create over 100 jobs

30th January 2023

The state of the art jewellery manufacturing plant that has been set up by international diamond and cutting company, KGK Diamonds Botswana will create over 100 jobs, of which 89 percent will be localized.

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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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