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Botswana slipping with rest of the world into imminent recession

Botswana-slipping-with-rest-of-the-world-into-imminent-recession

The nation is battling the devastating impact of COVID-19, with a bit of panic and extended lockdown period in May, the economy is bleeding heavily.

But what should inject Botswana with more anxiety is that the economic growth “will be lower than anticipated and might even result in a recession,” according to a report made by Botswana Insurance Holdings Limited (BIHL).

“The operating environment deteriorated substantially since mid-March 2020 as government instituted measures aimed at controlling the spread of the Coronavirus. A global recession is now predicted by most economists and Botswana is not an exception,” said BIHL.

According to BIHL business status report, the gloomy picture of economic projections poses a risk to growth in new business volumes as well as persistency experience. Increased pressure on corporate earnings will also heighten credit risk.

“New business volumes are furthermore restricted by lockdowns in markets where investee companies operate thus limiting advisors’ ability to conduct business,” according to the financial services company.

BIHL says equity, bond and currency markets across the globe are expected to remain volatile in the foreseeable future. Also, the impact of the downgrade by Moody’s of both the South African and Botswana sovereign ratings is yet to be seen but might add to volatility of asset prices especially in the South African market.

“The Average investment market levels, the exchange rates and the level of long-term interest rates are key factors that may have an impact on operational earnings and Group Equity Value to be reported for the six month to 30 June 2020 and the year ended 31 December 2020,” said BIHL.

Counting the cost of COVID-19

According to BIHL business report, the virus (COVID-19) is likely to impact the following key sources of revenue for the nation of Botswana. Like when Botswana’s influential economic partner South Africa is in lockdown and could be heading into the pit of recession with other economies.

SACU will bring less or no revenues to Botswana as one of COVID-19 measures is to lock the borders, said the financial services players. BIHL also said this week that not only this country will lose on customs, the second biggest revenue source, but also on the economic mainstay, diamonds, as its sales will be low and impact this country’s purse.

“The tourism sector is likely to be hard hit by the travel bans/restrictions which are being imposed across the world. Due to limited business activity especially during the lockdown period, we expect job losses and an increase in the unemployment rate, which is already high at 20 percent particularly in the youth,” said BIHL.

In the report the company further says it expects households to be under significant financial pressure leading to reduced spending and increases in debt arrears. SMME’s will be severely impacted, and we expect many to go out of business unless they are supported, said the financial services company.

In March, few weeks before Botswana lockdown, BIHL Group CEO Catherine Lesetedi presented BIHL financial results and took the podium with a huge smile saying, “the numbers speak for themselves,” as the financial giant held high a profit after tax which went up by 19 percent from the previous financial year. BIHL closed the year at over P434 million compared to P366 million registered in the prior year before having to battle with the ripple effects that are expected to come with COVID-19 in this current financial year to the next financial years.

After the success the BIHL board is aware that now the country or the whole world is at uncertain times and assures shareholders in its business update that it will remain resilient in the midst of an economically depressing pandemic. “BIHL is well positioned to weather the current conditions – we have a solid balance sheet; strong operational processes and the skillsets to navigate these tough times,” said the company when presenting its first quarter performance.

The financial services company is grateful of Botswana Life Insurance Limited, according to its report on its financial performance for the first quarter of the 2020 financial year and the possible impact of COVID-19 on BIHL’s operations and financial position.

According to BIHL, Botswana Life Insurance Limited is the largest business in its stable and accounts for 99 percent of the Group’s Capital Requirements (CAR).The BIHL Group’s CAR cover as at 31 December 2019 was 7.1 times and this provides the group with sufficient capital buffer should the volatility in markets and other COVID-19 related impacts on operations result in reduction in the value of assets backing CAR, or in an increase in the required capital.

BIHL’s operations have been classified as essential services and during the lockdown period, the company will operate on a limited staff basis, with only core staff on site.

According to BIHL, to date there has not been any impact on claims and persistency within the company. The BIHL Company and Group have considered and taken a stance to accept COVID-19 related claims when they do eventually occur.

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Business

Gambling Authority tender dangles as a jittery lottery quandary

30th November 2020
SEFALANA MD: CHANDRA CHAUHAN

Lucrative and highly anticipated national lottery tender that saw several Batswana businessmen partnering to form a gambling consortium to pit against their South African counterparts, culminates into a big power gamble.

WeekendPost has had a chance to watch lottery showcase even before the anticipated and impending national lottery set-up launches. A lot has been a big gamble from the bidding process which is now set for the courts next year January following a marathon legal brawl involving the interest of the gambling fraternity in Botswana and South Africa.

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Business

The uncertainty of getting the next meal in Botswana

30th November 2020
uncertainty of getting the next meal

Households representing more than half of Botswana’s population-mostly residing in rural areas- do not know where their next meal will come from, but neither do they take into consideration the quality and/or quantity of the food they consume.

This is according to the latest Prevalence of Food Insecurity in Botswana report which was done for the 2018/19 period and represents the state of food insecurity data even to this time.
The Prevalence of Food Insecurity was released by Statistics Botswana and it released results with findings that the results show that at national level 50.8 percent of the population in Botswana was affected by moderate to severe food insecurity in 2018/19, while 22.2 percent of the population was affected by severe food insecurity only.

According to the report, this translates to 27 percent of the population being food secure that is to say having adequate access to food in both quality and quantity. According to Statistician General, Burton Mguni, when explaining how the food data was compiled, Food and Agriculture Organization of the United Nations (FAO), is custodian of the “Prevalence of Undernourishment (PoU)” and “Prevalence of moderate or severe food insecurity in the population based on the Food Insecurity Experience Scale (FIES)” SDG indicators, for leading FIES data analysis and the resultant capacity building.

“The FIES measures the extent of food insecurity at the household or individual level. The indicator provides internationally comparable estimates of the proportion of the population facing moderate to severe difficulties in accessing food. The FIES consists of eight brief questions regarding access to adequate food, and the questions are answered directly with a yes/no response. It (FIES) complements the existing food and nutrition security indicators such as Prevalence of Undernourishment.

According to the FIES, with increasing severity, the quantity of food consumed decreases as portion sizes are reduced and meals are skipped. At its most severe level, people are forced to go without eating for a day or more. The scale further reveals that the household’s experience of food insecurity may be characterized by uncertainty and anxiety regarding food access and compromising the quality of the diet and having a less balanced and more monotonous diet,” says Mguni.

The 50.8 percent of the population in Botswana which was affected by moderate to severe food insecurity are characterized as people experiencing moderate food insecurity and face uncertainties about their ability to obtain food. These people have been forced to compromise on the quality and/or quantity of the food they consume according to the report on food insecurity.

Those who experience severe food insecurity, the 22.2 percent of the population, are people who have typically run out of food and, at worst, gone a day (or days) without eating. According to the statistics, rural area population experienced moderate to severe food insecurity at 65 percent while urban villages were at 46.60 percent and cities/town were at 31.70 percent. Those experiencing the most extreme and severe insecurity were at rural areas making 33.10 percent while urban villages and towns were at 11.90 percent and 17.50 respectively.

According to a paper compiled by Sirak Bahta, Francis Wanyoike, Hikuepi Katjiuongua and Davis Marumo and published in December 2017, titled ‘Characterization of food security and consumption patterns among smallholder livestock farmers in Botswana,’ over 70 percent of Botswana’s population reside in rural areas, and majority (70%) relies on traditional/subsistence agriculture for their livelihoods.

The study set out to characterize the food security situation and food consumption patterns among livestock keepers in Botswana. “Despite the policy change, challenges still remain in ensuring that all persons and households have access to food at all times. For example, during an analysis of the impacts of rising international food prices for Botswana, BIDPA reported that food prices tended to be highest in the rural areas already disadvantaged by relatively low levels of income and high rates of unemployment,” said the study.

According to the paper, about 9 percent of households were found to be food insecure and this category of households included 6 percent of households that ranked poorly and 3 percent that were on the borderline according to the World Food Programme’s (WFP) definition of food security.

Media reports state that the World Bank has warned that disruption to production and supply chains could ‘spark a food security crisis’ in Africa, forecasting a fall in farm production of up to 7 percent, if there are restrictions to trade, and a 25 percent decline in food imports.

Food security in Botswana or food production was also attacked by the locust pandemic which swept out this country’s vegetation and plants. The locust is said to have contributed to 25 percent loss in production.

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Business

Solid demand for diamonds towards the ‘gift’ season

30th November 2020
Diamonds

Global lockdown have been a thorn in diamonds having shiny sales, but a lot of optimism shows with the easing of Covid-19 restrictions, the precious stones will be bought with high volumes towards festive season. The diamond market is however warned of the resurgence of Covid-19 in key markets presents ongoing risks amid the presence and optimist about the new Covid-29 vaccines.

The latest findings published as De Beers Group’s latest Diamond Insight ‘Flash’ Report, which looks at the impact of the pandemic on relationships and engagements, has revealed that in the US that more couples than ever are buying diamond engagement rings. Bridal sales is mostly the primary source of diamond jewellery demand in recent months, De Beers said.

According to De Beers, interviews with independent jewellers around the US revealed that the rate of couples getting engaged has increased compared with the period when Covid-19 first had an impact in the US in the spring.

“In addition, despite challenging economic times, consumers were spending more than ever on diamond engagement rings – often upgrading in colour, cut and clarity, rather than size. Several jewellers speculated that with consumers spending less on elaborate weddings and/or honeymoons in the current environment, they had more to spend on choosing the perfect ring,” said De Beers.

According to De Beers, a national survey of 360 US women in serious relationships, undertaken in late October in collaboration with engagement and wedding website, The Knot. This survey is said to have found that the majority of respondents (54%) were thinking more about their engagement ring than the wedding itself (32%) or the honeymoon (15%), supporting jewellers’ hypothesis that engagement ring sales were benefiting from reduced wedding and travel budgets in light of Covid-19 restrictions.

When it came to researching engagement rings, online was by far the predominant channel for gaining ideas/inspiration at 86% of consumers surveyed, with 85% saying they had saved examples of styles they liked, according to De Beers. According to the survey, only a uarter of respondents said they had looked in-store at a physical location for design inspiration.

“For many couples, the pandemic has brought them even closer together, in some instances speeding up the path to engagement after forming a deeper connection while experiencing lockdown and its associated ups and downs as a partnership. Engagement rings are taking on even greater symbolism in this environment, with retailers reporting couples are prepared to invest more than usual, particularly due to budget reductions in other areas,” De Beers CEO Cleaver said.

According to De Beers Group, its Diamond Insight Flash Report series is focused on understanding the US consumer perspective in light of Covid-19 and monitoring how it evolves as the crisis evolves. Also, the company said, it is augmenting its existing research programme with additional consumer, retailer and supply chain touch-basis to understand the pain points and the opportunities for stakeholders across the diamond pipeline.

Demand for diamonds is as hard and resilient as the precious stone itself. De Beers pocketed US$ 450 million in its recently held ninth rough diamond sales cycle, and the company says it is more flexible approach to rough diamond sales during the ninth sales cycle of 2020, with the Sight event extended beyond its normal week-long duration.

“Steady demand for De Beers Group’s rough diamonds continued in the ninth sales cycle of the year, reflecting stable consumer demand for diamond jewellery at the retail level in the US and China, and expectations for reasonable demand to continue throughout the holiday season. However, the resurgence of Covid-19 infections in several consumer markets presents ongoing risks,” said De Beers CEO Bruce Cleaver recently.

High expectations are on diamonds being a sentimental gift for holiday season or as the most fetished gift. However the ninth cycle was lower than the eighth which registered US$ 467 million. For the last year period which corresponds with the current one, De Beers managed to raise US$ 400.

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