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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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China’s GDP expands 3% in 2022 despite various pressures

2nd February 2023
China’s Gross Domestic Product (GDP) expanded by 3% year-on-year to 121.02 trillion yuan ($17.93 trillion) in 2022 despite being mired in various growth pressures, according to data from the National Bureau Statistics.

The annual growth rate beat a median economist forecast of 2.8% as polled by Reuters. The country’s fourth-quarter GDP growth of 2.9% also surpassed expectations for a 1.8% increase.

In 2022, the Chinese economy encountered more difficulties and challenges than was expected amid a complex domestic and international situation. However, NBS said economic growth stabilized after various measures were taken to shore up growth.

Industrial output rose 3.6% in 2022 over the previous year, while retail sales slightly shrank by 0.2% data show that fixed-asset investment increased 5.1% over 2021, with a 9.1% hike in manufacturing investment but a 10% fall in property investment.

China created 12.06 million new jobs in urban regions throughout the year, surpassing its annual target of 11 million, and officials have stressed the importance of continuing an employment-first policy in 2023.

Meanwhile, China tourism market is a step closer to robust recovery. Tourism operators are in high spirits because the market saw a good chance of a robust recovery during the Spring Festival holiday amid relaxed COVID-19 travel policies.

On January 27, the last day of the seven-day break, the Ministry of Culture and Tourism published an encouraging performance report of the tourism market. It said that domestic destinations and attractions received 308 million visits, up 23.1% year-on-year. The number is roughly 88.6% of that in 2019, they year before the pandemic hit.

According to the report, tourism-related revenue generated during the seven-day period was about 375.8 billion yuan ($55.41 billion), a year-on-year rise of 30%. The revenue was about 73% of that in 2019, the Ministry said.

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Business

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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Business

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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