Forex Trading in Botswana – Overview
Like most countries, Botswana traders can easily start trading Forex, this is because it is the most accessible market of all the financial markets, along with being the most liquid yet most volatile markets.
Forex can be traded in a number of ways, this is made easy because there are a significant number of currency pairs that can be traded, and trading can occur 24/5 as the Forex market never closes due to the different time zones in which trading occurs.
There is, however, a weekend gap that traders need to be aware of and traders need to ensure that open positions are closed by the time the trading day concludes on Friday, to avoid being subjected to overnight or swap fees.
Due to the great volume that is being traded on a daily basis, Botswana traders can enjoy the liquidity and lowered transaction costs as result of the sheer traffic the Forex market experiences, with trades being executed at high speeds.
Beginner Botswanan traders need to ensure that they accumulate enough knowledge of the Forex Market and Forex trading before they attempt to trade using a live account by making use of guidelines, tutorials, and other comprehensive educational materials and tools.
Before registering a live account with a Forex broker, it is imperative for Botswana traders to verify the exchange rate along with the deposit, withdrawal and account base currencies supported.
Note that all currency conversions performed in this article have been done between the US Dollar and the Botswana Pula at the current exchange rate on the day and at the time that this article was written.
The Best Forex Brokers recommended for Botswana Traders
1. IC Markets
IC Markets is an Australian and Seychelles-based ECN broker which is well-regulated and authorized through the reputable ASIC and offers competitive trading conditions to a variety of traders residing in numerous countries around the globe.
When opening an account, Botswana traders can expect a minimum deposit of 2,340.96 BWP, which provides access to numerous tradable financial instruments, leverage of 1:500, variable spreads, and low commissions charged on trades.
RoboForex is a Belize-based market maker and STP broker under strict regulation from IFSC in providing online trading services and access to numerous financial instruments such as Forex, commodities, cryptocurrency, shares, and several others.
In opening an account with this broker, Botswana traders can expect minimum required deposits starting from 117.05 BWP, which provides them with access to leverage of up to 1:1000, variable spreads, average commission charges and reliable trading platforms.
XM is a reputable ECN and STP broker which is strictly regulated by ASIC, CySEC, and IFSC, with its services widespread across the globe in over 196 countries to over 2.5 million clients in offering the trade of Forex, commodities, metals, indices, and more.
When registering a live account, Botswana traders can expect minimum deposits of 58.52 BWP, spreads which are tight and variable, ultra-low commission charges on trades, leverage of up to 1:880 and access to the best trading platforms.
Exness is a globally-recognized broker with two main offices located in the Seychelles, it is also recognised as a Cyprus-based broker, with regulation and authorization through CySEC, FCA, and SFSA.
The minimum required deposit to open an account with Exness is 11.70 BWP and in opening a live trading account, Botswana traders have access to a variety of tradable financial instruments such as Forex and various CFDs, amongst others.
Exness also supports the use of MetaTrader 4 and MetaTrader 5, leverage of up to 1:1000, tight spreads and no hidden commission charges on trades.
Alpari is a STP and ECN broker which is based in Mauritius and holds regulation and authorization from FSC and FSA in facilitating the online trading of Forex, Cryptocurrency, metals, and CFDs.
When opening a live trading account with Alpari, Botswana traders can expect deposits from as little as from 58.52 BWP, which will give access to leverage of up to 1:1000, variable spreads, and exceptionally low commission charges.
Alpari also supports the use of MetaTrader 4 and MetaTrader 5 through which trading activities can be conducted.
Admiral Markets is a STP and ECN broker with offices in Australia, U.K, Cyprus, and Estonia with respective authorization and regulation through ASIC, FCA, EFSA, and CySEC in offering the trade of Forex, commodities, cryptocurrency, stocks, and more.
When opening an account with Admiral Markets, Botswana traders will be subjected to a minimum deposit of 2,340.96 BWP, which will allow them to take advantage of leverage of up to 1:500 with low commissions charged on trades, and tight, variable spreads.
LiteForex is a STP and ECN Forex and CFD broker which is headquartered in the Marshall Islands, and is strictly regulated through CySEC in offering its online trading services which allows traders access to trade Forex and various CFDs on various instruments.
The minimum deposit required when opening a live trading account is 585.24 BWP and this provides Botswana traders with leverage of up to 1:500, variable and tight spreads, and access to reputable trading platforms.
BDSwiss is a multi-regulated and award-winning broker which is based in Cyprus, Mauritius, and Seychelles with respective regulation through CySEC, FSC, and NFA.
The minimum required deposit of 2,340.96 BWP is quite average when compared to brokers who offer similar trading conditions and in opening a live account, Botswana traders have access to a variety of tradable instruments, including Forex.
In addition, BDSwiss supports the use of MetaTrader 4 and MetaTrader 5, and traders can enjoy access to leverage of up to 1:400, tight and variable spreads, and extremely low commissions charged on trades.
These brokers cater for a variety of traders despite their varying levels of skill, knowledge, and experience along with catering for millions of traders around the world who reside in various countries.
These brokers cater for Botswana traders with comprehensive and attractive trading conditions that meet the needs of traders whether they are beginners, or experts. Trading fees are transparent and not exuberant.
In addition to this, these brokers use only reputable, well-known, and user-friendly trading platforms including, but not limited to, MetaTrader 4 and MetaTrader 5, which are two of the most popular trading platforms in the trading community.
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More tariff hikes as Gov’t plans to stop BPC, WUC subsidies
The catastrophic economic mess occasioned by COVID-19 pandemic has pushed government to embark on an unprecedented cost containment undertaking – discontinuing subsidies for some parastatals.
This is aimed at managing the little remaining funds after COVID-19 wiped out billions of pulas projected for 2020/21 financial year, and further disrupting revenue streams for the entire remaining part of National Development Plan 11.
The diamond sales window alone, which is Botswana‘s main cash stream is likely to deliver a little P6 billion this year, against the initial projected revenue of P20 billion, mirroring a whopping 60 % decline.
Last week Government through Ministry of Finance released a draft recovery plan intended to stabilize the economy , balance expenditure with depressed revenue , and keep the national fiscal fabric afloat until markets and revenue streams bounce back to glory, something which global experts anticipate to happen somewhere around mid 2021.
Coming out clearly from the Economic Recovery & Transformation Plan (ERTP) which was prepared by the treasury with input from Bank of Botswana, University of Botswana and Botswana Institute of Development Policy Analysis (BIDPA), is the intention to embark on massive domestic revenue mobilization.
This according to government officials will be undertaken to relieve government of spending burden and free up resources for major infrastructural and investment projects that can pump significant stimuli into the national economic grid.
Reducing funding to parastatals and government agencies has been underscored as one of those avenues earmarked to save Botswana’s deteriorating revenue basket.
On an annual basis government spends billions on parastatals and agencies across different ministries. These are amongst others, research institutions, government think tanks, investment promotion agencies and regulatory bodies.
Amongst the organizations resourced by taxpayers through subvention are State Owned Enterprises, in particular those providing essential services like water and electricity have been receiving significant backing from Government through tariff subsidies.
However in the highly anticipated new expenditure blueprint, these parastatals will have to fend for themselves. Botswana Power Corporation(BPC) and Water Utilities Corporation (WUC) have been singled out as some quasi-governmental organizations that will no longer have it easy with receiving money from government, with suggestion that they will have to seek credit lines if need arise.
“Parastatals such as BPC and WUC, with high capital expenditure needs, can potentially raise their own funds from capital markets by borrowing to finance their new projects,” reads the economic recovery plan.
The document further stated, “But these parastatals need to be able to charge cost-reflective tariffs to become financially self-sustaining and eliminate dependence on transfers and subsidies from government.”
BPC receives tariff subsidy from government in the average region of P1 billion annually to cover operational costs and cushion consumers against high tariffs while Water Utilities occasionally receives around P350 million pula depending on dynamics of a particular financial year.
This year just after COVID-19 took its toll, Government announced a 22 % increase in electricity tariff.
The regulator Botswana Energy Regulatory Authority (BERA) explained that the tariff increase was to ensure cost reflective, affordable and appropriately priced service that supports BPC operational costs so that the corporation can continue fulfilling its mandate of delivering quality, reliable and sustainable power supply to its customers.
Just after Botswana emerged out of a month long lockdown, Permanent Secretary in the Ministry of Land Management, Water & Sanitation Services, Bonolo Khumotaka revealed that Water Utilities had lost over P100 million from unpaid bills.
She reiterated that Water Utilities Corporation was therefore suffocating from overwhelming operating costs that are not recovered.
To rectify this perennial dependence on government capital injection the economic recovery plan wants consumers to pay more. “Electricity and Water tariffs will be progressively raised to market levels within a specified period of about 3 – 5 years.”
“This should reduce the need for government financial support and allow these corporations to raise funds in the market on the strength of their own balance sheets,” observed officials at the Ministry of Finance.
Covid-19, informal sector joins P40 billion economic clichés
What is it all about this 2020/21 – 2022/2023 Economic Recovery and Transformation Plan (ERTP) much talked about this week? Notably, the word Covid-19 has inevitably forced itself into the economic jargon while the fiscus’ perpetual mere mention or omission at most time, informal sector, joined the other clichés this time.
BusinessPost engaged the new services of new sophistication, Data Journalism Tools, which makes a quick guide to find tools to analyze and visualize data, to see the peculiarity of the 64 document which was coveted by many hands this week. This publication introspected the language, tone and words behind the much anticipated ERTP.
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P40 billion needed to take Botswana’s economy out of Covid-19 mess
Botswana will need a total of approximately P40 billion to emerge out of COVID-19 economic shocks and reset back to pre-pandemic growth trajectories and development ambitions. This is contained in the Economic Recovery and Transformational Plan (ERTP) released this week by Ministry of Finance & Economic Development.
Themed “Sustainable and Resilient Recovery towards High – Income Status”, the plan which is still a draft seeks to respond swiftly to the catastrophic depression on Botswana’s economy delivered by the COVID-19 pandemic.
The minds involved in this strategic economic rescue path include Bank of Botswana, Ministry of Investment Trade & Industry, University of Botswana and Ministry of Finances amongst others. They envisage cultivation of exponential growth that will catapult Botswana’s economy to resilient development trajectories.
According to International Monetary Fund (IMF) COVID-19 global pandemic will shrink global economies by 3 % against initial expected growth of over 3 %. Locally against initial projected revenue of P62.4 billion, Botswana‘s economy will only generate a projected revenue of about P48 billion.
Government has trimmed its budget from P67.6 billion to P59.6 billion. Budget deficit will now shoot up from initial P5.2 billion, 2.4 % GDP to over P10 billion which will now be over 5 % of GDP, well over government threshold of 4%.Government will therefore do away with some planned expenditures and projects.
The decline in government revenue will be attributable to a massive reduction in Mining & Mineral revenue which is anticipated to shrink by over 33 %. The decline in mining and mineral revenue is predominately as a result of halt in rough diamond sales due to travel restriction and stand still in trading across the industry.
The diamond industry is Botswana‘s key foreign income earner and largest contributor to GDP. It was projected that diamond revenue will bring to the table a total of P20 billion, while Government experts revenue from mineral revenue to only be around P6 billion. Trade & Hotels revenue will go down over 32 %.
Manufacturing will go down by 10 %, Transport and communication will decline by over 4 %.Non Mineral tax revenue will shrink by P2 billion from initial projection of P14 billion to P12 billion. Revenue from Value Added Tax (VAT) will go down from P8.6 billion to P7.6 billion.
As part of Economic response to COVID 19 Bank of Botswana moved its regulatory mantle to make key adjustments. At the meeting held on April 30, 2020, the Monetary Policy Committee (MPC) of the Bank of Botswana decided to reduce the Bank Rate by 50 basis points from 4.75 percent to 4.25 percent and the primary reserve requirement (PRR) from 5 percent to 2.5 percent.
Inflation was unchanged for the fourth consecutive month at 2.2 percent in March 2020, remaining below the lower bound of the Bank’s desired medium-term objective range of 3 – 6 percent. According to BOB forecast, Inflation will revert to within the objective range in the fourth quarter of 2020. This represents a significant downward revision compared to forecasts contained in the February 2020 Monetary Policy Statement.
The reduction of Bank rate implied that for those with loans would now pay 0.5 percent less on their monthly loan repayment premiums. The Prime rate now stands at 5.75 percent from 6.25%. BOB’s decision to trim primary reserve requirement from 5 percent to 2.5 percent, effective May 13, 2020 mirrored commercial Bank will be able to keep more money in their hands which they can lend to new borrowers. The PRR cut is expected to result in an injection of liquidity of approximately P1.6 billion into the banking system.
However all these according to the Economic Recovery & Transformational Plan were just the beginning, the middle income country still has a long way to go. ERTP has underscored the need to invest in Agriculture to reduce import bill and propel Botswana to food security heights, ICT to enable globalization and enhance easy of doing business and tap into 4th Industrial Revolution as well as infrastructure to facilitate setting up of businesses.
The team led by Ministry of Finance says securing funding for the above initiatives is one of the most difficult components of the process. First, government revenue will be much lower than earlier anticipated; hence, there will already be a need for much larger deficit funding in the short- to medium term, even before adding ERTP initiatives.
Second, to be effective and meaningful, a stimulus package has to be larger than the “business as usual” or “just counter-cyclical”; that is, replacing what would have been the path of spending. This according to Experts implies a substantial injection of resources, which needs to be undertaken judiciously and for initiatives and projects that have significant multiplier effects and long-term economic durability and impact, i.e. evaluation of returns, and prioritization, is needed.
“Even as this is desirable, there is need for care not to overburden implementation and absorptive capacity of the economy. This is to guard against possible destabilization, in terms of prices, monetary growth and budget sustainability, as well as wastage and opportunities for corruption,” reads the draft plan.
There are five main options to fund the ERTP via the Budget, that is drawing down on the Government’s portion of the foreign exchange reserves and from Government Investment Account held at Bank of Botswana, external and foreign borrowing which may involve international financial institutions such as World Bank and IMF .
The other funding mechanism available is domestic borrowing from capital markets; by issuing bonds and treasury bills, sale of assets through for instance privatization and increasing domestic revenue generation. Ministry of Finance says the preferred options are domestic borrowing and revenue mobilization. However, they are unlikely to be sufficient to meet the entire funding needs over the remainder of the NDP 11 period.
The Ministry says the estimated total cost of ERTP spending is P20 billion over 2.5 years. In addition, the anticipated budget deficit over the same period is P20 billion, making a total of approximately P40 billion to be funded.
On the positive side the Ministry says there is considerable potential for increased borrowing through the issuance of government bonds, which currently amounts to around 7.5% of GDP. This compares with a legal limit on total domestic borrowing including guarantees of 20% of GDP, and an “ideal” size for an efficient, liquid government bond market of 15% of GDP.
Furthermore the draft plan suggested that Finance for budget deficits and the ERTP can be raised by doubling the size of total government borrowing from P15 billion to P30 billion. “The additional P15 billion of borrowing can be sourced from domestic savers (e.g. institutions such as insurance companies and pension funds) and banks, although the impact on cost (interest rates paid) is still to be determined. Encouraging the purchase of (Pula) bonds by foreign investors should also be considered,” reads the ERTP.