According to Moody’s growth forecasts for all African sovereigns’ downward in response to the coronavirus outbreak, Botswana whose real GDP was 10.9 percent in an adjustment from November 2019 forecasts plunged to 7 percent for June.
“We have significantly reduced our growth forecasts for the African sovereigns that we rate in response to the coronavirus crisis Botswana (A2 negative) face the sharpest declines in real GDP growth because the impact of domestic restrictions on economic activity and the impact of a fall in global demand in key sectors such as tourism and mining,” said Moody’s Investors Service recently.
Botswana in response to Covid-19 took measures to close its borders. This means no outside visit from Botswana diamond buyers. De Beers even broke its norm and moved its June sales sight viewings from Gaborone to Antwerp. The company is hinted to be taking its 27 July rough sales to Hong Kong and Dubai because Botswana borders are still closed.
Botswana will still get its big chunk of diamond profit despite sales moving out of its borders. According to Moody’s, on the positive, precious metal prices like gold and diamonds have performed better and have not fallen like most commodities. Oil producing countries are facing a down with the fall of prices amid OPEC+ Price War and the huge international demand.
“Weak global growth is weakening demand for diamonds, with production cuts to support prices resulting in a significant slowdown in Botswana’s diamond sector,” says Moody’s.
According to Moody’s international travel grinding to a halt is also weighing heavily on the tourism sector. The rating agency says in Sub-Saharan Africa, Mauritius is most vulnerable to a collapse in international travel given that the sector accounts for around 25 percent of its GDP.
The tourism sector still generates some economic activity for a number of African economies and the sector’s direct contribution of tourism in 2019 (% of GDP) for Botswana is 4.3 percent.
Moody’s says the crisis and its economic effects are also increasing social risks. Aside from the impact on health outcomes, the coronavirus is likely to lead to further increases in already high unemployment, in particular among the young. If not sustained, this could heighten social tensions. The shock will also stall any improvement in low incomes, aggravating income inequality, says Moody’s.
“Some governments have increased capital expenditure, as a means to provide stimulus to keeping infrastructure and other construction projects running during lockdowns. While this will support growth and continue expanding the provision of much-needed infrastructure in Africa, it will widen fiscal deficits and increase fiscal pressures.
At the same time, increases in health and social spending will be challenging to roll back once conditions normalise and combined with lower revenues will stress governments’ budgets,” says Moody’s researchers.
The rating agency further expects financial deficits will be widest in Mauritius, while South Africa, Zambia, Namibia, eSwatini, Botswana, and Egypt will also post significant deficits around 10 percent of nominal GDP.
According to Moody’s, the coronavirus shock has led to a financial squeeze in emerging markets and in particular frontier markets. The agency researchers said the effects of this change in conditions are worsened by the need to borrow even more than usual to finance growing fiscal deficits.
“Among our rated African sovereigns, seven will witness a greater than 5pps increase in gross borrowing requirements: Mauritius (14.4pps), Namibia (9.1pps), Gabon (7pps), Botswana (6.4 pps), Mozambique (5.9 pps), Republic of the Congo (5.4 pps),” says the researchers.
Moody’s reviewed all of its ratings last week Monday, when the credit profile of Botswana (issuer rating A2) reflects the country’s “ba2” economic strength balancing relatively high wealth levels against a small economy that is highly reliant on the diamond sector; its “baa1” institutions and governance strength balancing strong performance on the Worldwide Governance Indicators, robust monetary policy framework, and prudent fiscal policy against a mixed track record in terms of structural reform implementation; its “aa2” fiscal strength reflecting its low debt stock, strong debt affordability and a still strong government balance sheet despite weakening fiscal buffers; and its “a” susceptibility to event risk driven by its sound external position, modest government borrowing requirements, healthy banking system, and overall stable political system.
Moody’s normally conducts periodic reviews through portfolio reviews in which it reassesses the appropriateness of each outstanding rating in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers.
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.
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 companyâ€™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. Â The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.
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. â€śOur wide range of partners and experience can help anticipate and mitigate potential disruptions in business and production dynamics,â€ť said BĂ¸rge Brende, President, and World Economic Forum. â€śThe Forumâ€™s initiatives will help to ease physical, capital and digital flows in Africa through stakeholder collaboration, private-public collaboration and information-sharing.â€ť
Given the continentâ€™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. â€śThe 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,â€ť 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.
â€śMacro trends in the four key sectors and across Africaâ€™s growth potential reveal tremendous opportunities for business expansion as population, income and connectivity are on the rise,â€ť said Wamkele Mene, Secretary-General, AfCFTA Secretariat.
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 worldâ€™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,