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Gov’t revises 2020 forecast

Dr Thapelo Matsheka

Ministry of Finance & Economic Development has revised Botswana‘s economic contraction forecast for the year 2020 from 13.1 percent to a slightly less steeper decline projection of 8.9 percent.

Government had initially projected that the COVID-19 pandemic would shed off around P20 billion in government revenue due to muted diamond trading and zero activity in the tourism sector occasioned by international travel restrictions and eroded business sentiment.

When addressing members of the media in April Minister of Finance & Economic Development, Dr Thapelo Matsheka said against initial projected revenue of P62.4 billion Botswana‘s economy would only generate a projected revenue of about P48 billion, mirroring a 13.1 percent contraction from initial projected growth rate of about 4 percent.

Dr Matsheka attributed the then projected decline to an anticipated contraction of around 30 percent in both mining and tourism revenue. Minister Matsheka then announced that Government would move to trim its 2020/21 budget from P67.6 billion to P59.6 billion. He said Budget deficit would now shoot up from initial P5.2 billion, 2.4 % of GDP to over P10 billion which would be over 5 % of GDP, well over government threshold of 4%.

This week, through the Monetary Policy Statement, Bank of Botswana (BoB) amplified the projections by the Ministry of Finance and Economic Development and the International Monetary Fund (IMF), noting that a significant deterioration in economic growth for Botswana will be experienced in 2020.

“The Ministry estimates that the economy will decline by 8.9 percent in 2020, from an earlier forecast of a 13.1 percent contraction, before rebounding to growth of 7.7 percent in 2021,” reads an extract from the MPC statement released late last week.

The IMF forecasts the domestic economy to contract by 9.6 percent in 2020 compared to 5.4 percent in the April 2020 World Economic Outlook, before rebounding to a growth of 8.6 percent in 2021.  Bank of Botswana says even with anticipated recovery in 2021, the contraction in 2020 equates, approximately, to a two-year loss of output.

In the statement the central bank explained that disparity in forecasts attest to the challenges of making forward projections when there is uncertainty about the duration of constrained economic activity, the resultant adverse impact on productive capacity, as well as the speed of resumption of production and pace of recovery in demand.

BoB Executives further observed that broadly, the contraction in GDP reflects the substantial curtailment of economic activity due to the necessary measures implemented to contain the spread of COVID-19 and safeguard human life.

The resultant decrease in global demand and disruption in supply chains, as well as curtailed economic activity locally, has affected several sources of economic growth for Botswana. Notably, these include exports, such as minerals and tourism as well as non-food retail economic activity.

The global economy is projected to contract by 4.9 percent in 2020 but to rebound to 5.4 percent in 2021, anchored by unprecedented policy and resource support by individual countries and multilateral institutions.

However, the Bank says the recovery projections are fraught with uncertainty with respect to several critical factors, namely, the intensity and effectiveness of containment measures; the extent of supply disruptions; fiscal and market financing constraints; shifts in spending patterns; trends in commodity prices; and, ultimately, business and consumer confidence.

“A similar pattern of developments pertains with regard to Botswana,” said Bank of Botswana Governor Moses Pelaelo. The MPC, however, recognized that the short-term adverse developments in the domestic economy occur against a potentially supportive environment including accommodative monetary conditions; reforms to further improve the business 3 environment; concerted efforts by government to mitigate the impact of COVID-19; as well as the likely impact of the economic recovery and transformation plan. These would generally be positive for economic activity in the medium term.

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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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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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