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BoB in historic benchmark rate cut

BoB Governor: Moses Pelaelo

Businesses, banks and household on Thursday midday received the much anticipated announcement from Bank of Botswana Governor, Moses Pelaelo, who said the central bank has decided to reduce the Bank Rate by 50 basis points from 4.25 percent to 3.75 percent.

This is the second 50 basis points cut this year after the April cut from 4.25 percent to 4.75 percent. This Thursday cut is the record lowest since 2006, two years before global recession. The two cuts this year were seen as intervention to cushion the economic impact of Covid-19.
Covid-19 and its new normal to most business activities shifted most macroeconomic dynamics and dimension; this recent cut according to the central bank is meant to support the domestic economy which is backed against the wall by inflationary pressures.

The headline inflation remained steady at 1 percent in August and well below the lower bound of the Bank’s objective range of 3-6 percent after waking from the lowest level since records began in January of 1997(June and July, 0.9 percent). For August, the upward pressure came from prices of food & non-alcoholic beverages (4.2 percent vs 3.9 percent in July); housing & utilities (6.1 percent vs 5.9 percent); alcoholic beverages & tobacco (6.6 percent, the same pace as in July) as the economy was rising from a gloomy lockdown. But the Bank has decided to improve spending.

Inflation has been at the bottom of BoB’s container of 3 percent to 6 percent for 11 months and it is expected to bounce back to the targeted range in the third quarter of 2021 according to Pelaelo.  “The COVID-19 pandemic and consequent containment measures have severely throttled economic activity globally and domestically as production, supply chains, project implementation and provision of goods and services are constrained. Similarly, consumption and spending are disrupted, hence domestic demand pressures and foreign prices remain subdued.

Consequently, overall risks to the inflation outlook are skewed to the downside. However, inflation may rise above current forecasts if international commodity prices increase beyond current projections and in the event of upward price pressures occasioned by supply constraints due to travel restrictions and lockdowns,” says Pelaelo on Thursday.

Pelaelo and his Central Bank Monetary Committee was on this recent decision making amid the work-on of the second quarter of 2020 GDP data. In the Thursday press conference, Pelaelo said already Real Gross Domestic Product (GDP) contracted by 4.2 percent in the 12 months to June 2020, compared to a growth of 3.9 percent in the year to June 2019.

“The decline in output is attributable to the contraction in output of both the mining and non-mining sectors, resulting from the associated COVID-19 pandemic containment measures. Mining output contracted by 18.6 percent compared to a growth of 1.5 percent in the corresponding period ending June 2019, mainly due to weaker performance of the diamond, copper, soda ash and other mining subsectors,” said the Governor on Thursday.

Furthermore, Pelaelo said Non-mining GDP contracted by 2.6 percent in the year to June 2020 compared to a growth of 4.2 percent in the corresponding period in 2019. The decline in non-mining GDP was mainly due to contractions in output of the trade, hotels and restaurants, construction, manufacturing and transport and communications sectors.

But the storm was felt recently in the release of the second quarter of 2020 economic data, a depiction of the heavy wave that invisibly came with Covid-19 inside Botswana borders in March. A mammoth decline in real value added of Mining & Quarrying and Trade, Hotels & Restaurants industries by 60.2 and 40.3 percent respectively made sure that the Real Gross Domestic Product for the second quarter of 2020 plunges by 24.0 percent.

“The nominal Gross Domestic Product (GDP) for the second quarter of 2020 was P36, 863.5 million compared to P50, 726.5 million registered during the previous quarter. This represents a quarterly decrease of 27.3 percent between the two periods. During the quarter under review, General Government became the major contributor to GDP for the first time in many years, by 19.7 percent, followed by Finance & Business Services, Trade, Hotels & Restaurants and Mining & Quarrying by 16.7, 16.5 and 8.1 percent respectively. The contribution of other sectors was below 7.0 percent, with Water & Electricity being the lowest at 1.6 percent,” said Statistics Botswana.

A tale of contractions in projections by economists this year, riddled in uncertainty and all spelling deterioration in economic Botswana’s growth this year. Ministry of Finance and Economic Development and the International estimates that the economy will decrease 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. Commercial bank with a locally focused and commissioned research, Rand Merchant Bank, maintains an expectation of 10.5 percent contraction in growth in 2020.

Projections by the International Monetary Fund (IMF) is for 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 for Botswana in 2020.  According to the BoB Governor, with recovery in 2021, the contraction in 2020 equates, approximately, to a two-year loss of output. He further stated that the disparity in forecasts attests 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. Pelaelo however mentioned that there will be revisions on all the projections made.

Pelaelo explained that, something that was further echoed by his deputy Kealeboga Masalila, BoB’s monetary policy has recognized that the short-term adverse developments in the domestic economy occur against a potentially supportive environment including accommodative monetary conditions. The Governor was referring to, “reforms to further improve the business 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.”

A lot of anticipation has been on the Economic Recovery and Transformation Plan (ERTP) and its expected take off. With economists curious on whether there will be any monetary policy coordination from the central bank to the ERTP, like an expansionary monetary stance in the form of cutting the benchmark rate, as a way of catalysing the implementation of economic recovery efforts.

According to Rand Merchant Bank Global Markets Research seen by this publication, the government is expected to publish ERTP in 4Q:2020. But the implementation of ERTP is expected to begin in 2021. “With its success relying heavily on prudent project management by government,” says the report.

Business

The Bulb World starts operations in South Africa

8th April 2021

Homegrown LED light manufacturing company, The Bulb World, has kick started operations in South Africa, setting in motion the company’s ambitious continental expansion plans.

The Bulb World, which was partly funded by Citizen Entrepreneurial Development Agency (CEDA) at the tune of P4 million, to manufacture LED lighting bulbs for both commercial and residential use in 2017, announced last year that it will enter the South African market in the Special Economic Zone (SEZ) of North West province under the auspices of North West Development Corporation (NWDC).

The company has already secured a deal with South Africa authorities which entails production factory shells and tax incentives arrangements.

The company founder and Chief Executive Officer, Ketshephaone Jacob has also previously stated that the company is looking for just under P50 million to finance its expansion strategy and is reaching out to institutional investors such as Botswana Public Officers Pensioners Fund (BPOPF) and government investment arm, Botswana Development Corporation (BDC).

However, Jacob told WeekendPost that instead of sitting and waiting for expansion funding the company has started hitting the ground running.

“We have decided to get in the streets of SA, start selling lights from door to door, ” said Jacob who is in currently in Rusternburg to oversee the introduction of The Bulb World products in the market.

Jacob explained more brand activations will be undertaken in South Africa. “The plan is to do it the whole of North West and Limpopo province, through hawkers, we give the hawkers the lights to sell at a factory price and they put a mark up and make a living,” he said.

The Bulb World operates from Selibe Phikwe, it currently employees 65 young people, 80 % of which are Phikwe youth. The company plans to add 100 jobs this year alone as it forges ahead with its regional and continental expansion plans.

In July this year Bulb World products will hit South African Shelves:  Pick n Pay, Checkers and Africa’s largest retailer Shoprite.

The Bulb World has been registered as a company in South Africa; the company will start producing lights from Mogwasa after striking a special economic zones deal with North West Development Corporation in North West Province South Africa.

“Over the next 10 years we are looking to create over 5,000 jobs in Africa. Through our expansion into all of Africa we will be able to create employment for various individuals in different sectors namely; manufacturing, distribution electronics and retail,” Jacob told this publication earlier this year.

Jacob said if all goes well, the plan is to have taken over Africa or rather penetrated, and have prevalent presence in the African market.

“We are gunning to have at least 30 percent market share by then. According to a 2016 Market Survey, the total valuation of sales for LED Lighting was 57BN, a portion of which we plan to have taken over by then,” he said.

 

While the company has set its eyes on Africa, Jacob said, the company has not fully exploited its local growth, indicating that there could be strategic factories built to supply neighbouring countries of Angola and Zimbabwe.

“There is potential for further local expansion as well to other areas of Botswana if things run smoothly as anticipated. Hopefully in the long-term if our fellow Africans and all these markets receive us well we are planning to build another factory,” he said.

“We are looking to build another factory in the Chobe/Ngamiland Area that will give priority to markets in Zimbabwe and Angola,” he said

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Business

‘Oil exploration will have minimal impact’

30th March 2021
Okavango-River-Basin

The Maun based Okavango Research Institute (ORI) has downplayed the impacts of oil and gas exploration in part of Okavango delta arguing that given the distance proposed the likelihoods of negative impacts drilling these exploration wells on the surface water systems is likely to be negligible.

The Institution released a position paper titled ‘Proposed Petroleum (Oil and Gas) Exploration Operations in the Petroleum Exploration License (PEL) No. 73,’ with findings stating that, in the event of discovery of economically viable hydrocarbon deposits, much more careful consideration of the impacts and economic benefits of development of the resource will be needed.

For example, the fracking process for gas and oil extraction is known to require large volumes of underground water.

It further argues that increased extraction of the underground water is likely to affect the water table level and further affect the overall water availability in the river-basin.

“The effect on water availability and use may become worse if surface water is reticulated or sourced by any means from the Kavango River. Should the exploration and fracking for oil and gas expand to Block 1720, 1721 and 1821, the impact on water availability and quality will be significant, especially if the wastewater is not well managed,” said the paper.

The research unit recommends close communication between the relevant Basin State Ministries (Mineral Resources, Environment) and the Permanent Commission on the Okavango River Basin, OKACOM, and other stakeholders must be facilitated.

This will facilitate sharing of the correct information on the desired intentions of the basin states and compromises sought for the sustainability of the ecosystems in the downstream of the Cubango-Okavango river Basin, states the position paper.

ORI as a key stakeholder with scientific information says it is positioned to provide scientific advice and guidance to decision-makers on the potential impacts of both exploration and development and operation activities.

It also recommends that while the impacts might be minimal at the exploration stage, environmental impacts during the development and extraction process are significant.

Findings also state that the SADC Protocol places a mandatory duty to make a notification of planned measures undertaken in any riparian state in cases where such measures hold the potential to cause ‘significant adverse effects.’

It further states that where the planned development is trivial and not expected to cause any significant harm, the development state is not under duty to notify other riparian states.

Given that the drilling in the Kavango Region in Nambia is merely for exploratory purpose and the possibility of harm is minor, it is therefore not surprising that the Namibian government did not inform Botswana.

However, should it be found that the oil can be profitably or economically exploited, the Namibian government would be under a duty to notify both Angola and Botswana.

The institution further states that to ensure sustainable development in the Okavango Delta the following in the context of exploration for and potential development of hydrocarbon deposits within the Cubango-Okavango River Basin, it must be considered that the Okavango Delta is a World Heritage Site listed in 2014 by UNESCO and one of the binding requirements of the listing is the non-permissible commercial mining of any mineral, gas or oil within the World Heritage Site.

It states that the Okavango Delta is also a RAMSAR site in which mining is not allowed.

Should the exploration for minerals, oil and gas be allowed, there is a high chance that a mineral, oil or gas may be found given that the Delta is sitting on karoo sediments and shale rocks which in other parts of the world have been found to be sources of oil and gas deposits. Should oil or gas be discovered, there will be a strong socio-economic pressure to mine oil or gas and create jobs for the masses.

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Business

Pakmaya yeast penetrates local market

30th March 2021
Pakmaya Africa Sales Manager: Cem Perdar

Manufactured in Turkey, Pakmaya Instant Dry Yeast can be used in the production of various fermented products, as it is suited for both traditional and industrial baking processes. All kinds of breads, buns and fermented pastry products are typical examples of applications.

Pakmaya Africa Sales Manager Cem Perdar says Pakmaya has 4 plants in across the world, further indicating that all of the plants have the highest standards of quality certificates and approvals. Regarding raw material, molasses is the main ingredient for yeast. Concerning production activities, yeast manufacturing requires high know-how and capability. Pakmaya has all those capabilities and aspects more than 45 years.

According to Perdar, Pakmaya has been existent in African markets since 30 years. From South to North, Central to East and West, a consumer can find Pakmaya in nearly every part of Africa continent.

“With its high quality, rich product selection and good service, our brand has become the favorite yeast of many Africans. On the other hand, our distributors in African countries are working very hardly and loyally in order to promote our products in their markets. After some time, we are becoming like families with our exclusive distributors in Africa and this enables both parts to work harder and keeps our product sustainable in market,” he said in an interview this week.

The yeast manufacturing giant made its way to Botswana market. The company has been smoothly working with Kamoso Distribution, a local distribution company. Perdar told BusinessPost that two entities have been working hard to earn is market locally.

“At the moment we have a good market share with them in Botswana market. I’m sure during 2021 long, we will be increasing our sales and market position. Soon we are going to start a marketing campaign in Botswana, so that means Batswana will see and recognize Pakmaya more and more. Pakmaya wants to be the best friend of bakers in bakeries and ladies at homes in Botswana.”

As per global COVID-19 regulations to curb the spread of the COVID-19, Botswana just like other country closed borders. Providentially, the restrictions did not affect the company destructively.

Perdar says “Kamoso Africa is a very important and strong partner in Botswana territory. With Kamoso’s hard work and strict measurements, we have done a very good job. So as Pakmaya, we have not suffered any distribution problem. Our partner is doing the needful at the reaching our products to end users.”

He further said “We are doing well in Botswana market and hoping to make much more. Our aim is to enter every single corner in Botswana territory. With our new marketing campaigns, we are planning to be the most preferred yeast in Botswana market.”

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