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Saturday, 02 December 2023

Moodys already gloomy SSA report not yet infected by 501.V2

Business

The latest report on Sub Sahara Africa (SSA) by rating agency Moodys was prepared before the global panic of a new coronavirus variant which has already been detected in Botswana following its discovery in South Africa, the countrys major trade partner.

Latest reports are that the new variant, now christened South African 501.V2 or E484K, was detected from the local tourism hub of Maun, and the Covid-19 task team have borrowed credence from the high rate of infections prior to the festive season as vindication of the new virus mutation being in Botswana.

The local task team is not the only one missing on full scientific data of how this new corona virus variant is in Botswana and its carriers or patients renowned rating agency released a report on Wednesday with absence of any mention of South African 501.V2.

Moodys made a study on 2021 outlook negative as debt costs intensify amid limited institutional capacity to adjust post pandemic.

However, the current affairs suggest that post pandemic there are mutations or new variants of the virus which should be dealt with, now forcing countries like Botswana, South Africa and some in Southern Africa into coming up with curfew regulations to curb the new form of Covid-19.

The Great Pandemic seems to be here to stay in the midst of humankind if reports coming from next door South Africa about Covid-19 taking new forms to survive vaccine hence spreading uncontrollably is anything to go by.

Optimism has been brought the vaccine which is currently being rolled out, but scientific theories being conducted suggest that the new variant of Covid-19 might prove to be more resistant to vaccination.

Moodys released a report this week on the outlook of SSA creditworthiness in 2021 which is deemed to be negative. With the new variant sweeping across Botswana and its influential trade partner South Africa, curfew regulations that are currently in place in the two countries could lead to further economic injury.

That Moodys expectation for the fundamental conditions that will drive sovereign credit over the next 12-18 months to be severe, could be less far-reaching and short sighted given the lack of the new variant factor on the latest report.

We expect SSA sovereigns to face severe challenges in grappling with the fallout from the coronavirus shock as lower overall economic growth and revenue coupled with higher government expenditure will lead to wider fiscal deficits and higher debt, said Moodys on Wednesday.

Higher debt levels, weaker debt affordability (amid both lower revenue and higher interest payments) and low buffers will challenge SSA sovereigns institutional capacity to manage economies, public health, budget positions, financing strategies, reserves and social discontent, thus elevating event risk.

According to Moodys latest report on SSA, commodity producers and tourism-dependent countries like Botswana were hit particularly hard.

Currently no tourist can come to Botswana lest they want to brave the new Covid-19, incidentally borders have been closed save for goods transportation.

The change in outlook on Botswana (A2 negative) was driven by a fall in demand for diamonds, its principal export commodity, said Moodys. This has affected Botswanas GDP which on the third quarter of 2020 was -6 percent, moving from -24 percent in the second quarter which mirrored all the hallmarks of an economy down spiraled by Covid-19 negative ripple effects.

Moodys furthered its report by picking on overall growth in the SSA region to be associated with lasting impact of the economic contraction, which the rating agency said it will be greater in 2021.

The region’s long-term recovery is more precarious given that SSA sovereigns have little fiscal space to counter the pandemic’s negative impact on economic activity and preserve productive capacity, and given that structural factors are generally less conducive to fostering a rebound in SSA than in other Emerging Markets, said Moodys.

Moodys said although favourable base effects will help the recovery, real GDP growth will remain lower than historical averages in most countries. Botswana was at last given a glimmer of hope by the Moodys report, optimism was that non-energy exporters like this country will remain the most dynamic economies, with growth driven by domestic demand and high public investment rates, and a rebound in demand for non-energy commodities.

Public investment that addresses infrastructure gaps can raise growth both over the near and longer term. However, the impact of public investment on boosting long-term growth potential is determined in part by investment efficiency, which is generally weak in the region. Public investment efficiency is constrained by weak institutional quality, which affects project selection, appraisal and monitoring, as well as high rates of corruption, which can lead to rent-seeking and cost overruns, said the rating agency.

Moodys projected that Botswana will average economic growth of 6.5 percent in 2021 as a global growth recovery drives greater demand for coffee and diamonds. This is despite much uncertainty wearing on this countrys prospect of a big leap, the discovery of the new coronavirus variant believed to be at large in Botswanas shores.

Business

PROTECT YOUR FINANCES THIS HOLIDAY SEASON: A GUIDE TO FRAUD PREVENTION

17th November 2023

November marks Fraud Awareness Month across the world and Bank Gaborone has a dedicated mission to inform the public of evolving threats. The holiday season is a time for celebration, togetherness, and giving. However, it’s also a time when the risk of financial fraud increases.

Common Types of Financial Fraud During the Holidays

  • Online Shopping Scams: With the rise of online shopping, scammers often create fake e-commerce websites to steal your money and personal information.
  • Sim Swap: Fraudsters may try to gain control of your phone number by swapping your SIM card, which can lead to unauthorized access to your accounts.
  • Application Fraud: Be cautious when downloading apps, as some may be malicious and designed to steal your data.
  • Travel Scams: Planning a holiday trip? Watch out for fake travel deals and websites that can lead to disappointment and financial loss.
  • Identity Theft: Protect your personal information, as identity theft can have far-reaching consequences, both financially and emotionally.
  • Phishing and Email Scams: Scammers often send deceptive emails and messages, trying to trick you into revealing sensitive information or making payments.
  • Mobile Network Fraud: Be cautious about unsolicited calls or messages requesting personal information or payments.

How You Can Identify Potential Fraud

To protect yourself from financial fraud, keep an eye out for the following signs:

  • Unexpected Transactions: Check your account statements regularly for any transactions, withdrawals, or purchases that you didn’t initiate.
  • Unauthorized Account Activity: Pay attention to notifications of login attempts or changes to your account details that you didn’t initiate.
  • Phishing Attempts: Be cautious about emails, calls, or messages requesting sensitive information or payments, especially from unknown or suspicious sources.

Security Measures

At Bank Gaborone, we are committed to ensuring the security of your finances. Our Bank Gaborone 360 initiative encompasses several security features:

  • 3D Secure Cards: All our cards are equipped with 3D secure technology, which means that an OTP (One-Time Password) is sent with every purchase for your approval, adding an extra layer of security.
  • 24/7 Call Centre: Our round-the-clock customer centre is ready to assist you at any time. If you have questions, concerns, or need assistance related to your account’s security, simply give us a call 3158681   at any hour of the day.
  • Secure Online Mobile app: To enhance security and ease of access, you can use your biometric authentication to log in to the app and authenticate transaction. An additional layer of protection is provided through two-factor authentication.

Security tips for customers

  • Avoid sharing personal information – the Bank will never ask for login credentials, personal details, card numbers, or OTPs.
  • Exercise caution when receiving unexpected links or messages.
  • Ensure your device is protected with a screen lock and refrain from storing passwords on the device or in the cloud.
  • Promptly report lost or stolen devices to the bank for immediate action.

What to Do If You Fall Victim to Fraud

If you suspect that you have fallen victim to a fraud attempt, it’s essential to act quickly:

  • Report the incident to the bank immediately.
  • Block your card.
  • Contact the customer centre at 3158681 for assistance and guidance.

As you enjoy the holiday season, we urge you to stay vigilant and prioritise the security of your finances. Safeguarding your assets is a shared responsibility, and Bank Gaborone is committed to supporting you in this effort. Remember that you are not alone in this journey. Your bank is here to protect your financial interests and guide you through any challenges you may face. By being proactive and following the tips and security measures outlined in this article, you can ensure that your holidays are joyful, secure, and free from financial fraud.

 

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Business

Challenging times as GROWTH IS EXPECTED TO SLOW DOWN IN 2023

17th November 2023

The third quarter of 2023 has been characterised by a worsening of global economic conditions, with global growth forecasts revised downwards by the IMF, rising fuel prices, and the expectation that interest rates will remain “high for longer”. This has impacted on the global diamond market, which has experienced a persistent weakening of demand through the year. Domestically, annual GDP growth has fallen, but remains in line with expectations. Inflation has risen, also as expected, and is likely to rise further in the coming months, driven mainly by global factors.

Economic Growth

The IMF released its new World Economic Outlook (WEO) in early October, just after the end of the quarter. The IMF predicts a slowdown in global growth to 3.0% in 2023, down from 3.5% in 2022. Growth is projected to fall slightly further, to 2.9%, in 2024. Current and projected global GDP growth rates remain well below historical averages. The IMF notes that three factors are driving the slowdown in growth.

One is the tailing off of the post-COVID economic recovery, particularly following the very strong 2022 recovery in travel and tourism. The second is the consequence of the tighter monetary policy implemented in most countries to bring inflation down, with tightening of credit conditions impacting on aggregate demand. Third, the impact of the commodity price shock following Russia’s invasion of Ukraine persists, notably through higher energy prices, reducing real incomes in energy importing countries and of consumers generally. To what extent have these factors had an impact on Botswana? Certainly economic growth is tailing off, with annual GDP growth down to 5.0% in Q2 2023, with a projected further decline to 3.8% for the year as a whole.

However, the slowdown appears to be having a greater impact on sectors that have a domestic focus (such as agriculture, food manufacturing, wholesale and retail, and other domestic services). The main outward-facing sector that has experienced a severe slowdown is diamond trading (discussed more below). With regard to monetary policy tightening, Botswana is feeling the impact of global developments, but there has been no real domestic impact given that the Bank of Botswana has hardly tightened monetary policy while many other central banks have raised policy rates significantly. But Botswana has felt the impact of higher energy prices, which remain elevated despite some easing earlier in 2023, and there has been a squeeze on real incomes and living standards as a result.

Diamond Market

The major impact of adverse global conditions has been experienced in the diamond market. This has not yet fed through to diamond mining which, perhaps surprisingly, was up 7.1% in the 12 months to June 2023. This may just be “the calm before the storm”, however. Diamond sales through DBGSS are down 31% over the first eight sales cycles of 2023 compared to the same period last year, and Okavango Diamond Company is experiencing similar pressures. It will not be possible to continue expanding mining with sales contracting, as the required stockpiling becomes increasingly expensive. The global diamond market has been buffeted by multiple adverse factors during the year. Restrained consumer demand in the US, notwithstanding some resilience in the US economy, has been one factor, compounded by weak post-COVID recovery in China. Recent demand may have been impacted by a sharp increase in diamond prices in 2022, when demand was strong, but the industry is now paying the price. Synthetic diamonds are taking increasing market share, at much lower prices than natural diamonds. With slowing demand, downstream participants in the diamond value chain (cutters and polishers, traders, jewellery manufacturers and retailers) have all cut back on purchases as their stocks have risen, impacting rough diamond demand. As a result, De Beers have announced that sightholders would be permitted to defer up to 100% of their contracted purchases for the remainder of 2023 while Okavango Diamond Company cancelled its planned November auction.

Inflation and interest rates

After the sharp drop in inflation from its peak of 14.6% in August 2022 to 1.2% a year later, the increase to 3,2% in September was not unexpected. Fuel prices have been the main driver of changes in inflation over the past two years, in part because international oil prices have been so volatile, combined with their very high weight in the Botswana Consumer Price Index (CPI) basket. After the upsurge in oil prices caused by Russia’s invasion of Ukraine, to over US$110 per barrel in June 2022, prices fell to just over $70 a barrel in March this year. The decline enabled pump prices to be reduced, leading to the dramatic fall inflation as the previous year’s increases dropped out of the annual inflation calculation. In recent months, however, the deliberate actions by OPEC+ member states to restrict production and supply have pushed prices back over $90 per barrel, a selfish move seemingly calculated to put further pressure on households across the world who have already been badly impacted by the cost-of living crisis. In Botswana, regulated pump prices – which are determined under a highly politicised adjustment mechanism – have lagged the increase in global prices. For instance, the price increase in late October came about a month after the relevant increases in global prices. Following this increase, we expect inflation to continue to rise through to the end of 2023 and into 2024, when it is likely to temporarily go above the upper end of the BoB’s 3-6% inflation objective range. This means that there is unlikely to be any reduction in the BoB’s monetary policy rate (MoPR) in the near future.

Fiscal Developments

The Ministry of Finance’s draft Budget Strategy Paper (BSP) was released in September, and provided updated information on the outturn of the 2022-23 budget, revisions to the current year (2023-24) budget, and the medium-term fiscal framework out to 2026-27. The fiscal data shows a continuation of recent trends, with an (unplanned) balanced budget for 2022-23; a (planned) deficit budget for 2023-24 and 2024-25, and a (planned) balanced or surplus budget for the outer years of the projections, which would mark the beginning of the NDP 12 period. There is a consistent story in the BSP which relates to the need for fiscal consolidation (discussed further in our special feature). In a parallel with Saint Augustine’s famous prayer (“Lord, make me chaste, but not yet”), fiscal consolidation – in the form of a balanced or surplus budget – is always a year or two away. For instance, the BSP released in September 2022 projected a balanced budget from 2023/24 onwards. However, the September 2023 BSP now indicates a balanced budget two years later, from 2025/26 onwards. This largely reflects the dramatic increase in development spending first proposed in the 2023 Budget for 2023/24 and set to be continued in subsequent years. That relates to planned budgets. Outturns are quite different. In both 2021/22 and 2022/23 large projected deficits did not materialise, and in both years, budgets were broadly balanced, due mainly to significant underspending on the development budget, along with higher-than-expected mineral revenues. Notwithstanding a large (47%) planned increase in development spending in the current fiscal year, it seems quite possible that, as in the last two years, the development budget will be underspent and the budget will end up being broadly balanced – although there may be risks on the revenue side if the diamond market continues to deteriorate. Even though the outcomes are good (balanced budgets), the fact that these are unplanned reflects negatively on the quality of fiscal planning and budgetary control.

Outlook

The rest of 2023 and early 2024 looks likely to be an uncertain and somewhat challenging time for the economy. The main concern is the depressed state of the global diamond market, and the potential impact on economic growth, exports and government revenues – although it is important to note that no negative impact on these important economic indicators has yet been realised. The likelihood that inflation will rise in the coming months means that domestic interest rates are likely to be maintained – at levels that are low by international standards – for the foreseeable future. Projections of adverse climatic conditions in the coming months – with forecasts of higher temperatures and lower rainfall – are likely to have a negative impact on agriculture, water supplies and tourism, and illustrate the longer-term challenges posed by global climate change. Fortunately, Botswana’s critical financial buffers – in the form of the Government Investment Account at the BoB and the foreign exchange reserves – have been rising, assisting the ability of the economy to withstand possible shocks, at least in the short term.

(Adopted from Econsult Economic Review Q3)

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Business

Thamane Launches AADFI Working Group on Climate Change to Support African DFIs

15th November 2023

The Association of African Development Finance Institutions (AADFI) has taken a significant step towards addressing the pressing issue of climate change by launching a working group dedicated to this cause. The working group aims to support AADFI member institutions and the wider African DFI community in tackling the challenges posed by climate change.

The launch of the working group occurred on November 9, 2023, immediately following the opening ceremony of the AADFI 2023 Annual General Assembly in Egypt. The theme of the assembly was “The Role of African DFIs in Achieving Just Energy Transition,” highlighting the importance of sustainable energy practices in combating climate change.

Thabo Thamane, Chairman of AADFI and CEO of Citizen Entrepreneurial Development Agency (CEDA), announced the launch of the working group and introduced its members and objectives. The group was approved by the AADFI Board of Directors on August 28, 2023, following a resolution made at the previous annual general assembly.

The working group is chaired by the Development Bank of Southern Africa (DBSA), with Boitumelo Mosako, CEO of DBSA, leading the efforts. Mr. Olymous Manthata, Head of Climate Finance at DBSA, will coordinate the working group’s activities.

Comprised of member institutions dedicated to driving the climate agenda within their organizations and communities, the working group plays a crucial role in supporting AADFI member institutions and the wider African DFI community in addressing climate challenges. It serves as a strategic platform for generating ideas and actions that will enable the association and its members to remain relevant in the climate change agenda.

The working group has several key responsibilities. Firstly, it will support efforts to create a roadmap for African DFIs to accelerate their involvement in addressing climate challenges. This includes leading the effort in attracting technical assistance and support to build the skills and capacity of member DFIs in dealing with climate change.

Additionally, the working group will guide African national DFIs in mobilizing finance and identifying funding opportunities for green projects. It will also play a crucial role in raising green bonds and collaborating with the African Financial Alliance on Climate Change (AFAC) to represent the interests of AADFI members in the alliance. Furthermore, the working group will leverage support from partners such as the African Development Bank (AfDB), the Global Center on Adaptation, and the Green Climate Fund (GCF) to facilitate member DFIs’ actions on climate change.

The working group’s ultimate goal is to drive meaningful change and accelerate Africa’s just energy transition by collaborating with various stakeholders and partners. Thamane urged all member institutions to actively support the working group and participate in its activities. He expressed his gratitude to the DBSA for taking the lead role in the working group and expressed confidence in its ability to deliver on its mandate.

In conclusion, the launch of the AADFI working group on climate change marks a significant step towards addressing the challenges posed by climate change in Africa. By supporting member institutions and the wider African DFI community, the working group aims to drive meaningful change and accelerate Africa’s just energy transition. With the support of various stakeholders and partners, the working group has the potential to make a significant impact in combating climate change and ensuring a sustainable future for Africa.

 

 

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