BoB maintains bank rate at 3.75 percent
Business
Bank of Botswana (BoB) has kept the country’s lending rate at 3.75 percent. The decision emerged at the Central Bank’s Monetary Policy Committee (MPC) meeting held on August 19, 2021.
The Monetary Policy Committee (MPC) comprises senior Bank of Botswana staff and advisers. It is responsible for guiding monetary policy within the framework and objectives set out in the annual Monetary Policy Statement. Principally, this involves setting the policy rate (Bank Rate).
The policy is assessed in light of a systematic review of the evolving economic outlook that influences the anticipated medium-term path for inflation. Central to the Committee’s deliberations is the inflation forecast. The MPC meets approximately every two months, although, if required by circumstances, additional meetings can be convened.
Deliberating on why BoB maintained the bank rate, officials said in a virtual briefing on Thursday that inflation rose from 8.2 percent in June to 8.9 percent in July 2021, remaining above the upper bound of the Bank’s medium-term objective range of 36 percent. The latest increase in inflation mainly reflects the upward adjustment in domestic fuel prices in July 2021.
However, inflation is projected to revert to within the objective range in the second quarter of 2022, mainly on account of the dissipating impact of the recent upward adjustment in Value-Added Tax (VAT) and administered prices from the inflation calculation. Altogether they contributed 5.2 percentage points to the current level of inflation.
Overall, risks to the inflation outlook are assessed to be skewed to the upside. These risks include the potential for an increase in international commodity prices beyond current forecasts; persistence of supply and logistics constraints due to possible maintenance of travel restrictions and lockdowns; and domestically-based risk factors relating to second-round effects of the recent increases in administered prices and inflation expectations that could lead to generalized higher prices.
Furthermore, aggressive action by governments (for example, the Economic Recovery and Transformation Plan (ERTP)) and major central banks to bolster aggregate demand and the successful rollout of the COVID-19 vaccination programs could add pressure to inflation.
However, these risks are moderated by the possibility of weak domestic and global economic activity, with a likely further dampening effect on productivity due to periodic lockdowns and other forms of restrictions in response to the emergence of new COVID-19 variants.
BoB Governor Moses Pelaelo said Botswana’s slow rollout of vaccines resulting in the continuance of weak economic activity and the possible decline in international commodity prices could also result in lower inflation, as would capacity constraints in implementing the ERTP initiatives.
Real Gross Domestic Product (GDP) contracted by 8.6 percent in the twelve months to March 2021, compared to a growth of 2.2 percent in the corresponding period in 2020. The decline in output is attributable to the contraction in the production of both the mining and non-mining sectors, mainly resulting from the impact of the strict COVID-19 pandemic containment measures.
Mining output declined substantially by 27.8 percent in the year to March 2021 compared to a decline of 6.7 percent in 2020, as the sector, including its support service activities, underperformed. Similarly, non-mining GDP contracted by 3.1 percent in the twelve months ending March 2021, compared to a growth rate of 5 percent in the corresponding period in 2020. The decline in non-mining GDP was mainly due to lower output for accommodation and food services, manufacturing, construction, and diamond traders.
Projections by the Ministry of Finance and Economic Development and the International Monetary Fund (IMF) suggest a rebound in economic growth for Botswana in 2021. The Ministry projects a growth of 8.8 percent in 2021 before moderating to a growth of 5.5 percent in 2022. On the other hand, the IMF forecasts the domestic economy to grow by 8.3 percent in 2021; this is expected to moderate to 6.4 percent in 2022. The growth outcome will partly depend on the successful vaccine rollout.
Global output growth is forecast at 6 percent in 2021, reflecting expectations of strengthening economic activity in the latter part of the year, primarily supported by additional fiscal support and the rollout of effective COVID-19 vaccines. However, global output growth is anticipated to moderate to 4.9 percent in 2022, as some economies return to their pre-COVID levels.
Meanwhile, the South African Reserve Bank projects the South African GDP to grow by 4.2 percent in 2021 before slowing to 2.3 percent in 2022. The MPC noted that the short-term adverse developments in the domestic economy occur against a growth-enhancing environment.
This includes accommodative monetary conditions, improvements in water and electricity supply, further reforms to improve the business environment, and government interventions against COVID-19, including positive news around the vaccination rollout program.
In addition, the successful implementation of ERTP should anchor the growth of exports and preserve a sufficient buffer of foreign exchange reserves which have recently fallen to an estimate of P50.8 billion (9.4 months of import cover) in August 2021. Overall, it is projected that the economy will operate below total capacity in the short to medium term and, therefore, not creating any inflationary pressures going forward.
The projected increase in inflation in the short term is primarily due to transitory supply-side factors that, except for second-round effects and entrenched expectations (for example, through price adjustments by businesses, contractors, property owners, and wage negotiations), would not usually attract monetary policy response.
In this context, the MPC decided to continue with the accommodative monetary policy stance and maintain the Bank Rate at 3.75 percent. The Bank said it stands ready to respond appropriately as conditions dictate.
Business
CA SALES revenues rose to R9.5 billion
The Botswana and Johannesburg Stock Exchange listed distributor of fast-moving consumer goods
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Business
Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Business
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.