I will start by giving a highlight of the economic performance and how COVID-19 has impacted our economic landscape. I will then discuss some of the Government interventions in the wake of COVID-19 and how our Government intends on building back a more inclusive and resilient economy post the COVID-19 pandemic.
BRIEF ECONOMIC UPDATE
Almost all economic sectors in the domestic economy experienced negative growth in 2020, resulting in the overall contraction of 8.5 percent in 2020; worse than the originally-forecast contraction of 7.9 percent, which shows the severe impact of the outbreak, and partly due to technical adjustments to the GDP figures.
The negative growth during 2020 was most pronounced in the major sectors of Mining, Trade, Hotels and Restaurants, Transport & Communications, Manufacturing and Construction, which more than offset the positive growth rates in Agriculture, Water and Electricity and General Government. These three sectors were supported by some measures that were put forward to contain the virus outbreak. However, signs of recovery are evident in 2021, as the domestic economy expanded by 36.0 percent year-on-year during the second quarter of 2021, compared to a contraction of 26.0 percent in the same period in 2020.
The positive performance during the second quarter of 2021 was due to the rebound of the global diamond market from the COVID-19 crisis, which resulted in improved performance of the mining and diamond trading sectors. Projection for 2021 is 9.7 per cent. In terms of monetary policy, the Bank rate was maintained at 3.75 percent, its lowest ever level, after reducing it from 4.25 percent in September 2020 to encourage domestic investment.
Domestic inflation has been rising since the beginning of 2021. The sharp increase is mainly due to increases in indirect taxes and fuel price adjustments. Headline inflation stood at 8.8 percent as at August 2021, but has declined to 8.4 percent in September 2021. We expect that in the medium term, inflation will return to the Bank of Botswana’s objective range of 3-6 percent as the economy stabilizes, and the transitory impact of one-off price increases falls away.
As at the end of July 2021, the foreign exchange reserves amounted to P52.01 billion, equivalent to 10 months of import cover of non-diamond goods and services. The reserves will, however, be boosted by the recent SDR allocation by the IMF, and the proceeds of loans from the World Bank Group and African Development Bank.
GOVERNMENT INTERVENTIONS IN THE WAKE OF COVID-19
In light of this challenging environment, Botswana just like the rest of the world promptly responded by preparing an Economic Response Plan in April 2020, in order to address the short term economic impacts of COVID-19 pandemic.
Establishing a COVID-19 Relief Fund, with an initial capitalization of P2 billion from public funds; and individuals, private sector and development partners also contributed to the Fund. Establishment of the Industry Support Fund capped at P1.3 billion. P690 million has been disbursed to date. Government guaranteed loans by commercial banks to firms affected by COVID-19 (up to a maximum of P1 billion in total). Providing tax free wage subsidies to sustain jobs of most affected sectors. Food relief hampers of about P850 per family during lockdown period. Wage subsidy – Government covering half salary for those earning maximum of P5000 per month and all tourism related activities.
Tax Concessions up to March 2021
Financial relief payments (P1,000) for informal sector and small enterprises, that did not benefit from other relief measures, on condition of registration on the LEA database. Several of these short term interventions were funded from the COVID-19 Relief Fund established by Government.
BOTSWANA’S BUILD BACK BETTER AGENDA
Given the uncertainty and severity surrounding impacts of COVID-19 in our economy, there was need to come up with mitigation factors which will address not only the short-term but the medium-term to long-term impacts, hence, the development of the Economic Recovery and Transformation Plan (ERTP). The ERTP was adopted to complement Government’s short-term economic relief. Package that was implemented from April onwards. Therefore, an amount of P14.5 billion was allocated as additional fiscal resources for the ERTP. Expenditure to date stands at around P799 million.
Therefore, the ERTP seeks to reinforce the support already provided for severely affected and vulnerable businesses, workers and sections of the community. The restoration of the economy continues to be guided by the Economic Recovery and Transformation Plan (ERTP), launched as part of the Mid-Term Review (MTR) of National Development Plan (NDP 11), as well as the Government Reset Agenda, launched by His Excellency the President, Dr. Mokgweetsi Eric Masisi in May 2021, which I believe Chief of Staff, Mr. Boyce Sebetela will elaborate on later as per the programme. All these are geared towards taking our economy to another level, despite the economic challenges we are faced with.
Government is committed to supporting economic recovery post COVID-19 through some of the following interventions:
Establishment of the Industry Support Fund capped at P1.3 billion, of which 690 million has been disbursed to date. The Bank of Botswana reduced primary reserve requirement (PRR) from 5 percent to 2.5 percent and this is still maintained. Liquidity support measures for commercial banks which include reducing the cost of borrowing by banks from the central bank and extending the range of eligible collateral for such funding, while the capital adequacy ratio was reduced from 15 percent to 12.5 percent.
The Bank of Botswana has reduced the cost of accessing overnight funding facility, Credit Facility, to the Bank Rate (3.75 percent) from the cost of Bank Rate plus 6 percent. The launch of the revised Botswana Exporter Development Programme (BEDP) through the Botswana Investment and Trade Centre (BITC) initiative to support export-led growth. The BEDP aims to support local firms to penetrate export markets and participate in export value chains. Similarly, the UNDP-supported Supplier Development Programme is helping to build links between large firms and potential small- and medium sized suppliers.
Saving Botswana’s population from COVID-19;
Promoting export-led growth and diversification, including the development of value chains and economic clusters; Investment in productive infrastructure, including digital infrastructure; Building resilience, including citizen economic empowerment, supporting SME development, diversifying the domestic supply base and responding to climate change; Promoting the digital transition.
Strong economic recovery of around 9.7 percent is expected this year. However, risks and uncertainties remain, given an exponential increase in COVID-19 cases and related mortality experienced in the last few months in a number of Countries. Although, the number of new cases recorded on a daily basis has been declining steadily in recent weeks, there is still a risk for the fourth wave towards the end of the year. It is therefore, important that we continue to comply with all the health protocols as advised by the experts leading the fight against the disease, and also increase our uptake of the available vaccines.
The recent decline in new cases can be attributed to increased vaccination roll-out, coupled with containment measures that Government has put in place. Globally, the pandemic seems to be under control, primarily due to the widespread of vaccine rollout. This has allowed many countries to relax movement and border restrictions. However, risks still remain.
As I conclude, let me highlight that the COVID-19 pandemic has persisted longer than anticipated, and therefore, concerted efforts will continue to be made towards saving lives of Batswana through increased vaccination rollout and as well as intensifying measures that will accelerate economic recovery going forward.
Finally, the build back agenda at national, company, or individual level must take into account the lessons learnt from this pandemic and build ecosystems that are resilient, leveraging technology and partnerships, while we develop and monetize skills for the next few decades to achieve a green recovery. I do hope these are some of the issues will be discussing throughout the day.
Peggy O. Serame is Honourable MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT
For the past two years, the world has been at combat with various COVID-19 variants. A new variant of concern which is considered to have a combination of the greatest hits (Alpha, Beta, Gamma, and Delta) has sent alarm bells around the world.
Botswana’s COVID-19 genomic surveillance, which actively monitors COVID-19 variants in Botswana, picked four samples that were concerning and discovered a completely new variant. In accordance with international obligations, as a responsible member state under the International Health Regulations of 2005, Botswana submitted the suspected new variant for the entire global scientific community to respond to this early finding. Shortly after, the Republic of South Africa, also submitted a similar concerning variant.
The new variant, ‘Omicron’ is named after the 15th letter of the Greek Alphabet to avoid public confusion and stigma. The news spread like wild fire which resulted in European Union member states, the United Arab Emirates and United States of America imposing travel bans on Botswana and other sister SADC nations, resulting in drawing a wedge between nations.
In his address on the occasion of an update on Government’s response to the COVID-19 pandemic President Dr Mokgweetsi Masisi has shunned the response by some countries to Botswana’s detection of the Omicron variant stating that it is unfortunate as it appears to have caused unnecessary panic amongst the public across the world. He considers it defeating the spirit of multilateral cooperation in dealing with this global pandemic.
“The decision to ban our citizens from travelling to certain countries was hastily made and is not only unfair but is also unjustified while remain confident that reason and logic will prevail, the harshness of the decision has the effect of our shaking our belief in the sincerity of declared friendship and commitment of equality and economic prosperity for us,” he said.
President Masisi has appealed to the nations that have imposed travel restrictions on Botswana to reflect and review their travel restrictions stance against the Southern African region.
African leaders and heads of state are in agreement on a matter. Some stating that the travel bans are ‘uncalled for, afro phobic, unscientific, strict, unfair and unjustified’. They have come out to bash the unilateral travel bans and request immediate upliftment of the restrictions imposed on SADC member states by European Union member states, the United Arab Emirates and United States of America.
While Batswana are banned from international travel, locally as at 26th November 2021, a total of 195 068 COVID19 cases and 2 418 deaths had been reported since the beginning of the pandemic.
“We have been steadily witnessing a decrease in the number of new cases and deaths in the last three months. We are currently reporting an average of less 10 infections per 100 000 people compared to 648 cases per 100 000 people at the peak of the third wave. We have also observed a gradual decline in hospitalizations across the country with an average of less than 10 patients at a time at Sir Ketumile Masire Teaching Hospital (SKMTH) and our other health facilities countrywide,” pointed out President Masisi.
Masisi encouraged Batswana not to despair as to date, all the nations’ key indicators remain stable. “This is comforting although it still does not warrant any complacency on our part in terms of behaviour and other attitudinal patterns towards this dreadful disease. We are actively monitoring the evolving situation in view new variant of concern,’’ he sternly advised.
Government through the different Ministries leading the different sectors, has been working tirelessly to prepare for potential outbreaks and a fourth (4th) wave. This will be achieved through; installing oxygen generating plants and increasing skilled human capacity.
With regards to the vaccination programme; as of 29th November 2021, an estimated One Million and Fifty Three Thousand Three Hundred and Sixty One (1 053 361) people translating to 75.7% of the target Batswana citizens and residents over the age of 18 years have received at least 1 dose of the COVID-19 vaccines. A total of Nine Hundred and Fifty Thousand Nine Hundred and Seventy Three (950 973) people translating to 68.4% have been fully vaccinated. This number exceeds the 64% target Botswana has set to achieve by end of December 2021.
Masisi enthusiastically revealed that; “We are one of the three countries in Africa that have achieved the World Health Organisation target of vaccinating at least 40% of the entire population by December 2021. We are committed to ensure that all is done to reduce the transmission of the virus in the country.
More vaccines are being procured to ensure availability for those who have not yet received any dose. Government is also considering booster doses for those who may be identified as qualifying for them.”
President Masisi urged Batswana to continue observing the COVID-19 health protocols of social distancing, washing hands or sanitizing and wearing masks and avoid unnecessary travelling.
As COVID-19 pandemic continues to shake the world, China has promised to donate a billion coronavirus vaccines, advance billions of dollars for African trade and infrastructure, and write off interest-free loans to African countries to help the continent recover from the coronavirus pandemic. All these promises emerged at the Conference of the Forum on China-Africa Cooperation (FOCAC) held in Senegal at the end of November 2021.
Chinese President Xi Jinping announced that China will provide one billion doses of vaccines to Africa when delivering keynote speech at the Eighth Ministerial FOCAC via video link on 29th November. Of those, 600 million would be via donations and the rest would be produced jointly by African countries and Chinese companies. In addition, China would send medical teams to help the continent deal with the pandemic.
President Xi also announced nine programmes that China will work closely with African countries in the next three years. He mentioned the medical and health program, the poverty reduction and agricultural development program, the trade promotion program, the investment promotion program, the digital innovation program, the green development program, the capacity building program, the cultural and people-to-people exchange program, the peace and security program. President Xi hailed China-Africa relations as a shining example for building a new type of international relations.
Furthermore, Xi said Beijing would pump US$10 billion into African financial institutions for onward lending to small and medium enterprises. He promised to extend another US$10 billion of its International Monetary Fund allocation of special drawing rights, which would help stabilise foreign exchange reserves. In addition, China will write-off interest-free loans due this year, to help the economies that had been ravaged by the pandemic. Last year, China also promised to write off interest-free loans due at the end of 2020.
Beijing pledged US$60 billion to finance Africa’s infrastructure at the forum in Johannesburg in 2015, and a similar amount when the gathering was held in the Chinese capital in 2018. But in the past few years, Chinese lenders, including the policy banks – Exim Bank of China and China Development Bank – have become more cautious and are now demanding bankable feasibility studies amid debt distress in the continent.
Besides seeking more money for projects, Xi said China would encourage more imports of African agricultural products, and increase the range of zero-tariff goods, aiming for US$300 billion of total imports from Africa in the next three years.
China would also advance US$10 billion of trade financing to support African exports into China. He said the country would also advance another US$10 billion to promote agriculture in Africa, send 500 experts and establish China-Africa joint agro-technology centres and demonstration villages. African countries are pushing to grow exports of agricultural products into China. At the moment, Beijing maintains an enormous trade surplus over the continent. African imports from China include machinery, electronics, construction equipment, textiles and footwear.
Meanwhile, State Councilor and Foreign Minister Wang Yi summarized FOCAC achievements when meeting with journalists ahead the 8th FOCAC Ministerial Conference. Wang said that the FOCAC is a crucial platform for collective dialogue between China and Africa and an effective mechanism for practical cooperation.
He said since the inception of the FOCAC 21 years ago, Chinese enterprises have built over 10,000 kilometers of railways, nearly 100,000 kilometers of roads, nearly 1,000 bridges, nearly 100 ports, and over 80 large-scale power facilities in Africa.
In addition, they have assisted Africa in building over 130 medical facilities, 45 gymnasiums and more than 170 schools, and training over 160,000 professionals in various fields. Chinese medical teams have provided medical service to an accumulated number of 230 million, and China’s network service has covered around 700 million user terminals.
Yi said that the Eighth FOCAC Ministerial Conference was a great success. According to Yi, the success of the conference confirmed the strong will of China and Africa to work together to overcome difficulties and seek common development, and showed the huge potential and bright prospects of China-Africa cooperation.
Wang summarized the most important consensus reached at the conference as following: 1) both sides will promote the spirit of China-Africa friendship and cooperation; 2) China and Africa will work together to defeat the pandemic; 3) both sides will work to enrich China-Africa cooperation in the new era; 4) the two sides will work together to practice true multilateralism; 5) China and Africa will jointly build a China-Africa community with a shared future in the new era.
FOCAC, is one of the developments that came as a major shift in the dynamics of the China-Africa relationships came about in the 1980s when China embarked upon its “Opening up and Reform Policy” –a wide-ranging policy that gave birth to the new China. Economic and geo-strategic interests rather than the desire to export a specific political philosophy drive China’s current relationship with Africa.
For Africa though, the key problem is that our economies are weak in value creation. As argued by one economist, what workers and factories produce is produced more efficiently, with better quality and at lower cost, by other economies. “In such circumstances, making money is easier through rent than through value creation.
African governments should be capable of guiding their private sector towards value creation, a key factor for achieving a sustainable competitive edge in the global market. Furthermore, partnerships that Africa forges should be targeted to enhance such an environment”. The question remains as to whether China’s intervention in Africa will help address this challenge.
A report by The Economist Intelligence Unit (The EIU) has given its outlook for the rise and fall of living costs around the world.
The report is based on current and past trends impacting the cost of living, including currency swings, local inflation and commodity shocks. In addition, it compares more than 400 individual prices across over 200 products and services in 173 cities.
The Worldwide Cost of Living (WCOL) rankings continue to be sensitive to shifts brought about by the COVID-19 pandemic, which have pushed up the cost of living across the world’s major cities. Although most economies are now recovering as covid-19 vaccines are rolled out, the world’s major cities still experience frequent surges in cases, prompting renewed social restrictions. In many cities this has disrupted the supply of goods, leading to shortages and higher prices.
The report highlights that “the inflation rate of the prices tracked in the EIU’s WCOL across cities is the fastest recorded over the past five years. It has accelerated beyond the pre-pandemic rate, rising by 3.5% year on year in local-currency terms in 2021, compared with an increase of just 1.9% in 2020 and 2.8% in 2019.”
However; supply-chain problems, as well as exchange-rate shifts and changing consumer demand, have led to rising prices for commodities and other goods. The most rapid increases in the WCOL index were for transport, with the price of a litre of petrol up by 21% on average.
Tel Aviv, a city on Israel’s Mediterranean coast tops the WCOL rankings for the first time ever, making it the most expensive city in the world to live in. The Israeli city climbed from fifth place last year, pushing Paris down to joint second place with Singapore. Tel Aviv’s rise mainly reflects its soaring currency and price increases for around one-tenth of goods in the city, led by groceries and transport, in local-currency terms. Property prices (not included in the index calculation), have also risen, especially in residential areas.
The cheapest cities are mainly in the Middle East and Africa, or in the poorer parts of Asia. Damascus has easily retained its place as the cheapest city in the world to live in. It was ranked the lowest in seven of the ten pricing categories, and was among the lowest in the remaining three. While prices elsewhere have generally firmed up, in Damascus they have fallen as Syria’s war-torn economy has struggled. Tripoli, which also faces political and economic challenges, is ranked second from the bottom in our rankings, and is particularly cheap for food, clothing and transport.
“Over the coming year, we expect to see the cost of living rise further in many cities. Inflationary expectations are also likely to feed into wage rises, further fuelling price rises. However, as central banks cautiously raise interest rates to stem inflation, price increases should moderate from this year’s level. We forecast that global consumer price inflation will average 4.3% in 2022, down from 5.1% in 2021 but still substantially higher than in recent years. If supply-chain disruptions die down and lockdowns ease as expected, then the situation should improve towards the end of 2022, stabilising the cost of living in most major cities.”
“The survey has been designed to enable human resources and finance managers to calculate cost-of-living allowances and build compensation packages for expatriates and business travellers. It can also be used by consumer-goods firms and other companies to map pricing trends and determine optimum prices for their products across cities. In addition, the data can be used to understand the relative expense of a city to formulate policy guidelines,” highlights the report.