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Botswana may record increased investment

Botswana could record an increase in investment by foreign and domestic investors this year, this is despite the COVID-19 fourth wave anticipated before the end of 2022, according to DLA Piper Africa, an international law firm with business lawyers in African countries.

In its 2022 report, the firm indicated that its survey shows that investors are interested in investing Southern African countries including Botswana.

In the report the firm noted that with the lifting of COVID-19-related travel restrictions and the end of lockdowns in many countries, there appears to be a slow but, increased appetite for investing in Botswana and other Southern African countries. The report stated that the recent Gross Domestic Production (GDP) growth projections place Botswana among the countries that could attract more investors this year.

The Ministry of Finance and Economic Development recently announced that Botswana now expects economic growth of 9.7% of GDP for 2021, compared with the 8.8% forecast in February 2021, helped by higher diamond sales and a recent rebasing of GDP accounts.

Botswanas growth rate is projected to be the highest in Africa for 2021. Fitch ratings S&P revised the countrys economic outlook from negative to stable. This positive news bodes well for increased investment in 2022, particularly in the diamond mining sector, reads the report in part.

DLA Piper Africa Botswana managing partner, Terrence Dambe said another factor which could attract more investors to Botswana is its high vaccination rate which could minimize the impact of the expected COVID-19 fourth wave. With experts talking of the prospect of a possible COVID-19 fourth wave before the end of the year, it remains to be seen whether or not a possible rise in infections will put a damper on investment prospects. The current vaccination rates in Botswana are very encouraging in terms of both availability of the vaccines and uptake by the eligible population. This provides hope that a fourth wave will either be avoided or greatly diminished or not have a significantly negative impact on economic activity and investments, said Dambe.

Dambe said following the improvement in demand for diamonds in the international market the diamond industry, is among the sectors which could record increased investment in the next 18 months.He said in Botswana, diamonds, which are the mainstay of the economy, greatly improved international sales, following the 2020 30% fall in diamond sales by Botswanas biggest diamond mining company, Debswana Diamond Company (a 50/50 joint venture between the government and De Beers.

The sales of rough diamonds rebounded by 41% in the first half of 2021, driven by the reopening of key markets the US and China. The more favourable trading climate has resulted in renewed interest, with diamond cutting and polishing companies wanting to establish manufacturing facilities in Botswana. This is no doubt welcome foreign direct investment that bodes well for increased economic activity, said the renowned lawyer.

According to Dambe farming and agribusiness are the sectors which are expected to attract more investment this year. He said this will be possible because government has made improved food security a national priority. This has given rise to renewed interest in farming. We foresee the agriculture sector and its entire value chain being a major sector for growth, providing increased formal and informal employment opportunities and stimulating the growth of small, medium and micro enterprises, he said.

Investment Monitor Africa, a research company on global economic issues, has identified Botswana among five (5) African countries that look ready for increased investment in 2022.Investment Monitor Africa economist, Christine Patton said the recent removal of Botswana from the list of countries susceptible to money laundering, terrorist financing and other illicit money flows has sparked optimism and should help efforts to diversify Botswanas economy and attract foreign investors.

According to latest published statistics by Botswana Investment and Trade Center (BITC), Botswana recorded foreign direct investment amounting to P1.456 billion while domestic investment stood at P1.608 billion in 2020.

Business

Botswana records over P6 billion trade deficit

7th February 2024

Botswana has recently recorded a significant trade deficit of over P6 billion. This trade deficit, which occurred in November 2023, follows another deficit of P4.7 billion recorded in October of the same year. These figures, released by Statistics Botswana, highlight a decline in export revenues as the main cause of the trade deficit.

In November 2023, Botswana’s total export revenues amounted to P2.9 billion, a decrease of 24.3 percent from the previous month. Diamonds, a major contributor to Botswana’s exports, experienced a significant decline of 44.1 percent during this period. This decline in diamond exports played a significant role in the overall decrease in export revenues. However, diamonds still remained the leading export commodity group, contributing 44.2 percent to export revenues. Copper and Machinery & Electrical Equipment followed, contributing 25.8 percent and 10.1 percent, respectively.

Asia emerged as the leading export market for Botswana, receiving exports worth P1.18 billion in November 2023. The United Arab Emirates, China, and Hong Kong were the top destinations within Asia, receiving 18.6 percent, 14.2 percent, and 3.8 percent of total exports, respectively. Diamonds and Copper were the major commodity groups exported to Asia.

The Southern African Customs Union (SACU) received Botswana’s exports worth P685.7 million, with South Africa being the main recipient within SACU. The European Union (EU) received exports worth P463.2 million, primarily through Belgium. Australia received exports worth P290 million, while the United States received exports valued at P69.6 million, mostly composed of diamonds.

On the import side, Botswana imported goods worth P9.5 billion in November 2023, representing an increase of 11.2 percent from the previous month. The increase in imports was mainly driven by a rise in Diamonds and Chemicals & Rubber Products imports. Diamonds contributed 23.3 percent to total imports, followed by Fuel and Food, Beverages & Tobacco at 19.4 percent and 15.0 percent, respectively.

The SACU region was the top supplier of imports to Botswana, accounting for 77.7 percent of total imports. South Africa contributed the largest share at 57.2 percent, followed by Namibia at 20.0 percent. Imports from Asia accounted for 9.8 percent of total imports, with Diamonds, Machinery & Electrical Equipment, and Chemicals & Rubber Products being the major commodity groups imported. The EU supplied Botswana with imports worth 3.2 percent of total imports, primarily in the form of Machinery & Electrical Equipment, Diamonds, and Chemicals & Rubber Products.

Botswana’s recent trade deficit of over P6 billion highlights a decline in export revenues, particularly in the diamond sector. While Asia remains the leading export market for Botswana, the country heavily relies on imports from the SACU region, particularly South Africa. Addressing the trade deficit will require diversification of export markets and sectors, as well as efforts to promote domestic industries and reduce reliance on imports.

 

 

 

 

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Business

Business sector optimistic about 2024

7th February 2024

The business sector in Botswana is optimistic about the year 2024, according to a recent survey conducted by the Bank of Botswana (BoB). The survey collected information from businesses in various sectors, including agriculture, mining, manufacturing, construction, and finance, among others. The results of the survey indicate that businesses expect trading conditions to improve in the first quarter of 2024 and remain favorable throughout the year.

The researchers found that firms anticipate improvements in investment, profitability, and goods and services exported in the fourth quarter of 2023 compared to the previous quarter. These expectations, combined with anticipated growth in all sectors except construction and real estate, contribute to the overall confidence in business conditions. Furthermore, businesses expect further improvements in the first quarter of 2024 and throughout the entire year.

Confidence among domestic market-oriented firms may decline slightly in the first quarter of 2024, but overall optimism is expected to improve throughout the year, consistent with the anticipated domestic economic recovery. Firms in sectors such as mining, retail, accommodation, transport, manufacturing, agriculture, and finance are driving this confidence. Export-oriented firms also show increased optimism in the first quarter of 2024 and for the entire year.

All sectors, except agriculture, which remains neutral, are optimistic about the first quarter of 2024 and the year ending in December 2024. This optimism is likely supported by government interventions to support economic activity, including the two-year Transitional National Development Plan (TNDP) and reforms aimed at improving the business environment. The anticipated improvement in profitability, goods and services exported, and business investment further contributes to the positive outlook.

Firms expect lending rates and borrowing volumes to increase in the 12-month period ending in December 2024. This increase in borrowing is consistent with the expected rise in investment, inventories, and goods and services exported. Firms anticipate that domestic economic performance will improve during this period. Domestic-oriented firms perceive access to credit from commercial banks in Botswana to be relaxed, while export-oriented firms prefer to borrow from South Africa.

During the fourth quarter of 2023, firms faced high cost pressures due to increased input costs, such as materials, utilities, and transport, resulting from supply constraints related to conflicts in Ukraine-Russia and Israel-Hamas. According to the survey report, the firms noted that cost pressures during the fourth quarter of 2023 were high, mainly attributable to increase in some input costs, such as materials, utilities, and transport arising from supply constraints related to the Ukraine-Russia and Israel-Hamas wars. “However, firms’ expectations about domestic inflation decreased, compared to the previous survey, and have remained within the Bank’s 3 – 6 percent objective range, averaging 5.4 percent for 2023 and 5.4 percent for 2024. This suggests that inflation expectations are well anchored, which is good for maintenance of price stability,” reads the survey report in part.

However, firms’ expectations about domestic inflation decreased compared to the previous survey, and inflation expectations remained within the Bank’s objective range of 3-6 percent. This suggests that inflation expectations are well anchored, which is beneficial for maintaining price stability.

In terms of challenges, most firms in the retail, accommodation, transport, manufacturing, construction, and finance sectors considered the exchange rate of the Pula to be unfavorable to their business operations. This is mainly because these firms import raw materials from South Africa and would prefer a stronger Pula against the South African rand. Additionally, firms in the retail, accommodation, transport, and mining sectors cited other challenges, including supply constraints from conflicts in Russia-Ukraine and Israel-Hamas, as well as new citizen economic empowerment policies that some firms considered unfavorable to foreign direct investment.

On the positive side, firms highlighted factors such as adequate water and electricity supply, a favorable political climate, an effective regulatory framework, the availability of skilled labor, and domestic and international demand as supportive to doing business in Botswana during the fourth quarter of 2023.

Overall, the business sector in Botswana is optimistic about the year 2024. The anticipated improvements in trading conditions, supported by government interventions and reforms, are expected to drive growth and profitability in various sectors. While challenges exist, businesses remain confident in the potential for economic recovery and expansion.

 

 

 

 

 

 

 

 

 

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Business

Fiscal space is shrinking- UN

6th February 2024

A study conducted by the United Nations says countries implemented bold and timely fiscal policy measures in response to the COVID-19 pandemic crisis and to stimulate recovery.

Governments around the world have also relied on fiscal policy to confront higher food prices and food insecurity risks resulting from the war in Ukraine. The UN said in a report titled World Economic Situation and Prospects 2024 that sharp increases in interest rate since the first quarter of 2022 and tighter liquidity conditions have adversely affected fiscal balance, renewing concerns about fiscal deficits and debt sustainability.

Fiscal space remains very limited, especially in developing countries: for many of these countries the lack of fiscal space presents special risks, as it restricts their capacity to invest in sustainable development and respond to new shocks.

In 2022, more than fifty developing economies spent more than 10% of total government revenues on interest payments, and 25 countries spent more than 20%. The UN added that market expectations that interest rates in major economies will remain higher for longer than previously anticipated have led to a further rise in sovereign bond yields, adding pressure on fiscal balances.

In the medium term, subdued growth prospects, together with the need for increased investment in education, health and infrastructure, will put pressure on government budgets and exacerbate fiscal vulnerabilities.

In this report, it is highlighted that in developing countries with less vulnerable fiscal positions, it ill be crucial for governments to avoid self-defeating fiscal consolidation. “Many of these economies will need to bolster fiscal revenues to expand their fiscal space. In the short term, the increased use of digital technologies can help developing countries reduce tax avoidance and evasion.”

The UN stressed that in the medium term, governments will need to expand revenues through more progressive income, wealth and green taxes. Many economies also need to improve the efficiency of fiscal spending and the effectiveness of subsidies and better target social protection programmes.

Low-income countries, as well as middle-income countries with vulnerable fiscal situations will need debt relief and restructuring measures to avoid devastating debt crises and protracted cycles of weak investment, slow growth and high debt-servicing burdens.

 

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