Connect with us

BoB hikes interest rate to manage liquidity, inflation

Bank of Botswana on Thursday, kick-started its overhauled monetary policy signaling mechanism with an increase in interest rate, a 51 percent basis point on the Monetary Policy Rate ( MoPR) – the new anchor announced in February.

This increase jumps the prevailing MoPR from 1.14 percent yield on the 7-day Bank of Botswana Certificate to 1.65 percent, a move that the central bank says will manage liquidity and tame inflation which has been on an upward trajectory until last month. Bank of Botswana Governor Moses Pelaelo explained that on the 51 percent basis point, 1 pbs was just a technical adjustment, the increase in effect is actually 50 basis points, half a percent.

“This is obviously an increase in the cost of credit, we are signaling the direction in which interests rates must take and our expectation is that banks will take the same direction, so if the banks increase prime lending rate on a variable rate credit arrangement that means there will be an increase in the cost of the credit or a loan, but if the credit contact was on a fixed rate, nothing will change for the consumer “. He said

The MoPR is the new policy signaling rate which replaced the Bank Rate, the migration from the latter was announced in February as an overhaul move adopted to revolutionarise the country’s monetary policy, taking effect from Thursday 28 April 2022. The reforms are aimed at improving and changing the monetary policy with three key objectives. First, and foremost, to enhance policy transmission and the desired market response to monetary policy and monetary operations adjustments.

Second, to designate an anchor policy rate capable of affecting commercial banks liquidity management decisions, and thus providing a direct link to policy changes. Lastly, to achieve an interest rate structure that influence commercial bank decisions and market responses, fostering an active interbank market and effectively reflecting the policy stance and desired impact of monetary operations.

Deliberating on the decision to increase the prevailing MoPR, Bank of Botswana top brass said the idea is to manage liquidity in the system and tame inflation. With the global supply chain disruptions in the wake of Russian – Ukraine conflict the Bank of Botswana has now revised its inflation expectations, projecting that under prevailing circumstances, inflation will only revert to object range of 3 – 6 percent in the first quarter of 2023 against the initial projection of second quarter 2022.

“With MoPR and the subsequent increase announced today, we wanted to enhance the potency of the policy signaling rate, that is the policy anchor rate , so that we make sure that what we say needs to happen, actually happens, with the bank rate, because of structural access liquidity in the system commercial banks were not borrowing from us, so when we change and now target and use the monetary policy rate it will better influence and impact the interest rate structure of the economy” Governor Pelaelo explained.

He said effectiveness of the monetary policy signaling rate will beenhanced tremendously”the money that the banks are going to bring to us, we will pay them a rate that they now know is going to be 1.65 percent, they can then know how much they should pay for the deposit, they can now anchor the products that they will be selling, such as loans”.

Pelaelo reiterated that better policy effectiveness in influencing monetary conditions in the economy is what the reforms are intended to do. “This is about liquidity management, how banks and us from policy side are doing to manage liquidity, clearly now that we are pricing on the liability side we think that we stand a better chance to influence monetary policy conditions ” he said.

Deputy Governor, Dr Tshokologo Kganetsano added, “The ultimate goal is price stability, if we can control liquidity, we will be able to better control inflation, and the rate at which prices are increasing will slow down, so ultimately the consumer will benefit from contained price of cooking oil for instance”

Governor Pelaelo said the changes will contribute to macroeconomicstability. “We want to tame this inflation, and this reforms are going to work, next month, inflation is going to go down to a single digit number, but obviously not back to the objective range, that will only be realised in the first quarter of 2022, subject to current economic circumstances remaining as projected ” he said.

Inflation declined from 10.6 percent in February 2022 to 10 percent in March 2022, remaining above the Banks medium-term objective range of 3 – 6 percent. BoB explained that the latest decline in inflation mainly reflects the base effects associated with the upward adjustment in domestic fuel prices in the corresponding period in 2021.

The current high level of inflation is mainly driven by supply-side factors which contribute about 7 percentage points to the prevailing inflation (March 2022). However, the Central Bank’s Monetary Policy Committee projects that inflation will, in the short term, remain above the objective range but continue to trend downward in 2022 and to revert to within the objective range from the first quarter of 2023.

This is mainly on account of the dissipating impact of the upward adjustment in the value added tax (VAT) and administered prices from the inflation calculation. The bank observed that there is a significant risk that inflation could remain elevated due to factors that include: the potential increase in international commodity prices beyond current forecasts; persistence of supply and logistical constraints due to lags in production; the economic and price effects of the ongoing Russia-Ukraine conflict; uncertain COVID-19 profile; domestic risk factors relating to possible regular annual administered price adjustments, short-term unintended consequences of import restrictions (shortages in supplies leading to price increases); as well as second-round effects of the recent increases in administered prices and inflation expectations that could lead to generalised higher price adjustments.

Furthermore, the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices could add upward pressure to inflation.These risks are, however, moderated by the possibility of weaker than anticipated domestic and global economic activity due to geo-political tensions and possible periodic lockdowns and other forms of restrictions in response to the emergence of new COVID-19 variants, with a likely further dampening effect on economicactivity.

Lower international commodity prices than currently projected could also result in lower inflation, as would capacity constraints in implementing the Economic Recovery and Transformation Plan (ERTP) initiatives.


CA SALES revenues rose to R9.5 billion

27th March 2023

The Botswana and Johannesburg Stock Exchange listed distributor of fast-moving consumer goods

This content is locked

Login To Unlock The Content!

Continue Reading


Grit divests from Letlole La Rona

22nd March 2023

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.

Continue Reading


Stargems Group establishes Training Center in BW

20th March 2023

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.

Continue Reading