Botswana not on track to reach high income status – IMF
By Aubrey Lute
The International Monetary Fund (IMF) has raised red flagged on Botswanas target to reach high income status saying the country is not on the right track.
According to a recent report on Botswanas economic outlook, IMF noted that Botswana economic growth is estimated at about 4 percent in the medium term. This, the organisation warned, is below the 5 percent required to attain the authorities goal of reaching high-income status by 2036. The report states that in general, growth is projected at 4.3 percent in the current year.
The IMF made this observation through its team, led by Papa NDiaye who is Assistant Director in the IMF African Department and Mission Chief for Botswana when they assessed Botswanas economic outlook recently. The report also warned that Botswanas economic recovery from the pandemic should continue into 2022 amid higher prices and demand for diamonds, good rainfall in some parts of the country and increasing international tourist arrivals.
Despite the strong outlook, the report says, long-standing challenges remain. Unemployment rose to 26 percent in 2021, while poverty and inequality have also increased. Inflation exceeded the central banks medium-term objective range of 3 6 percent in 2021 and increased sharply in the first months of 2022.
Robust diamond production, favorable terms of trade, improvements in tourism, and smaller portfolio outflows should further strengthen Botswanas external position. Buffers, particularly those held by the government, should continue to recover, the report says.
Relatively low fiscal buffers and continued reliance on mining activity expose Botswana to external shocks, such as geopolitical and climate shocks, the report says. Some progress has been made on diversification and digitalization reforms, but the authorities are also relying increasingly on inward-looking policies, including import restrictions, it says.
It says excessive reliance on import substitution and restrictions to promote industrialization should be avoided. Instead, the report says, accelerated implementation of the Reset Agenda is required to diversify the economy towards financial services (facilitated by fintech), manufacturing, and tourism.
According to the report, reforms should include deeper trade integration, implementation of planned visa and work permit reforms and faster investment in renewable energy. It says this will also help create the jobs needed to reduce unemployment and absorb the 35,000 annual labour market entrants.
While higher demand for and prices of diamonds could result in some windfall for Botswana, the report says, higher food and energy prices will weigh on fiscal and external balances and threaten food security and energy affordability for the most vulnerable populations.
At the same time, COVID-19 outbreaks in China, supply chain disruptions, and tighter financial conditions are projected to reduce global growth to 3.6 percent in 2022, from 6.1 percent in 2021, the report says. The report notes that risks to the outlook remain elevated. Growth will depend heavily on the path of commodity prices.
An abrupt slowdown in China or a protracted war in Ukraine could weaken global demand, thus lowering demand for diamonds. However, the report warns further, prolonged sanctions against Russia (the largest rough diamond producer) could increase demand for and prices of Botswanas diamonds, the report says. It says outbreaks of more lethal and contagious COVID-19 variants could further hamper the recovery, particularly of tourism.
Faster tightening of monetary policy in key advanced economies could trigger volatility in global markets, prompt capital outflows, and reduce demand for diamonds, the report says. The report concludes, Climate shocks continue to pose a threat to agriculture, mining, and tourism. Domestically, shortfalls in planned consolidation could further erode buffers, exposing Botswana to external shocks, the report says.
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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.
âIn 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,â 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.Â 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.
âCommunity 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,â 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, Â 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.
âAs 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 economyâs 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,â said the Minister of Minerals and Energy.
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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Moodyâs Reaffirms African Trade Insuranceâs A3 Rating & Revises Outlook to Positive
Moodyâs Investors Service (âMoodyâsâ) has affirmed the A3 insurance financial strength rating (IFSR) of the African Trade Insurance Agency (ATI) for the fifth consecutive year and changed the outlook from stable to positive.
Moodyâs noted that the change in outlook to positive reflects the strong growth in ATIâs membership base – that has resulted in improved portfolio diversification, strengthened capital adequacy, and the good profitability despite the challenging operating environment. In addition, ATI benefits from its preferred creditor status (PCS) amongst sovereign member states which protects it from the risk of default by member sovereigns through securing recoveries against claims paid on guarantees.
The strong membership and equity growth are some of the key considerations for the consistent reinstatement of ATIâs A/Stable rating by Standard & Poorâs and Moodyâs rating, over the years. Also supporting the rating affirmation are; consistent improvement in financial performance, commitment of its shareholders who continue to uphold the preferred creditor status, its high quality and conservative investment portfolio as well as strong relationships with a number of global reinsurers that provide significant risk-bearing capacity.
With the change in outlook to âpositiveâ, ATI is now better placed to provide enhanced support to its member countries, attract additional shareholding and grow its portfolio. The positive outlook is an indication that if ATI continues to demonstrate its strong underwriting performance and ability to recover claims under the preferred creditor arrangements, among other factors, an upward pressure towards an upgrade may be generated. The Moody’s press release can be accessed fromÂ here
Commenting on the rating, Africa Trade Insurance Chief Executive Officer Manuel Moses said: âThis positive revision is in line with our 2023 – 2027 strategic objectives in which we set to improve our rating outlook to positive in the first year, and achieve an upgrade of at least âAAâ/Stable rating by both Moodyâs and S&P within this Strategic Plan period. We aim to achieve this by doubling our exposures and increasing our capital to more than USD1 billion.â
ATIâs mandate is to provide trade-credit and political risk insurance, as well as other risk mitigation products to its member countries and relatedÂ public and private sector actors. These insurance products not only directly encourage and facilitate foreign direct investment as well as local private sector investment in our member countries, but also contribute to intra- and extra-African trade.
About The African Trade Insurance AgencyÂ
ATI was founded in 2001 by African States to cover trade and investment risks of companies doing business in Africa. ATI predominantly provides Political Risk, Credit Insurance and, Surety Insurance. Since inception, ATI has supported US$78 billion worth of investments and trade into Africa. For over a decade, ATI has maintained an âA/Stableâ rating for Financial Strength and Counterparty Credit by Standard & Poorâs, and in 2019, ATI obtained an A3/Stable rating from Moodyâs, which has now been revised to A3/Positive.