www.econsult.co.bw compiled by KEITH JEFFERIS SETHUNYA SEJOE KITSO MOKHURUTSHE ECONOMIC REVIEW fourth quarter october-december 2018 in this issue ...
COMMENTARY KEY NEWS MACRO- SPECIAL ECONOMIC HIGHLIGHTS ECONOMIC FEATURES 1 VARIABLES 4 7 DATA 11 12
COMMENTARY
Green shoots of recovery, but much remains to be done
Introduction As we enter 2019, there are has been a range of positive economic developments that point to an improving economic climate. Key develop- ments include a broadly-based upturn in economic growth, as well as an improvement in the rate of job creation, along with some positive policy changes. At the same time, there have been a few badly thought-through policy proposals, particularly with regard to taxation, that run the risk of undermining these welcome developments.
Growth and Employment economic sectors, between Q2 and Q3 2018. Our preferred measure of econom- GDP data for the period to the end of the ic activity from the perspective of future third quarter 2018 show an improvement sustainability – the output of all sectors in economic growth to 5.1% over the 12 excluding diamonds and government – months to September. This partly reflects a shows growth at 5.2% year-on-year in Q3, revision of historical GDP data (now show- compared to only 0.6% a year earlier. So ing that real growth in 2017 was actually there are clear signs that economic growth 2.9%, not the 2.4% previously reported). is improving. But more positively, it reflects a broad- based improvement in growth, across most
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There has also been a welcome upturn in employment, Economic Review of 2017, Q2, the current basket weights with the number of jobs increasing by 1.6% in the year to are not supportive of diversification, export-led growth and September 2018, compared to a contraction of 0.8% in the job creation. In particular, the weight for the SA rand (45%) previous year. Although the rate of employment creation is is too low, and causes the Pula-Rand exchange rate to fluc- still far too low, and is driven more by the public sector than tuate excessively. Given that most of Botswana’s non-min- the private sector, it remains the case that the number of eral exporters are exporting into South Africa, and hence jobs created in the economy over the past year has more competing with imported rand-denominated products, and than compensated for the number lost over the previous similarly for firms selling domestically in competition with year, following the closure of the BCL copper-nickel mine. South African products, stability in the BWP-ZAR exchange rate it essential. It is also important to prevent the Pula from Finance, Inflation and Exchange Rates strengthening too much against the rand, which the cur- Conditions have also improved in the banking sector. The rent basket weights do not do. So, as before, we propose growth of lending to the private business sector has picked that rand weight in the basket is raised to 55%-60% to up, and that to households have fallen. Arrears on lending support exports and job creation. are down, and profitability is up. Bank liquidity had been declining since 2016, raising concerns about a potential Diamonds credit squeeze; however, the trend seems to have been re- The global diamond market has been performing reasonably versed now and liquidity has improved, due to a welcome well in overall terms, but with stress in particular segments growth in bank deposits. that may reflect structural change and potential volatility going forward. Total sales of rough diamonds through De Inflation has risen slightly, mainly due to higher fuel prices, Beers Global Sightholder Sales were up marginally in 2018, but still remains modest and within the lower half of the driven mainly by higher rough prices, which rose about 7% Bank of Botswana’s (BoB’s) inflation objective range. As on average over the year. Sales during the 2018 holiday a result, interest rates have been maintained at historically season (November/December) were reasonably good, sup- low levels, with the commercial bank prime lending rate at porting improved sentiment in the industry. However, the 6.5%. Nevertheless, the results of BoB’s latest Business price increase for rough has squeezed profit margins for Expectations Survey show that, on balance, firms expect dealers and cutters, as polished prices have not increased interest rates to rise in 2019. The same survey shows that commensurately. The problem has been particularly acute firms, on average, expect inflation next year to be between for small, low value diamonds, perhaps due in part to pres- 3.5% and 4%. This is in line with our own forecasts of sure from increasing supplies of synthetic diamonds. inflation over the next year.
The Pula exchange rate has continued to be buffeted by in- Policy Changes stability in the SA rand/US dollar exchange rate, given that The new government that has been in place since April 1st these are the two main currencies in the basket to which 2018, when President Masisi took office following the end the Pula is pegged. This resulted in a small depreciation of of former President Khama’s 10 year term, has been mak- the Pula against the US dollar over the fourth quarter, and ing improvements to the policy environment from a busi- a small appreciation against the rand. ness and growth perspective. The availability of work per- mits for foreign investors and skilled workers has improved, The regular annual exchange rate review at the end of the and the announcement that entry visas will soon be made year resulted in a marginal change in the rate of crawl of available on arrival at the main airports and border posts the Pula against the basket, from -0.3% to +0.3% on an is very welcome. President Masisi has been making deter- annual basis. Given that the rate of crawl is so small, the mined efforts to engage with the domestic and interna- impact of the change is unlikely to have a significant im- tional business community to boost investment. A range of pact. business environment reforms have been promised, includ- ing deregulation and improved co-ordination between dif- However, it is disappointing that the review did not result ferent government departments. However, many of these in a change to the basket weights. As we noted in our require new or amended laws, which is an extremely slow review of Exchange Rate Policy and Diversification in the process.
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Some policy changes still need to be better thought through Budget – due on February 4th – will lay out the spending from the perspective of their impact on the private sec- plans for the new fiscal year (2019/20). As we explained tor. A couple of recently proposed tax changes show this in our last Review (2018 Q3), the 2019 Budget Strategy clearly. A proposed change to the Transfer Duty Act will Paper from the Ministry of Finance and Economic Develop- raise the rate of transfer duty on property transactions for ment (MFED) envisages a 6% increase in total government sales to non-citizens (both individuals and firms) from 5% spending in 2019/20, well ahead of inflation. There are also to 30%. This punitive change runs the risk of undermining rumors of a substantial pay increase for public sector em- the positive developments mentioned above with regard to ployees, although it is difficult to see how this can be ac- reaching out to attract foreign investors. It will also under- commodated within a sustainable budget framework. mine the domestic property market, reduce property prices, and reverse recent efforts to expand mortgage lending by Increasingly, however, the problem with government spend- banks. The definition of a citizen firm applies only to those ing is not availability of funds, but inefficiencies in (for in- that are 100% citizen owned, which means that joint ven- stance) procurement, with many government departments tures between citizens and non-citizens are classified as unable to spend funds they have been allocated – which foreign. This in turn penalizes such joint ventures, which of course results in disruption to both firms that are suppli- is counter-productive as they are one of the most effective ers to government (of which there are many) and the firms ways to promote citizen empowerment. and households who depend on the services that should be provided. Improving the quality and efficiency of public Coming on top of this, the Tax Amendment Bill makes service delivery is one of the major challenges facing the changes that will effectively kill off one of the most impor- government, and is crucial to improving the quality of the tant business structures in the property sector, the Variable business environment. Rate Loan Stock (VRLS) company. This structure enables (tax-exempt) institutional investors such as pension funds Finally, the external (international and regional) environ- to invest in property funds, and has been an important driv- ment offers mixed prospects over the coming year. Interna- er of the listing of property companies on the Botswana tionally, the economic outlook is deteriorating, with lower Stock Exchange (BSE). Combined with the transfer duty growth prospects and increasing risks. The IMF has lowered changes – under which all BSE-listed property companies its forecasts of global growth in 2019 from 3.7% to 3.5% are classified as foreign – the negative impact could be in its latest (January 2019) World Economic Outlook. Eco- substantial. nomic growth in 2019 is expected to be lower than in 2018 in the USA, the Euro zone and China. Global economic risks Outlook are also increasing, due to the ongoing, unresolved trade Notwithstanding these mis-steps – which it is not too late dispute between the USA and China; the likely destabiliz- to reverse – the third and fourth quarters of 2018 were gen- ing impact of the UK’s exit from the European Union; and erally positive from an economic perspective, with higher uncertainty over the pace of the slowdown of economic GDP and employment growth, and improvements to the growth in China. In the short-term there are additional risks policy environment. This has been supported by greater to US growth from the ongoing US government shutdown transparency from government, improved communication, and budget disputes, and in the long-term the unwilling- and attempts to address the problem of rising corruption. ness of the current US government to contribute to global There has been an improvement in business confidence, efforts to combat global warming and climate change. with a majority of firms having positive expectations about business conditions, according to the BoB’s September Regionally, the outlook is more promising, notwithstand- 2018 Business Expectations Survey – although due to ing current instability in Zimbabwe. In the most important changes in the format of the survey and its reporting, it economy in the region, South Africa, there are prospects is no longer possible to be specific about the numbers or of improved growth in 2019 and further ahead, under the proportions of firms responding positively, in contrast to Presidency of Cyril Ramaphosa. This will have a positive past surveys. spillover for Botswana and other SADC economies. Indeed, sub-Saharan Africa is one of the few regions of the world The main negative factor affecting business conditions in that is projected to experience higher growth in 2019 and the BOB survey is concerns about the growth of govern- 2020. ment spending (or lack thereof). The forthcoming 2019
page 3 Annual GDP Growth Sectoral GDP Growth 30% Water & Elec. 27.3% 20% Annual GDP Growth TradeSectoral GDP Growth 10% 30% www.econsult.co.bwTrans. & Comm. Water & Elec. 27.3% 20% Total VA 0% Trade KEY ECONOMIC VARIABLES Fin. & Bus. Service -10% 10% Trans. & Comm. Mining 0% Total VA -20% Annual GDP Growth Sectoral GDP Growth Fin. & Bus. ServiceManuf -10% -30% AnnualAnnual GDP Growth GDP Growth ConstructionSectoralMining Sectoral GDP Growth GDP Growth -20%30% 30% -40% Soc. Water & Pers. & Elec. Water ServicesManuf27.3% & Elec. 27.3% 20% 20% -30% Trade Construction AgricultureTrade -50% 10% 10% Trans. & Comm. -40% Soc. & Pers.GovernmentTrans. Services & Comm. Total VA 0% 0% AgricultureTotal VA -50% 0% 2% 4% 6% 8% NMPS Mining GDP Fin. & Bus. ServiceFin. & Bus. Service -10% -10% Government Mining Mining The -20%Botswana-20% economy continued to Improved performance0% 2% was4% evident6% across8% NMPS Mining GDP Manuf Manuf improve-30% during-30% the third quarter of 2018, with mostConstruction economicConstruction sectors, the exceptions The Botswana economy continued to Improved performance was evident across annual real GDP growth increasing further in Soc.being & Pers.Soc. ServicesMining, & Pers. Services Manufacturing and Water & improve-40% during-40% the third quarter of 2018, with most economic sectors, the exceptions during the period. Year-on-year GDP growth Electricity Agriculture, Agriculturewhich recorded lower growth annual-50% real-50% GDP growth increasing further in being Mining, Manufacturing and Water & was 5.1% in Q3 2018, higher than the ratesGovernment in Q3Government 2018 compared to Q2. Trade during the period. Year-on-year GDP growth Electricity, which recorded lower growth revised (higher) growth of 4.9% in Q2 2018 was the faste0% st2% 0%growing4%2% sector6%4% 8%,6% recording8% was 5.1% inNMPS Q3 NMPS2018,Mining higherMiningGDP thanGDP the rates in Q3 2018 compared to Q2. Trade and 2.4% in Q3 2017. Growth in Q3 2018 year-on-year growth of 7.5% during the revisedThe Botswana(higher) growtheconomy of 4.9%continued in Q2 2018to Improved was theperformance fastest growingwas evident sector across, recording wasThe driven BotswanaThe by economy theBotswana noncontinued-mining toeconomy improve private during continued thesector third quarterto ImprovedImproved, upperformance fromperformance thewas revisedevident was across evidentgrowth most across ofeconomic 6.0 % andimprove 2.4% during in Q3 the 2017. third quarter Growth of 2018in Q3, with 2018 most year economic-on-year sectorsgrowth, theof 7.5%exceptions during the (NMPS)quarter, of where 2018,improve with growth annual during real increasedthe GDP third growth quarter increasing to 5.7 of further. 2018% y -, withy- osectors,-mosty in Q2theeconomic exceptions 2018. being Growthsectors Mining, ,in Manufacturing thethe Tradeexceptions and sectorWater wasannual driven annualreal byGDP realthe growth GDPnon- mininggrowthincreasing increasingprivate further sector infurther being inquarter Mining,being, up Mining,Manufacturing from Manufacturingthe revised and Watergrowth and &Water of 6.0 &% o-y Year-on-yearup from GDPthe growth revised was 5.1% growth in Q3 2018, of 5.1% higher thanin Q2.the is mainly& Electricity, attributable which recorded tolower the growth Wholesale rates in Q3 2018sub - (NMPS)revisedduring (higher) the,during where growth period. the of growth 4.9% period.Year in -Q2 onincreased 2018Year-year and-on GDP 2.4%-year to ingrowth Q35.7GDP 2017.% growth yElectricity- y- ocompared-Electricityy ,in whichQ2 to Q2. 2018., Tradewhichrecorded wasGrowth therecorded fastestlower in growingthe growthlower Trade sector, growth sectorrecording MiningoGrowth-wasy up sectorin 5.1from Q3was% 2018 thein5.1 wasgrowth revisedQ3% driven in2018, byQ3 slowedgrowththe non-mininghigher2018, of during higher 5.1%thanprivate sector inthethan theQ2. rates thesectoris inyear-on-yearmainlyrates Q3, which 2018in attributable growthQ3 comparedgrew2018 of 7.5% compared by toduring tothe16.3% Q2.the Wholesale quarter,toTrade yQ2.-o up- y Trade from insub theQ3 - , periodMining(NMPS),revised, with where revisedsector (higher)y growth-o-y increased(higher)growth growthgrowth to growth5.7%ofslowed 4.9%4.0% y-o-y of upin, from4.9% downduringQ2 the 2018 inrevised from Q2 the was2018 comparedsector therevisedwas faste, growthwhichthest to fasteof growingthe 6.0%grewst revised y-o-ygrowing bysector in Q216.3% growth ,2018. sectorrecording Growthy ,- oforecording- y 9.5%in inthe TradeQ3 y -,o - and 2.4% in Q3 2017. Growth in Q3 2018 year-on-year growth of 7.5% during the the periodgrowthrevised of, with5.1%and growth iny2.4% Q2.-o- yMining ofgrowthin Q35.6%sector 2017. ofgrowth in 4.0% Q2Growth slowed , 2018,down during in Q3fromthebut 2018 ycompared insectoryear the is- on mainlyprevious- toyear attributablethe growth revised quarter. to theof growth Wholesale7.5% Other ofsub-sector,during 9.5%sectors thewhichy-o - of higherperiod,was than withdrivenwas y-o-y the growthbydriven therevised of nonby4.0%, the-mining down growthnon from- miningprivate the revisedof privatesector minusgrowth sectorquarter Agriculture, grew,quarter up by from 16.3%, up theGovernment, y-o-y from revised in Q3,the compared revisedgrowth Social to growthof the 6.0 revised &% of Personal growth6.0% of theof(NMPS) 5.6% revised in Q2, where2018, growth but growth higher of than 5.6%increased the revised in Q2 growthto 5.72018, of% minus y -but y- o-y in9.5%in Q2 the y-o-y 2018. previous in the Growth previous quarter. inquarter. the TradeOther Other sectors sector sectors of Agriculture, of 12.4% y-o-y(NMPS) recorded, where same growth period increased last year. to 5.7 % Services,y- y-o-y in FinanceQ2 2018. Growth& Business in the TradeServices sector and higher12.4%o-y upy-o-y fromthano recorded-y up the thefrom in revised the revisedsamethe revised growthperiod lastgrowth ofgrowth year. 5.1% ofof in 5.1% Q2.minus inis Q2. mainlyAgriculture, Government,is attributablemainly Social attributableGovernment, &to Personal the Wholesaleto Services, theSocial Wholesale Finance sub& Personal -& Businesssub- 12.4%Mining y -Miningosector-y recorded sectorgrowth same growthslowed period slowedduring last duringyear.the sector theTransportServices, ,Services sectorwhich and, grewFinancewhich Transport& by grew Communication& 16.3% &Communication Businessby 16.3%y-o-y recorded in Servicesy -Q3o -y ,growth recordedin Q3 andrates, period, periodwith y-,o with-y growth y-o-y growthof 4.0% of, down 4.0% ,from down comparedfromgrowthTransport ofcompared 2.9%, to rates the2.8%, revised & toof3.5%, the2.9%,Communication 4.7%, revisedgrowth 2.8and 5.5%growthof%, 9.5% 3.5%,respectively, of y -9.5%o recorded4.7%,- all y higher-o -and the revisedthe revisedgrowth growthof 5.6% of in 5.6% Q2 2018,in Q2 but2018, y butin5.5%growth the thany previous ininrespectively Q2ratesthe 2018. previous ofquarter. 2.9%,, quarter. allOther2.8 %,higher sectors Other3.5%, than sectors4.7%,of in andof Q2 higher higherthan thethan revised the revisedgrowth growthof minus of minusAgriculture,2018.5.5% Agriculture, respectively Government, Government,, Socialall higher &Social Personal than& Personal in Q2 12.4% y1-2.4%o-y recorded y-o-y recorded same period same lastperiod year. last year.Services, Services, Finance Finance & Business & Business Services Services and and AnnualAnnual Credit Credit Growth Growth 2018. Bank Deposits, Lending & Liquidity TransportTransport &Bank Communication &Deposits, Communication Lendingrecorded recorded & 45% Annual Credit Growth growth ratesgrowth of rates 2.9%, of 2.8 2.9%,%, 3.5%, 2.8%, 4.7%, 3.5%, and 4.7%, and 45% Bank Deposits,Liquidity Lending & 40% 5.5% respectively5.5% respectively, all Liquidityhigher, all higherthan inthan Q2 in Q2 40% 2018. 2018. 35% 60,000 30% 35% Annual Credit Growth 60,000 30% Annual Credit Growth Bank Deposits, Lending & 30% 45% 45% Bank Deposits, Lending & 30% LiquidityLiquidity 25% 40% 40% 40,000 20% 25% 40,000 20% 35% 60,000 60,000 30% 30% 20% 35% million P 20% million P 30% 30% 15% 20,000 10% % of total assets % of total assets % of creditto sector 15% 40,00020,000 20% 10% % of creditto sector 25% 25% 40,000 20% 10% P million P 10%20% 20% million P
0 % of total assets 0% 5% 15% 20,000 20,0000 10% 10%0% % of total assets % of creditto sector 5% 15% % of creditto sector 0% 0%10% 10% 5% 5% 0 0 0% 0% DepositsDeposits LendingLending ExcessExcess Liquidity Liquidity TotalTotal FirmsFirms HouseholdsHouseholds 0% 0% AnnualAnnual bank bank credit credit growth growth rose rose to to 7.6% 7.6% inin BankBankDeposits liquidityliquidityDeposits LendingimprovedLending Excess furtherfurther LiquidityExcess inin LiquidityOctober October Annual bank credit Totalgrowth roseTotal toFirms 7.6% inFirms theHouseholds year to OctoberHouseholds Bank liquidity improved further in October 2018 as a result of the theyear year to Octoberto October 2018 2018, compared, compared to to 7.3% 7.3% 20182018 asas a result ofof aa sharpsharp growth growth in in bank bank 2018,Annual compared bank to 7.3%credit in growthJuly, significantly rose tohigher 7.6% than inthe Bank aliquidity sharp growth improved in bank furtherdeposits. inExcess October liquidity increased in Julyin July, significantly, Annualsignificantly bank higher credithigher growththan than rose thethe to4.8%4.8% 7.6% depositindeposit Bankss .. liquidity Excess improved liquidityliquidity further in increasedOctoberincreased 4.8%the recordedyearthe to in yearOctober October to October2017. 2018 This, compared 2018is attributable, compared to to7.3% faster to 20187.3% asmarginally2018 a result as to 7.0%a of result aof sharptotal of assetsa growthsharp in October growthin bank 2018 in from bank 6.9% recordedgrowth in lending in October to private firms, 2017. which This increased is attributable to 10.0% in marginallyin July, to reach to 7.0%the highest of totallevel since assets December in October2016. Total recordedin July in,in Octobersignificantly July, significantly 2017. higher This higherthan is attributablethe than 4.8% the deposit4.8% marginally sdeposit. Excesss .to 7.0% Excessliquidity of totalliquidity assetsincreased increased in October to fastertoOctoberrecorded faster fromgrowth growth8.3%in October inin July inlending and 2017.lending 6.8% This into Octoberto ispri priattributablevate 2017.vate Onf irmsf irmsthe ,marginally , 20182018bank fromdepositsfrom to 7.0% 6.9% reached of total inP71,418in July,July, assets billion toto ininreach reachOctober October the2018, the highest increasing highest other hand, recordedgrowth of credit in October to Households 2017. decreased This is for attributable both bymarginally more than P4 to billion 7.0% between of total July assetsand October in October and passing to faster growth in lending to private firms, 2018 from 6.9% in July, to reach the highest periods, recordingto faster annual growth growth of in 6.1% lending in October to comparedprivate firms, P702018 billion from for the 6.9% first time.in July, This reducesto reach concerns the overhighest deposit to 7.6% and 7.1% in July 2018 and October 2017 respectively. growth in the banking sector, which had been very weak in 2017 Within credit to the private business sector, there were noteable and early 2018. It also relieves some concerns about the negative increases in lending to agriculture, construction, trade, finance impact of the proposed withdrawal of some government deposits and business services. from the banks.
page 4 Commentary addition – insert these last two at the end of the commentary
Finally, the external (international and regional) environment offers mixed prospects over the coming year. Internationally, the economic outlook is deteriorating, with lower growth prospects and increasing risks. The IMF has lowered its forecasts of global growth in 2019 from 3.7% to 3.5% in its latest (January 2019) World Economic Outlook. Economic growth in 2019 is expected to be lower than in 2018 in the USA, the Euro zone and China. Global economic risks are also increasing, due to the ongoing, unresolved trade dispute between the USA and China; the likely destabilizing impact of the UK’s exit from the European Union; and uncertainty over the pace of the slowdown of economic growth in China. In the short- term there are additional risks to US growth from the ongoing US government shutdown and budget disputes, and in the long-term the unwillingness of the current US government to contribute to global efforts to combat global warming and climate change.
Regionallywhich the increasedoutlook is more, to promising, 10.0% in notwithstand October ingfrom current since instability December in Zimbabwe. 2016. Total bank deposits In the 8.3%most important in July economyand 6.8% in thein region,October South 2017. Africa, On there reached are prospects P71,418 of improved billion in October 2018, growththe in 2019other and furtherhand, ahead, growth under theof Presidency credit of toCyril increasingRamaphosa. Thisby willmore have than a P4 billion between positiveHouseholds spillover for Botswanadecreased and other for SADCboth economies. periods Indeed,, July sub and-Saharan October Africa and is passing P70 billion for one of the few regions of the world that is projected to experience higher growth in 2019 recording annual growth of 6.1% in October the first time. This reduces concerns over and 2020. compared to 7.6% and 7.1% inwww.econsult.co.bw July 2018 deposit growth in the banking sector, which and October 2017 respectively. Within credit had been very weak in 2017 and early 2018. KEYto ECONOMICthe private business VARIABLES sector, there were It also relieves some concerns about the noteable increases in lending to agriculture, negative impact of the proposed withdrawal Interestconstruction, rates chart: replace trade, with financethis one and business of government deposits from the banks. services. Interest Rates Inflation and Forecast
InterestInterest Rates Rates Inflation and Forecast 14 14 16% 12 14% 12 10 12% 10 8 10% 8 % 8% % 6 6 6% 4 4 4% 2 2 2% 0 0 0%
Bank Prime Bank Rate Prime Rate BoB Upper BoB Lower 91-day BoBCBoBC91 14-day BoBCBoBC14 Actual Forecast The Bank of Botswana’s (BoB) Monetary The headline inflation rate in December The PolicyBank of Botswana’sCommittee (BoB) Monetary(MPC) Policymaintained Committee its 2018The headline was inflation 3.5%, rate in higherDecember 2018than was the3.5%, 2.9%higher (MPC)monetary maintained itspolicy monetary stance policy stance and and held held thethe Bank Bank inflationthan the 2.9% rate inflation recorded rate recorded inin SeptemberSeptember 2018 and 2018 0.3% rate rateconstant constant at 5.0% at itsat meeting 5.0% in December at its 2018, meeting citing a in andhigher than0.3% inflation higher in December than 2017. inflation Group indices in December had marginal positiveDecember inflation outlook. 2018, Money citingmarket ratesa werepositive stable duringinflation 2017.changes duringGroup the year indices except forhad Transport, marginal which rose changes by 10.1% Q4 ofoutlook. 2018, but haveM oneyincreased market over the year rates even as werepolicy rates stable y-o-y as a result of changes in Operation of Personal Transport remained unchanged; the 14-day BoBC rate increased from 1.45% duringfollowing increasedthe year fuel prices.except Core inflationfor Transpo (trimmed mean)rt index was in Decemberduring 2017 Q4 toof 1.52% 2018, in December but have 2018 increasedand the 91-day over group3.6% in December,which rosewhile the by alternative 10.1% measure y-o-y of as core a inflationresult BoBCth ratee roseyear from even 1.41% toas 1.53% policy during ratesthe same remainedperiod. of(excluding changes administered in prices) Operation was 1.8%. Inflation of is Personalforecast to The commercialunchanged; bank Prime the Lending14-day Rate BoBC remained rate unchanged increas at ed Transportincrease gradually following in the first halfincreased of 2019 but remainfuel withinprices. the 6.5%.from 1.45% in December 2017 to 1.52% in Corelower half inflation of BoB’s medium-term (trimmed objective mean) range wasof 3-6%. 3.6% in December 2018 and the 91-day BoBC rate December, while the alternative measure of rose from 1.41% to 1.53% during the same core inflation (excluding administered prices) period. The commercial bank Prime Lending was 1.8%. Inflation is forecast to increase Rate remained unchanged at 6.5%. gradually in the first half of 2019 but remain Stock Markets International Trade within the lower half of BoB’s medium-term StockStock Markets Markets objective rangeInternationalInternational of 3-6%. Trade Trade 150 150 30,00030,000
140 140 25,00025,000
130 130 20,00020,000 15,00015,000 120 120 10,00010,000 110 110 5,0005,000 100 100
Trade BWP Trade BWP million 0 Trade BWP Trade BWP million 0 90 90 100 = 2010 Jan Index, -5,000 Index, Jan 2010 = 100 = 2010 Jan Index, -5,000 80 80 -10,000 -10,000 70 70
BSE DCI (BWP) BSE DCI (USD) MSCI EM Trade Balance Imports Exports BSE DCI (BWP) BSE DCI (USD) MSCI EM Trade Balance Imports Exports The Botswana Stock Exchange (BSE)’s The latest data from Statistics Botswana TheDomestic TheBotswana Botswana Companies Stock ExchangeStock (BSE)’s IndexExchange Domestic (DCI) Companies weakened(BSE)’s Index TheshowThe latestlatest that data trade fromdata Statistics slowed from Botswana inStatistics the show third that tradequarterBotswana slowed ofin Domestic(DCI) weakened Companies marginally in theIndex fourth quarter(DCI) of 2018.weakened The DCI showthe third that quarter trade of 2018, slowed decreasing in for allthe categories third of quarter imports and of marginallydeclined by 1.2% in andthe 0.2% fo uinrth Pula quarterand USD terms of 2018.respectively. The 2018,exports. Totaldecreasing exports fell by 21.6%for to allP14.8 billioncategories in Q3 2018 fromof marginallyDCIThe BSEdeclined has in performed the by fo poorly1.2%urth throughout quarterand 0.2% 2018, of falling in2018. Pula by 10.2% The and 2018,importsP18.9 billion decreasingand in Q2 exports.2018 while for totalTotal importsall exports decreasedcategories byfell 1.9% byto of DCIUSDand declined 19.9% terms in Pula by and respectively.1.2% USD terms and respectively 0.2% The inover PulaBSE 12 months. andhas imports21.6%P14.9 billion toand fromP14.8 P15.1exports. billionbillion during Total thein same Q3exports period. 2018 This resultedfellfrom by USDperformedIt has,terms however, poorly outperformedrespectively. throughout the MSCI EmergingThe 2018 MarketsBSE, fall ingIndex,has by 21.6%P18.9in a trade billionto deficit P14.8 of in P29.2 Q2 million,billion 2018 down while fromin aQ3 surplus total 2018 of P3.8imports billionfrom performedwhich declined poorly by 23.0%, throughout over the year, but2018 not the, fallMSCIing World by P18.9in the previousbillion quarter. in Q2 Exports 2018 decreased while for all categoriestotal imports except 10.2%Index, which and declined 19.9% by 14.9%. in Pula and USD terms decreasedfor Machinery &by Electric 1.9% Equipment to andP14.9 Salt & Soda billion Ash. from 10.2%respectively and 19.9% over 12in months.Pula and It hasUSD, however, terms decreasedP15.1 billion by during 1.9% theto sameP14.9 period. billion Thisfrom respectivelyoutperformed over the 12 months.MSCI Emerging It has, however, Markets P15.1resulted billion in a duringtrade deficitthe same of P 29.2period. million, This outIndex,performed which the declined MSCI byEmerging 23.0%, Marketsover the resulteddown from in a surplustrade deficit of P3.8 of Pbillion29.2 inmillion, the Index,year, which but not declined the MSCI by World23.0%, Index over, which thepage downprevious 5 from quarter. a surplus Exports of P3.8decreased billion for in allthe year,declined but not by 14.9%.the MSCI World Index, which previouscategories quarter. except Exportsfor Machinery decreased & Electric for all declined by 14.9%. categoriesEquipment andexcept Salt for& Soda Machinery Ash. & Electric De Beers Diamond Sales Equipment and SaltExchange & Soda Rates Ash. 900 De Beers Diamond Sales Exchange Rates 900 800 6.0 1.45
800 700 1.40 6.07.0 1.45 600 1.35 700 1.40 7.0 500 8.0 1.30 600 1.35 400 1.25 500 8.09.0 1.30
US US $ million 1.20 300 1.25 400 Rand per Pula Pula per USD 10.09.0 1.15
US US $ million 200 1.20 300 1.10 Rand per Pula 100 Pula per USD 10.011.0 1.15 200 1.05 0 1.10 100 11.012.0 1.00 1.05 0 BWP per USD ZAR per BWP 12.0 1.00 The global market for rough diamonds was The Pula continuedBWP per USD to weakenZAR per againstBWP the fairly stable through the year, and recorded US dollar in Q4 2018. The Pula-US dollar Thehigher global sales market in 2018 for roughcompared diamonds to 2017. was In Theexchange Pula continuedrate was to10.73 weaken at the against end ofthe fairlyline stable with increased through outputthe year, during and the recorded year, De USDecember dollar ,in Q4compared 2018. Theto Pula10.59-US dollarin higherBeers sales Global in 2018Sightholder compared Sales to 2017.(DBGSS) In exchangeSeptember, rate reflecting was 10.73 a depreciation at the end of of lineincreased with increased sales outputby 1.2% during in 2018, the year, up from De December1.3%. During, compared the period, to the10.59 Pula in BeersUSD5,294 Global millionSightholder in 2017 Sales to (DBGSS)USD5,390 September,appreciated againstreflecting the SAa randdepreciation to end the of increasedmillion in sales 2018. byDuring 1.2% the in holiday 2018, seasonup from in 1.3%.year at ZARDuring 1.3441 the, upperiod, from ZARthe 1.3339 Pula USD5,294Q4, sales million increased in by 2017 12.9% to toUSD5,390 USD1,464 appreciatedduring the quarter against, an the appreciation SA rand to of end0.8%. the millionmillion in 2018.from USD1,235During the millionholiday inseason Q3. Dein yearThe atPula ZAR exchange 1.3441 , rateup frompolicy ZAR has 1.3339also Q4,Beers sales holds increased ten sightholders by 12.9% sales to USD1,464 each year duringbeen reviewed the quarter in January, an appreciation 2019, and theof 0.8%.rate millionand therefrom wereUSD1,235 three sightholder million in sales Q3 .in DeQ4 Theof crawlPula exchangeagainst the rate basket policy adjustedhas also Beers holds ten sightholders sales each year been reviewed in January 2019, and the rate and there were three sightholder sales in Q4 of crawl against the basket adjusted Stock Markets International Trade 150 Stock Markets 30,000 International Trade 150 30,000 140 25,000 140 25,000 130 20,000 20,000 130 15,000 120 15,000 120 10,000 110 10,000 110 5,000 100 5,000
100 Trade BWP million 0
90 Trade BWP million 0 Index, Jan 2010 = 100 = 2010 Jan Index, 90 -5,000 Index, Jan 2010 = 100 = 2010 Jan Index, 80 -5,000 80 -10,000 70 -10,000 70
BSE DCI (BWP) BSE DCI (USD) MSCI EM Trade Balance Imports Exports BSE DCI (BWP) BSE DCI (USD) MSCI EM Trade Balance Imports Exports The Botswana Stock Exchange (BSE)’s The latest data from Statistics Botswana DomesticThe Botswana Companies Stock Index Exchange (DCI) weakened (BSE)’s showThe thatlatest trade data slowed from inStatistics the third quarterBotswana of Domestic Companies Index (DCI) weakened show that trade slowed in the third quarter of marginally in the fourth quarter of 2018. The 2018, decreasing for all categories of marginally in the fourth quarter of 2018. The 2018, decreasing for all categories of DCI declined by 1.2% and 0.2% in Pula and imports and exports. Total exports fell by DCI declined by 1.2% and 0.2% in Pula and imports and exports. Total exports fell by USD terms respectively. The BSE has 21.6% to P14.8 billion in Q3 2018 from USD terms respectively. The BSE has 21.6% to P14.8 billion in Q3 2018 from performed poorly throughout 2018, falling by P18.9 billion in Q2 2018 while total imports performed poorly throughout 2018, falling by P18.9 billion in Q2 2018 while total imports 10.2% and 19.9% in Pula and USD terms decreased by 1.9% to P14.9 billion from 10.2% and 19.9% in Pula and USD terms decreased by 1.9% to P14.9 billion from respectively over 12 months. It has, however, P15.1 billion during the same period. This respectively over 12 months. It has, however, P15.1 billion during the same period. This outoutperformedperformed the the MSCI MSCI Emerging Emerging Marketswww.econsult.co.bwMarkets resultedresulted inin aa tradetrade deficitdeficit ofof PP29.229.2 million,million, Index, which declined by 23.0%, over the down from a surplus of P3.8 billion in the Index,KEY whichECONOMIC declined VARIABLES by 23.0%, over the down from a surplus of P3.8 billion in the year,year, but but not not the the MSCI MSCI World World Index Index, ,which which previousprevious quarter.quarter. ExportsExports decreaseddecreased forfor all declineddeclined by by 14.9%. 14.9%. categoriescategories exceptexcept forfor MachineryMachinery && ElectricElectric De Beers Diamond Sales EquipmentEquipment and and Salt SaltExchange && SodaSoda Rates Ash.Ash. DeDe Beers Beers Diamond Diamond Sales Sales Exchange Rates 900 Exchange Rates 900 800 6.0 1.45 800 6.0 1.45 700 700 1.401.40 7.07.0 600600 1.351.35 8.0 1.30 500500 8.0 1.30 1.25 400400 1.25 9.09.0 US US $ million
US US $ million 1.20 300300 1.20 Rand per Pula Rand per Pula Pula per USD 10.0Pula per USD 10.0 1.151.15 200200 1.101.10 100100 11.011.0 1.051.05 0 0 12.012.0 1.001.00 BWPBWP per per USD USD ZARZAR per per BWPBWP
TheThe Theglobal global global marketmarket market for rough for for diamonds rough rough was diamonds diamondsfairly stable through was was TheTheThe Pula PulaPula continued continuedcontinued to weaken toto againstweakenweaken the US againstagainst dollar in Q4thethe fairlyfairlythe stable year,stable and through recorded through higher the thesales year, year,in 2018 and comparedand recorded recorded to 2017. USUS2018. dollardollar The Pula-US inin Q4Q4 dollar 2018.2018. exchange TheThe rate was PulaPula 10.73--USUS at the dollardollar end higherhigherIn linesales saleswith increasedin in 2018 2018 output compared duringcompared the year, to Deto Beers2017. 2017. Global In In exchangeexchangeof December, rate ratecompared waswas to 10.59 10.7310.73 in September, atat thethe reflecting endend a of Sightholder Sales (DBGSS) increased sales by 1.2% in 2018, up depreciation of 1.3%. During the period, the Pula appreciated lineline withfrom with USD5,294increased increased million outputin output 2017 toduring duringUSD5,390 the themillion year, year, in 2018. De De DecemberDecemberagainst the SA, , randcompared comparedto end the year at ZARtoto 1.3441, 10.5910.59 up from ZAR in BeersBeersDuring Global Globalthe holiday Sightholder seasonSightholder in Q4, sales Sales increasedSales (DBGSS)by(DBGSS) 12.9% to September,September,1.3339 during thereflectingreflecting quarter, an appreciation aa depreciationdepreciation of 0.8%. The Pula of increasedincreasedUSD1,464 sales millionsales from by byUSD1,235 1.2% 1.2% millionin in 2018, in2018, Q3. De upBeersup fromholdsfrom 1.3%.1.3%.exchange D rateDuringuring policy has alsothethe been reviewedperiod,period, in January thethe 2019, PulaPulaand USD5,294USD5,294ten sightholders million million sales each in inyear and 20172017 there were toto three USD5,390USD5,390 sightholder appreciatedappreciatedthe rate of crawl againstagainst against the the thebasket SASA adjusted randrand upwards toto end endto 0.3% thethe sales in Q4 compared to two sightholder sales in Q3. per annum, while the Pula basket weights were maintained at millionmillion in in2018. 2018. During During the the holiday holiday season season in in yearyear45% at forat theZARZAR South 1.3441 African1.3441 Rand,, andupup 55% fromfrom for the ZAR ZARSpecial Drawing1.33391.3339 Q4,coQ4,co mparedsales mparedsales increased toincreased to two two sightholder sightholder by by 12.9% 12.9% sales sales to to USD1,464 in USD1,464in Q3. Q3. duringupwardsduringupwardsRight (SDR).the the to to quarter quarter 0.30.3%% ,perper , anan annumannum appreciationappreciation,, whilewhile oftheofthe 0.8%.0.8%. PulaPula millionmillion from from USD1,235 USD1,235 millionmillion inin Q3Q3. . DeDe ThebasketThebasket PulaPula weightsweights exchangeexchange werewere maintainedmaintainedraterate policypolicy atat ha ha 45%45%ss alsoalso for BeersBeers holds holds ten ten sightholders sightholdersFuel prices sales sales each each year year beenthebeenthe SouthreviewedSouth reviewed AfricanFormalAfrican in in JanuarySectorJanuary RandRand Employment 2019and2019and ,,55% 55% andand thetheforfor rateratethethe andand there there were were three three sightholder sightholder sales sales in in Q4 Q4 ofSpecialofSpecial crawlcrawl Drawing Drawing againstagainst RightRight thethe (SDR(SDR basketbasket).). adjustedadjusted FuelFuel prices prices FormalFormal SectorSector EmploymentEmployment 1,2001,200 400,000400,000 350,000350,000 1,0001,000 300,000300,000 800800 250,000250,000
600600 200,000200,000 150,000150,000 400400 100,000100,000 Crude (pula/barrel) Crude (pula/barrel) 200200 50,00050,000
0 0 00 Pump Retail (thebe/litre) and Brent Brent and (thebe/litre) Retail Pump Pump Retail (thebe/litre) and Brent Brent and (thebe/litre) Retail Pump
Petrol/DieselPetrol/Diesel CrudeCrude Oil Oil PrivatePrivate ParastalParastal GovernmentGovernment
LocalLocal retail retail prices prices for for petrol petrol and and dieseldiesel roserose RRecentecent datadata (to(to SeptemberSeptember 2018)2018) onon formalformal byby Local12.6% 12.6% retail inprices in the the for twelve petroltwelve and months dieselmonths rose to byto 12.6%December December in the employmentemploymentRecent data (to September showedshowed 2018) anan on overallformaloverall employment increaseincrease showed in 2018,twelve monthsin tocontrast December 2018,to in contrastthe todecline the decline in thean overallnumber increase of in formallythe number of employed formally employed persons persons in in 2018,in international in contrastfuel prices. Internationalto the fuel pricesdecline had risen in theBotswana. number The ofnumber formally of new jobs employed created between persons September in internationalinternationalsteadily during the fuel fuelyear, beforeprices.prices. falling InternationalsharplyInternational in Q4. The spotfuelfuel Botswana.Botswana.2017 and September TheThe number number2018 was 5,458, ofof newnew an increase jobsjobs ofcreatedcreated 1.6%, pricespricesprice of had Brenthad crude risenrisen fell bysteadilysteadily 24.2% and during17.5%during in US thethe dollar year yearand , , betweenbetweenwhich was theSeptemberSeptember highest growth rate 20172017 since 2011. andand Formal SeptemberSeptember employment beforebeforePula termsfalling falling respectively sharply sharply in December in in Q4. Q4. 2018.The The Local spot spot prices pri pri cewerece of of 20182018increased waswas across 5,458,5,458, all sectors; anan increase increasehowever, growth ofof 1.6% 1.6%was driven,, whichwhich by Brentadjusted crude upwards fell three by times 24.2% during the and year 17.5%in May, October in US wasthe government.the highest Employment growt rose hby rate2.7%, withsince 3,436 2011(net) . Brentand November,crude byfell 23t, by 65t 24.2% and 33t for and petrol 17.5% and 45t, 73tin andUS wasnew thepersons highest employed bygrowt the governmenth rate between since September 2011 . dollardollar36t for diesel.andand Retail PulaPula fuel prices termsterms are regulated respectivelyrespectively and reviewed every in in FormalFormal2017 and employmentSeptemberemployment 2018. Parastatal increasedincreased and private acrossacrosssector formal all DecemberDecembermonth by the 2018.Botswana 2018. Local EnergyLocal Regulatory prices prices Authoritywere were (BERA)adjusted adjusted and sectorssectorsemployment; ; however,however, growth was 1.6%growthgrowth and 0.9%, waswas representing drivendriven 304 byby and thethe upwardsupwardsthe increase three threein local times pricestimes was during during necessary the the towards year year bringing in in May, May,the government.government.1,718 new jobs respectively, EmploymentEmployment during the rose rosesame period. byby 2.7%2.7%,, with OctoberOctoberNational Petroleumand and November, November,Fund (NPF) to cost by by recovery 23t, 23t, levels.65t 65t andand 33t33t 3,4363,436 (net)(net) newnew personspersons employedemployed byby the for petrol and 45t, 73t and 36t for diesel. government between September 2017 and for petrol and 45t, 73t and 36t for dieselpage. government 6 between September 2017 and RetailRetail fuel fuel prices prices are are regulated regulated and and reviewed reviewed SeptemberSeptember 2018.2018. ParastatalParastatal andand priprivate everyevery monthmonth byby thethe BotswanaBotswana EnergyEnergy sectorsector formalformal employmentemployment growthgrowth waswas 1.6%1.6% RegulatoryRegulatory AuthorityAuthority (BERA)(BERA) andand thethe andand 0.9%,0.9%, representingrepresenting 304304 andand 1,7181,718 new increaseincrease inin locallocal pricesprices waswas necessarynecessary toto jobsjobs respectively respectively,, duringduring thethe samesame period.period. bringbring the the National National Petroleum Petroleum Fund Fund (NPF) (NPF) toto recoveryrecovery levels. levels.
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NEWS HIGHLIGHTS
03 October Africa's Pulse Economic growth in Sub-Saharan Africa is estimated to have risen to (World Bank) 2.7 percent in 2018 from 2.3 percent in 2017. This is a downward revision of 0.4 percentage points from the initial growth forecast of 3.1 percent for the region published in April. The downward revision was due to sluggish expansion in the three largest economies within the region, namely South Africa, Nigeria and Angola.
03 October Alcohol levy cut by The government has cut the alcohol levy by 20 percentage points, down 20 percent (Mmegi) to 35 percent for both locally brewed and imported products.
05 October Blue Train revenues inch The BR Express, the passenger rail service of Botswana Rail, recorded forward to P15 million revenue of P15 million and transported 134,702 passengers in 2017. (Mmegi) Botswana Rail’s goods haulage business managed to amass a total of P289 million in 2017, down from P323 million in 2016.
08 October Bank Gaborone Loan Bank Gaborone’s loan book grew by 15 percent to P3.5 billion, up Book Balloons (Mmegi) from P3 billion in the previous year. Individual loans, commercial loans and mortgage loans rose by 8.9 percent, 42.7 percent and 4 percent respectively.
12 October IMF slashes Botswana The International Monetary Fund (IMF) has revised down Botswana’s 2019 growth forecast to 2019 growth projection from an initial 4.5 percent to 3.6 percent. The 3.6 percent (Mmegi) revision comes as part of the World Economic Outlook (WEO) publication, which is released in April and reviewed in October.
14 October Financiers Pledge The US government-owned Overseas Private Investment Corporation USD125 million (OPIC), along with Botswana Finance and Stanbic Bank, have agreed to Botswana Trade to guarantee a loan worth USD125 million to Botswana’s diamond (Rapaport) manufacturing industry. The loan is aimed at diversifying Botswana’s economy, developing its financial sector and providing local companies with access to financing.
15 October Moody’s “Okays” In a report titled “Government of Botswana – A2 stable, Annual Credit Botswana’ debt level Analysis”, Moody’s have given a positive outlook on Botswana’s credit (Sunday Standard) position. The report states that Botswana’s low susceptibility to event risk is due to its low government borrowing, strong net external position, healthy banking sector and overall political stability.
15 October BDC takes over Botswana Development Corporation (BDC) has bought out Imperial Transport Holdings Group in a transaction worth P149 million to become the majority (Weekend Post) shareholder of Transport Holdings (TH). Furthermore, BDC’s investment will finance the acquisition of Imperilog Botswana; a subsidiary of TH. The takeover deal is also set to raise capital for TH’s African expansion strategy.
28 October De Beers rough The Anglo-American Corporation third quarter production report has production down stated that De Beers’ rough diamond production has slowed over the 5 percent in Q3:2018 third quarter. This was due to expected lower grades and the shutdown (Sunday Standard) of various mines as they transition from open cut to underground mining.
29 October Alrosa Joins De Beers De Beers has signed up Alrosa to its blockchain pilot project. The Blockchain (Rapaport) collaboration between the two leading diamond producers is aimed at building a source-verification project which will track diamonds on their journey from mine to retail. The project was launched earlier in 2018 with diamond manufacturers Diacore, Diarough, KGK Group, Venus Jewel and Rosy Blue alongside retailer; Signet Jewelers.
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NEWS HIGHLIGHTS
02 November BoB expects low The Bank of Botswana (BoB), in the October Monetary Policy Report inflation to persist for (MPR), has projected inflation to remain close to the lower, 3 percent two years ‘or longer’ end of their inflation threshold over the next two years or longer. BoB (Mmegi) have highlighted modest trading partner inflation, the relative strength of the pula against the rand, along with limited oil and food inflation as factors that will keep headline inflation low in the coming months.
09 November BPOPF ups stake in Botswana Public Officers Pension Fund (BPOPF), has bought 23.3 million Minergy as 2019 more shares in Minergy Limited, bringing its total stake in the company production nears up to 34.4 percent, up from 30.8 percent last year. This follows news (Mmegi) that Minergy has begun construction of the Masama mine, with the first coal sales expected in February 2019.
12 November Air Botswana re-fleets Air Botswana (AB) has added two ATR72-600 Turbo propeller aircraft to and rebrands (Mmegi) its fleet. The new aircraft are set to replace a pair of older ATR72-500 models. The airline has also decided to adopt a new logo, which has been inspired by Botswana’s diamonds, as it celebrates thirty years in operation.
12 November De Beers is offering big De Beers is said to have made steep cuts in the price of low-quality discounts on low-quality stones at their most recent sale (as of 12 November). Prices are diamonds (Bloomberg) rumoured to have been cut by as much as 10 percent. This is the latest sign of turmoil at the bottom end of the market due to the oversupply of low-quality diamonds. As a result, cutting centres such as Surat in India have been squeezed by lower profit margins and currency depreciation.
14 November Another fuel hike tonight Government, through the ministry of Mineral Resources Green (Mmegi) Technology and Energy Security in collaboration with the Botswana Energy Regulatory Authority (BERA) announced another fuel increment that will take effect from midnight November 15, 2018. Retail prices for petrol grades, diesel and illuminating paraffin will rise by 33t, 36t and 31t respectively.
14 November BancABC to list BancABC Managing Director, Kgotso Bannalotlhe, has stated that the (The Patriot) bank’s decision to list on the Botswana Stock Exchange (BSE) is an at- tempt at consolidating the bank’s market position. The bank has made available for purchase, up to 180,525,000 ordinary shares at a cost of P2 per share. He further added that 82.3 percent of the shares on offer have already been allocated to institutional investors through pre-listing commitments.
14 November Cene, BOFINET offer Cene Media, in partnership with Botswana Fibre Networks (BOFINET) free Wi-Fi zones (The has launched new Free Wi-Fi Zones. Speaking at the launch, Cene Patriot) Media CEO, Nial Downey, highlighted the fact that the product gives local businesses and aspiring enterprises the opportunity to market their products and services on a new media platform.
21 November Debswana appoints new Debswana Diamond Company has appointed Albert Milton as Managing MD as Bonyongo retires Director (MD), effective December 1, 2018, following the retirement (Mining Weekly) of Balisi Bonyongo. Bonyongo, who had been with the company for 26 years and served as MD since January 2014, will stay on for three months to ensure a smooth transition.
22 November Shumba Energy strikes Shumba Energy Ltd. and Lurco Group South Africa have reached an deal with ESKOM agreement for the establishment of a 50/50 joint venture partnership supplier (Gazette) between the two. The deal is set to help Shumba supply export coal into the region, as Lurco is already a supplier to ESKOM for thermal coal.
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NEWS HIGHLIGHTS
23 November CEDA funding reached The Citizen Entrepreneurial Development Agency (CEDA) has financed P4.9 billion since 7,286 projects amounting to P4.9 billion since its establishment in inception 2001. 5,221 of the projects valued at P3.6 billion, representing 76 (Sunday Standard) percent of their portfolio, are reported to be performing well. The Minister of Investment, Trade and Industry, Bogolo Kenewendo, further stated that 2,844 loans valued at P1.4 billion had been fully settled.
27 November Minergy’s Botswana Botswana’s first opencast coal mine, Masama, has begun operations opencast coal mine after being awarded a mining license in August 2018. The first soil was project springs to life dug on September 9 and the mine is expected to start selling thermal (Mining Weekly) coal in the first week of February 2019. According to Minergy CEO, Andre Boje, the mine is projected to initially produce 1.2 million tons of coal a year before increasing annual production to 2.4 million tons. He stated that the mine has 390 million tons of coal reserves and a life-of- mine in excess of 100 years.
30 November SEZA targets The newly established Special Economic Zones Authority (SEZA) P200 million+ has made a commitment to attract investors, bringing Foreign Direct investments Investment (FDI) in excess of P200 million. Thatayaone Ndzinge, CEO (The Patriot) of SEZA, has said that the core objectives of the authority are to create an environment that is friendly to investors, increase competitiveness and to target value adding sectors that offer market and cost driven investment opportunities aligned to the needs of the investors.
03 December PEEPA to unveil BMC Public Enterprises Evaluation and Privatisation Agency (PEEPA) has set privatization strategy in a target of May 2019 for the release of a strategy paper that will outline May 2019 how the government will sell part, if not all, its stake at the Botswana (Sunday Standard) Meat Commission (BMC). According to Obakeng Moumakwa, CEO of PEEPA, the privatisation of BMC is set to take place in three stages, the first of which entails converting BMC into limited liability company. The second stage will be the development of a privatisation strategy and the third will be the implementation of the strategy.
04 December Monetary Policy The Monetary Policy Committee (MPC) of the Bank of Botswana (BoB) Committee Meets has decided to maintain the Bank Rate at 5 percent. The MPC reports a (Bank of Botswana) positive outlook for price stability, with the inflation rate forecast to be within the Bank’s objective range of 3-6 percent in the medium term.
05 December Bank profits soar even Local commercial banks have recorded profits that rose to P1.33 billion higher (Mmegi) in the third quarter. Total bank profits over the first six months of 2018 were nearly 64 percent higher than those recorded in the same period in the previous year, whilst nine-month profits were approximately 59 percent greater in 2018 than in 2017.
06 December Cut 9: Jwaneng mine The Jwaneng Cut 9 project, which is scheduled to begin construction lifeline (The Patriot) in December 2019, is set to extend the lifespan of the diamond mine to as far as 2034. However, production volumes are set to fall as the mine transitions from Cut 8 to Cut 9.
06 December Orange constructs Orange Botswana will construct a new data centre located at the P70 million data centre Botswana Innovation Hub and Technology Park. The construction is set (Gazette) to take place over 12 months and will include office space, equipment space, 2 redundant energy centres and a tower for backhaul and transmission. The Orange Data Centre is set to provide coverage to 81 percent of the country’s population with 2G technology, 62 percent with 3G technology and 45 percent with 4G technology.
06 December Lab-grown production At its current growth rate, the production of lab-grown rough diamonds rising 15 percent per could increase to between 10 million and 17 million carats per year by year (Rapaport News) 2030. The growth in output is being driven by an increase in consumer demand for synthetic diamonds along with a large drop in their cost of production.
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NEWS HIGHLIGHTS
10 December President ‘thumbs- President Masisi has praised local mobile network operators for helping up’ mobile money to close the financial divide through mobile money. The President (Guardian) also praised Orange Botswana for helping create employment and supporting Small Medium and Micro-sized Enterprises (SMMEs) by engaging 14,000 hawkers to distribute their services nationwide. Statistics from the Botswana Communications Regulatory Authority (BOCRA) show that Orange has the greatest number of mobile money subscriptions with 356,938 subscribers followed by Mascom with 167,356 and BTCL with 2,496.
11 December Botswana’s Mowana Botswana’s last operating copper mine, Mowana Mine, has suspended copper mine suspends operations due to working capital constraints. This has led to failures operations over working in paying both salaries and suppliers. Even though copper prices have capital (African Reuters) recovered on the international market, Mowana Mine has been unable to take advantage of these due to frequent equipment breakdowns. The mine currently employs 411 individuals.
12 December De Beers raises De Beers has revised production forecasts up for 2018 and subsequent production outlook years. This is due to the miner’s anticipation of solid consumer demand. (Rapaport News) The miner expects output for 2018 to reach between 35 million to 36 million carats, its highest level since 2008. Recovery is expected to dip in 2019 due to the movement from open-pit to underground mining in Venetia mine in South Africa and the closure of Victor mine in Canada. However, following that, production is expected to steadily rise through to the year 2021, whereby in which output within the range of 35 million to 37 million carats is expected.
14 December MOD granted renewals MOD Resources has had all its prospecting licences across the Joint on all its Botswana Venture (JV) landholdings along Botswana’s copperbelt extended by prospecting licences two years. Additionally, the miner has been granted a new three-year (Mining Weekly) license. This brings the joint coverage of MOD Resources’ licences to 8,163 km2 along the Kalahari copperbelt.
18 December De Beers’ final sales De Beers sold USD540 million worth of diamonds in its tenth and cycle for 2018 ends on final sales cycle of the year 2018. This represents the strongest sales a high (Mining Weekly) for the final cycle of a year for the past 3 years, with the 10th cycle in 2017 and 2016 recording sales valued at USD455 million and USD422 million respectively. The latest cycle brings total sales for the year 2018 to USD5.376 billion.
19 December Botswana’s Mowana Cradle Arc has applied for the provisional liquidation of its 60 percent copper mine applies for owned Leboam Holding subsidiary which owns the recently suspended provisional liquidation Mowana copper mine, whilst alternative funding arrangements are (Mining Weekly) being made. Mowana mine has been facing significant working capital constraints and was unable to pay both salaries and suppliers.
21 December Big step for BBS Parliament has approved the Building Societies (Amendment) Bill which (The Patriot) paves the way for the commercialisation of the Botswana Building Society (BBS). The bill proposed the raise of the shareholder protective cap from 15 percent to 25 percent for societies. This will allow the Society, once it is a commercial bank, to raise capital by allowing existing shareholders the opportunity to buy additional shares in BBS beyond the current 15 percent cap. This will allow the Society to meet the minimum capital adequacy ratio requirement of 15 percent for all banking institutions in Botswana.
21 December Botswana rebases CPI, Statistics Botswana is rebasing its Consumer Price Index (CPI), the adds new items (Mmegi) most commonly used measure of inflation, to reflect the changes that have taken place in consumer consumption patterns over recent years. The new CPI measure will monitor the prices of the 400 goods and services in its basket as compared to the 393 in the previous basket. The base year for the series (CPI) will also change from September 2016 to December 2018. The first inflation data using the new basket is set to be released in March 2019.
page 10 www.econsult.co.bw MACRO-ECONOMIC DATA
Key Economic Data unit 2013 2014 2015 2016 2017 2018Q1 2018Q2 2018Q3 2018Q4
Annual Economic Growth GDP % 11.3 4.1 -1.7 4.3 2.9 3.8 4.9 5.1 .. Mining % 24.2 0.5 -19.6 -3.7 -11.1 -0.3 5.6 4.0 .. Non-mining private sector % 10.1 4.9 1.4 7.1 5.6 4.5 5.1 5.7 .. GDP current prices P mn 125,158 145,868 146,066 170,564 180,102 45,820 46,967 48,912 .. GDP 2006 prices P mn 84,081 87,569 86,083 89,787 92,398 23,484 24,064 24,174 ..
Money & Prices Inflation % 4.1 3.8 3.1 3.0 3.2 2.8 3.1 2.9 3.5 Prime lending rate % 9.0 9.0 7.5 7.0 6.5 6.5 6.5 6.5 6.5 BoBC 14-day % 3.06 3.07 0.97 0.84 1.45 1.47 1.47 1.52 1.52
Trade & Balance of Payments Exports - total goods P mn 66,404 76,261 63,484 80,336 61,093 13,795 18,899 14,823 .. Exports - diamonds P mn 55,367 65,328 52,730 70,781 54,384 12,345 17,253 12,990 .. Balance of payments P mn 1,340 11,404 - 57 2 843 61 -1 470 - 972 .. ..
Foreign Exchange Exchange rate BWP per USD end 8.718 9.515 11.236 10.650 9.872 9.533 10.395 10.593 10.730 Exchange rate ZAR per BWP end 1.196 1.217 1.383 1.279 1.256 1.235 1.317 1.334 1.344 FX reserves $ mn 7,726 8,323 7,546 7,189 7,502 7,383 7,147 7,146 .. FX reserves P mn 67,772 79,111 84,881 76,804 73,693 70,582 74,297 75,781 ..
Financial Sector Deposits in banks P mn 48,512 51,492 59,961 62,438 63,581 62,495 64,838 68,517 .. Bank credit P mn 39,763 45,116 48,307 51,316 54,181 54,695 56,531 57,582 .. BSE index 9,053.4 9,501.6 10,602.3 9,727.7 8,860.1 8,589.6 8,402.7 7,837.3 7,853.5
Business Indicators Diamond production (a) '000 cts 23,134 24,658 20,732 20,880 22,961 5885 6,360 5,825 6,307 Copper production (b) tonnes 49,448 46,721 23,050 16,878 1,239 135 547 625 155 Nickel production tonnes 22,848 14,958 16,789 13,120 0 0 0 0 0 Business confidence index 45% 52% 44% 43% 46% 58% .. No. of companies formed 14,190 16,300 19,134 17,133 20,707 5,327 ...... Electricity consumption GWh 3,502 3,990 3,974 3,929 3,772 960 992 1,004 .. Crude oil (Brent) $/bar 109.95 55.27 36.61 54.96 66.73 69.02 77.44 73.16 50.57
Employment (formal) Government 130,175 129,918 130,220 129,216 129,009 129,118 130,817 132,386 Parastatals 18,838 18,790 19,411 19,008 19,444 19,491 19,566 19,773 Private sector 189,894 191,399 191,484 194,202 193,745 194,162 194,564 195,198 Total 338,907 340,107 341,115 342,426 342,198 342,771 344,947 347,357 2017/18 2018/19 Govt Budget 2014/15 2015/16 2016/17 Actual Proposed Revenues P mn 55,904 47,420 57,398 58,154 58,113 Spending P mn 50,564 54,411 56,275 57,934 62,688 Balance P mn 5,340 -6,991 1,123 220 -4,575 Public debt & guarantees P mn 33,131 35,342 36,864 38,000 38,539 Govt deposits at BoB P mn 41,680 33,916 29,819 30,094 30,596 GDP P mn 147,920 149,134 174,630 182,223 203,175
Revenues %GDP 37.8% 31.8% 32.9% 31.9% 28.6% Spending %GDP 34.2% 36.5% 32.2% 31.8% 30.9% Balance %GDP 3.6% -4.7% 0.6% 0.1% -2.3%
Public debt & guarantees %GDP 22.4% 23.7% 21.1% 20.9% 19.0% Govt deposits at BoB %GDP 28.2% 22.7% 17.1% 16.5% 15.1%
Sources: Bank of Botswana; MFED; Statistics Botswana; Department of Mines; Registrar of Companies; BSE; Econsult Notes: (a) From 2013, figures include production from Lucara Diamonds (Karowe mine) and Debswana. From 2016, figures also include production from Gem Diamonds (Ghagoo) and Lerala mines, which ceased in February 2017 and April 2017 respectively (b) Copper production starting Q2 2017 for Mowana mine (c) Numbers in Italics reflect revisions from the previous review page 11 www.econsult.co.bw
SPECIAL FEATURE
Feature: Botswana’s Performance on Major International Rankings
The World Bank’s Doing Business DB e or s are a ell es a lished annual series o assess en s o Botswana’s Performance he usiness en iron en on in ar i i a ing Major oun ries The DB assess en easures usiness regula ion and he ro e ion o ro er righ s a ross oun ries in ased on uan i a i e indi a ors o ering he li e le o usinesses o uses on a ors ha ha e een sho n o e su or i e o International Economic usiness Rankingsde elo en or ons rain s o i The DB indi a ors o er as e s o he usiness li e le s ar ing a usiness dealing i h ons ru ion er i s ge ing ele ri i regis ering ro er ge ing redi ro e ing inori in es ors a ing a es rading a ross orders en or ing on ra s resol ing insol en and he la our arke regula ion The resul s ro ide a easure en o oun r er or an e in ea h area and o erall he DB s ore and a o ara i e ranking agains o her oun ries in luded in he sur e The DB re or is ased on in or a ion ga hered in id
Bo s ana has no een doing ell in he Doing Business rankings in re en ears The general rend Ease of Doing Business indi a esfrom a59 de eriora ion in 2018. in he This ease o is doing the usiness best ranking n he la es across re or any rankings of the Bo s ana o edindicators. i e la es Improvingdo n ards ro the ou timeliness o oun ries of inconstruction o osi ion permits one is he es he lo es ranking Bo s ana has e er had osi ion Bo s ana is elo auri ius rank andais important en a also and to ou h improve ri a project and us delivery a o e a ia of projects is in eres ing in- o The World Bank’s Doing Business (DB) Reports are a well- o arecluded his in i h National he ranking Development en ears ago DB Plan auri ius (NDP) 11. anda en a established annual series of assessments of the business ou h ri a a ia Bo s ana as hen ranked nu er environment in participating countries. The DB assessment The highes rank Bo s ana has e er a hie ed as ou o oun ries in There as ano her i ro e en in ere Bo s ana as ranked a ong he o oun ries in ri a or measures business regulation and the protection of prop- i le en ing essen ial re or s in Figure u 1: he general rend has een un or una el erty rights across countries (190 in 2019) based on quan- onsis en Doing Business Index Ranking, Botswana titative indicators covering the life cycle of businesses. It Figure 1: Doing Business Index Ranking, Botswana focuses on factors that have been shown to be supportive of business development, or constraints to it. The DB indi- 0 cators cover 11 aspects of the business life cycle: starting 20 a business, dealing with construction permits, getting elec- tricity, registering property, getting credit, protecting minor- 40 ity investors, paying taxes, trading across borders, enforc- DBI ranking 60 ing contracts, resolving insolvency and the labour market regulation. The results provide a measurement of country 80 performance in each area and overall (the DB score), and 100 a comparative ranking against other countries included in Source: Doing Business reports, various the survey. The 2019 DB report is based on information Source: Doing Business reports, various gathered in mid-2018. n anal sis o he DB indi a ors sho s here as a ig i ro e en in dealing i h ons ru ion er i sOther indicators redu ing i e where aken o ro essBotswana er i a li a ions performs and relativelys rea lining ro edureswell allo ing hird ar engineers o do so e o he ork u o oun ries Bo s ana as ranked Doing Business Rankings nu erinclude in trading u ro across in borders This is he es and ranking paying a ross an taxes. o he indi a ors Howev ro ing- heer, i eliness the direction o ons ru ion of er i schange is i or an is worrying, also o i ro e as the ro e ranking deli er ono ro e s in luded in a ional De elo en lan D Botswana has not been doing well in the Doing Business these two indicators has fallen. Trading across Borders was rankings in recent years. The general trend indicates a dete- ranked 55 out of 190 countries in 2018 down from 50 out rioration in the ease of doing business. In the latest (2019) of 190 countries in 2017, while Paying Taxes was ranked report rankings, Botswana moved five places downwards 51 out of 190 countries in 2018 from 47 out of 190 coun- from 81 out of 190 countries in 2018 to 86 (position one tries in 2017. The three indicators which had the lowest is the best), the lowest ranking Botswana has ever had. rankings were Starting a Business, Getting Electricity and At position 86, Botswana is below Mauritius (rank 20), Enforcing Contracts at 157, 133 and 134 out of 190 coun- Rwanda (29), Kenya (61), and South Africa (82), and just tries in 2019 from 153, 124 and 133 out of 190 countries above Zambia (87). It is interesting to compare this with in her 2018 indi a ors respectively. here Bo s ana er or s rela i el ell in lude rading a ross orders and a ing the ranking ten years ago (DB 2009): Mauritius (24), Rwan- a es o e er he dire ion o hange is orr ing as he ranking on hese o indi a ors has allen Trading a ross Borders as ranked ou o oun ries in do n ro ou o oun ries da (143), Kenya (84), South Africa (32), Zambia (99). Bo- in hile a ing Ta es as ranked ou o oun ries in ro ou o oun ries in The hree indi a ors hi h had he lo es rankings ere ar ing a Business e ing tswana was then ranked number 39. le ri i and n or ing on ra s a Figure and ou 2: o oun ries in ro and ou o oun rieDoings in Business res e i el Indicators – Rankings The highest rank Botswana has ever achieved was 19 (out Figure 2: Doing Business Indicators – Rankings of 155 countries) in 2005. There was another improvement 180 160 in 2009 where Botswana was ranked among the top 10 140 153 120 133 124 countries in Africa for implementing essential reforms in 100 80 157 134 2007/08, but the general trend has been (unfortunately) 60 133 81 77 76 79 59 80 85 83 81 40 47 50 51 55 consistent. 20 31 0 An analysis of the 2019 DB indicators shows there was a big improvement in dealing with construction permits. This was achieved by reducing the time taken to process per- mit applications and streamlining procedures by allowing third party engineers to do some of the work. Out of 190 2019 2018 countries, Botswana was ranked number 39 in 2019, up Source:Source: Doing Doing Business Business report report 2019 and2019 2018 and 2018
The DB rankings are based on a country’s DB scores, in relation to other countries. The DB score page easures 12 ho ell a oun r is doing rela i e o he es er or ing oun r in ea h indi a or category. Botswana’s DB s ore i ro ed ro ou o in o ou o in here is he highes s ore ossi le This i lies ha e en hough so e as e s o he usiness en iron en i ro ed higher s ore o her oun ries i ro ed as er lo er ranking n he indi idual o onen s n or ing on ra s and esol ing nsol en ha e he ors s ores and are here ore he ur hes ro regula or es ra i e ar ing a Business has a good s ore u a lo ranking hi h indi a es ha os o her oun ries ha e e en higher s ores also indi a es ha it should be relatively easy to improve Botswana’s ranking on this indicator with some well hosen re or s su h as he long ro ised online usiness regis ra ion o e er i should e no ed ha regula or i ro e en s ake a hile o i a on he DB s ores and rankings no onl does he hange ha e o e ade u i s i a us e el he ri a e se or as he s ores are ased on ri a e se or no go ern en res onses o he sur e ues ions Dealing i h ons ru ion er i s is he onl indi a or ha has i ro ed i s s ore ro ou o in o ou o in
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SPECIAL FEATURE
Doing Business Scores Conclusion
The DB rankings are based on a country’s DB scores, in re- Botswana’s performance in the DB ranking is worrying. To lation to other countries. The DB score measures how well improve, the country has to increase its scores across the a country is doing relative to the best-performing country 11 indicators, and do so faster than other countries. This in each indicator category. Botswana’s DB score improved implies that Botswana has to improve its score in relation to from 64.94 out of 100 in 2018 to 65.40 out of 100 in the best performer in the index and faster than other coun- 2019, where 100 is the highest score possible. This implies tries. This is because the DB rankings improve in relation to that even though some aspects of the business environ- an improvement in DB score. However, an improved score ment improved (higher score), other countries improved does not guarantee an improved ranking if other countries faster (lower ranking). are progressing faster. For example, out the ten indicators above, the scores of six indicators did not change, three On the individual components, Enforcing Contracts and Re- Figurehad 3improved: Doing Business score – Scores and only one had a marginal decline - solving Insolvency have the worst scores and are therefore and the overall rank for Botswana was a movement of five Resolving Insolvency the furthest from regulatory best practice. Starting a Busi- placesEnforcing downwards Contracts in 2019. Simply put, Botswana’s per- ness has a good score but a low ranking, which indicates formanceGetting in CreditDB ranking in 2019 decreased because other that most other countries have even higher scores. It also countriesProtecting Minority where Investors improving faster than us. Getting Electricity indicates that it should be relatively easy to improve Bo- Registering Property tswana’s ranking on this indicator with some well-chosen GlobalStarting a BusinessCompetitiveness Index (GCI), reforms, such as the long-promised online business reg- Dealing with Construction… 2018Paying Taxes istration. However, it should be noted that regulatory im- Trading Across Borders provements take a while to impact on the DB scores and 0 20 40 60 80 100 2018 2019 rankings; not only does the change have to be made, but Botswana continued its downward movement in global its impact must be felt by the private sector, as the scores Source:competitiveness Doing Business report 2019 rankings and 2018 as revealed in the recently- are based on private sector (not government) responses to released World Economic Forum Global Competitiveness Botswana’s performance in t e DB ran in is worryin . o impro e, t e country as to increase its the survey questions. scores Report across 2018.t e in icators Botswana, an o so fasterranked t an ot er 90 countries. out isof implies140 t atcountries Botswana as toin impro e 2018, its score the in relationworst to t eranking est performer since in t e the in e an GCI faster began t an ot er in countries. 2006. is is ecause t e DB ran in s impro e in relation to an impro ement in DB score. owe er, an impro e Dealing with Construction Permits is the only indicator that scoreIn 2017, oes not uaranteeit ranked an impro e 85 outran in 135 if ot er countries countries are pro ressin - having faster. dropped or e ample, out11 t eplaces ten in icators from a o e, 64 t e out scores of of 137si in icators countries i not c an e, in 2016. t ree a In impro e Africa, score has improved its score, from 72.3 out of 100 in 2018 to an only one a a mar inal ecline an t e o erall ran for Botswana was a mo ement of places 76.6 out of 100 in 2019. ownwar sBotswana in ranked . Simply put, 6 Botswana’safter Mauritius performance in(49), DB ran in South in Africa ecrease (67), ecause ot erSeychelles countries w ere (74), impro in Morocco faster t an (75)us. and Tunisia (87).
Botswana continue its ownwar mo ement in lo al competiti eness ran in s as re eale in t e ȋ ȌǡʹͲͳͺrecently release orl conomic orum lo al ompetiti eness eport . Botswana ran e Figure 3: out of countries in , t e worst ran in Figure since t e 4: e an in . n , it ran e out countries a in roppe places from out of countries in . n frica, Botswana Doing Business – Scores ran e after Global auritius , Competitiveness Sout frica , Seyc elles Index , orocco - Ranking an unisia . Figure 3: Doing Business – Scores Figure 4: Global Competitiveness Index - Ranking
Resolving Insolvency Enforcing Contracts Getting Credit Protecting Minority Investors Getting Electricity Registering Property Starting a Business Dealing with Construction… Paying Taxes Trading Across Borders 0 20 40 60 80 100 2018 2019
Source: GCI 2018 Source:Source: Doing Doing Business Business report report 2019 and 2019 2018 and 2018 Source: GCI 2018
Botswana’s performance in t e DB ran in is worryin . o impro e, t e country as to increase its scores across t e in icators, an o so faster t an ot er countries. is implies t at Botswana as to impro e its score in relation to t e est performer in t e in e an faster t an ot er countries. is is ecause t e DB ran in s impro e in relation to an impro ement in DB score. owe er, an impro e score oes not uarantee an impro e ran in if ot er countries are pro ressin faster. or e ample, out t e ten in icators a o e, t e scores of si in icators i not c an e, t ree a impro e score an only one a a mar inal ecline an t e o erall ran for Botswana was a mo ement of places ownwar s in . Simply put, Botswana’s performance in DB ran in in ecrease ecause ot er countries w ere impro in faster t an us.
Botswana continue its ownwar mo ement in lo al competiti eness ran in s as re eale in t e ȋ ȌǡʹͲͳͺrecently release orl conomic orum lo al ompetiti eness eport . Botswana ran e out of countries in , t e worst ran in since t e e an in . n , it ran e out countries a in roppe places from out of countries in . n frica, Botswana ran e after auritius , Sout frica , Seyc elles , orocco an unisia . Figure 4: Global Competitiveness Index - Ranking
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Source: GCI 2018 www.econsult.co.bw
SPECIAL FEATURE
Indicators/Pillars ICT adoption: the rankings for the indicator dropped in 2018 compared to the previous year. Botswana ranked 98 Figure 5: out of 140 countries in 2018, down from 90 out of 135 Indicators/Pillars Ranking - 2018 countries in 2017. In this indicator, Botswana did best on Figure 5: Indicators/Pillars Ranking - 2018 Ȁ mobile cellular subscriptions, and the percentage of people using the internet increased. However, other countries im- proved faster than Botswana, hence, a downward move- ment for Botswana on ICT adoption. Macroeconomic Stability Macroeconomic Market Labour Institutions System Financial Skills Market Product Adoption ICT Capability Innovation Business Dynamism Infrastructure Market size Health 0 1 20 57 62 Macroeconomic stability: Botswana continues to do well 40 69 92 95 96 101 103 60 108 111 115 under this indicator, where it is ranked number one along- 80 side several other countries. The country does well in con- 100 120 taining the level of public debt as a percentage of national 140 output (GDP) and the level of inflation. Source:Source: GCI 201 GCI8 2018 e is ase on in icators co erin a num er of pillars, of w ic t e most rele ant ones are as follows Health: the improvement in life expectancy in Botswana Institutions: Botswana is wei e own y inefficiency an t e poor uality of some pu lichas led to an increase in the indicator’s ranking from 115 institutions.The GCI is in icator is based ran e on outindicators of in covering countries compare a number to outof of pillars, countries out of 135 countries in 2017 to 107 out of 140 countries in .of orwhich t is in icator, the most Botswana relevant oes not oones well in are protection as follows: of property, property ri ts, an t e uality of lan a ministration, an t ere is a i ur en of o ernment re ulation. owe er, t ein 2018. country oes well in terms of t e inci ence of corruption, an as an in epen ent u icial system. Infrastructure:Institutions: t e infrastructure Botswana in icator is ran sweighed out downof countries by inefficiency in own fromand out countries in . e uality of roa s, airport connections, an t e efficiency of air transport Skills: Botswana did not perform well with this indicator, ser icesthe are poor in icate quality as t e ri ersof some of t e publiclow ran in s. institutions. owe er, t ere This was anindicator impro ement in electrification, relia ility of water supply an low ris of e posure to unsafe rin in water. weighed down by the quality of vocational training which ranked 62 out of 140 countries in 2018 compared to 45 ICT adoption: t e ran in s for t e in icator roppe in compare to t e pre ious year. Botswanascored 3.8 out of 7.0, where 7 is the best. It is indicated ran e out outof of135 countries countries in in, own 2017. from For out this of indicator, countries in . Botswana n t is in icator, Botswana i est on mo ile cellular su scriptions, an t e percenta e of people usin t e internetthat there is limited training of employees. In addition, the does not do well in protection of property, property rights, increase . owe er, ot er countries impro e faster t an Botswana, ence, a ownwar mo ementlevel of critical thinking in schools is low and it is not easy for Botswanaand the on quality a option. of land administration, and there is a high to find skilled employees. This may be exacerbated the fact Macroeconomicburden of stability: government Botswana continues regulation. to o well un erHowever, t is in icator, the w erecountry it is ran e num er one alon si e se eral ot er countries. e country oes well in containin t e le el of pu licthat the number of work permits held by foreigners has e t doesas a percenta e well in of nationalterms output of the D incidence an t e le el ofof inflation. corruption, and has fallen by approximately 71% in 2018 Q2 2018 from over Healthan the independent improvement in judiciallife expectancy system. in Botswana has led to an increase in the indicator’s ran in from out of countries in to out of countries in . 19,000 permit holders in 2009 to about 5,000 permit hold- Botswana i not perform well wit t is in icator, wei e own y t e uality of ocational Skills: ers. trainin Infrastructure: w ic score . out the of . , infrastructure w ere is t e est. indicator t is in icate ranks t at t ere 108 is limite out trainin of of employees. n a ition, t e le el of critical t in in in sc ools is low an it is not easy to fin s ille employees.140 iscountries may e e acer ate in 2018 t e down fact t at t efrom num er 90 of out wor 135 permits countries el y forei ners in as fallen y appro imately in from o er , permit ol ers in to a out , Product market: the extent of market dominance, tariffs permit2017. ol ers. The quality of roads, airport connections, and the ef- and non-tariff barriers and competition in services are con- ficiency of air transport services are indicated as the drivers tributors to the low performance on the indicator, where of the low rankings. However, there was an improvement Botswana ranks 95 out of 140 countries. in electrification, reliability of water supply and low risk of exposure to unsafe drinking water.
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SPECIAL FEATURE
Labour market: Botswana performs better in observing workforce and restrictions on work permits for foreign workers’ rights, hiring and firing practices, female partici- workers are not helping the situation. Low levels of cluster pation in the labour force as well as pay and productivity. development, multi-stakeholder collaboration and research However, there are constraints such as redundancy cost, and development expenditure (as % of GDP) contributes lack of flexibility in wage determination, lack of active la- to the non-performance of the indicator. There was an im- bour policies, difficulty in internal labour mobility and the provement in trademark applications as businesses recog- difficulty in hiring foreign skilled labour. Botswana ranked nise the importance of protecting their creation. 57 out of 140 countries in 2018. Conclusions Financial system: there is limited availability of SME finance and venture capital. The soundness of the financial system Botswana’s deteriorating performance on key global indica- has dropped and there are risks associated with rising non- tors of competitiveness and the business environment is performing loans. However, Botswana does well in terms of worrying, and has been on a persistent downward trend the credit gap and banks’ regulatory capital ratio. over the past decade. It should not be surprising, as it mir- rors declining performance across a range of economic indi- Market size: the Botswana economy is small and the result- cators, notably real GDP growth, employment creation, and ing small market size hampers competitiveness. Botswana non-diamond exports. Reversing these trends is essential, ranks number 106 in comparison of national output with to generate higher rates of export-led growth and job cre- other countries in the survey. ation in future.
Business dynamism: even though the financial costs of However, there is no easy answer or “magic bullet” to starting a business in Botswana are low, the number of achieve this. Reforms and improvements are required across days required to start a business in Botswana are not. Busi- a wide range of policies and public sector activities, while nesses in Botswana are less dynamic compared to other the private sector needs to become more innovative, dy- countries as they are less innovative and able to embrace namic and outward looking. Although demanding, the task disruptive ideas. Business dynamism was ranked number is not impossible, as the examples of Mauritius and Rwanda 103 out of 140 countries. – as well as other countries outside of Africa – show. What is needed is a coherent reform agenda, focusing on better Innovation capability: businesses in Botswana lack the ca- policies, public sector efficiency and private sector com- pability to be innovative. There is limited diversity of the petitiveness, with consistent and speedy implementation.
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SPECIAL FEATURE
Some results from the Botswana Multi-Topic Household Survey (BMTHS)
Introduction Of those who are employed, 510,953 (74%) are wage earn- ers. The remaining 26% are self-employed, including those Statistics Botswana released the full results of the 2015/16 in farming, or running informal or formal sector businesses. Botswana Multi-Topic Household Survey (BMTHS) towards The informal sector employs 179,483 people, around one the end of 2018. Some of the highlights (e.g. poverty and quarter of the total, in 105,445 different businesses. Some unemployment rates) have been published previously. But 71,645 people, around 10% of the total employed, work on there are many interesting details hidden in the main report, their own farms or cattle posts. which runs to over 350 pages. Here we present a few of the highlights. One insight from these results is that the regular, quarterly formal employment survey only covers around half of those With regard to the findings for poverty, inequality and un- in employment. The intention of Statistics Botswana is that employment, preliminary results were released in August the new household survey will in future be conducted on 2017 and January 2018. The full report entails only minor a quarterly basis, at least for core modules, and will pro- changes to those preliminary results. The key findings were vide an enhanced, more comprehensive data source for the that: measurement of employment and unemployment. Public administration & defence 138,428 20.1% • The national headcount poverty rate 16.3% in TradeLooking at the industries 97,111 where people14.1% work, it will come Agriculture 80,311 11.6% 2015/16, down from 19.3% as recorded in the previ- as no surprise to learn that the largest, by far, is public ad- Householdsministration, as employers which accounts 68,930 for 20%10.0% of total employment. ous household survey in 2009/10, the Botswana Core Education 52,252 7.6% Other large sectors are wholesale & retail trade (14%), ag- Welfare Indicators Survey (BCWIS). Thus the poverty Manufacturing 40,719 5.9% rate has continued to decline, but at a slower rate than Administrativericulture (12%), services and households 40,556 as employers5.9% (10%), fol- in earlier periods. The household poverty rate (i.e. the Constructionlowed by education (8%) 35,714 and manufacturing5.2% (6%). Despite proportion of households, rather than individuals, be- Accommodationbeing the largest & food servicesector 28,786 of the economy,4.2% mining only ac- low the poverty line) is 9.0%. Miningcounts for 2% of total employment. 16,262 2.4% Other 90,459 13.1% Total 689,528 • Inequality, as measured by the Gini coefficient, has ris- Figure 1: en. The consumption inequality Gini rose from 0.495 Employment by Industry, 2015-16 in 2009/10 to 0.522 in 2009/10, after falling from Source: BMTHS Table 5.6T 0.571 in 2002/3. Hence the earlier trend of declining Agriculture inequality has been reversed. 12% Households as employers Trade 10% • The national unemployment rate was 17.6%, very 14% similar to the 17.8% recorded in the 2009/10 BCWIS. Education 8% These earlier results were discussed in detail in our Econom- ic Reviews of 2017 Q3 and 2018 Q1. Here, we concentrate Manufacturing on some of the newer information in the full BMTHS report. 6% Public administration & Administrative Employment defence services 20% 6% The BMTHS provides detailed information on the nature Construction 5% of employment, broken down by type of employer (public Accommodation & vs. private sector, formal vs informal etc.), occupation, and Other Mining food service industry. Amongst the highlights relating to employment, 13% 2% 4% we learn that the Botswana labour force (15 years and old- Source for all charts: Statistics Botswana, BMTHS er) totals 836,734 individuals, of whom 689,528 are em- ployed and 147,206 unemployed (17.6%). This excludes economically inactive adults, such as those in education, and those who are sick or retired.
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SPECIAL FEATURE
Another interesting result concerns the gender distribution calculationsUnemployment show that the main unemployment problems of employment by occupation. Overall, the employed la- face thoseUnem who (U4) haveEmp been (5.10T) educatedTotal to junior and senior bour force is split almost equally between men and women. secondaryNone levels;6819 both groups53041 have59860 unemployment11.4% rates And in contrast to other countries where women are often ofPrimary well over 20%.21503 Despite124101 concerns145604 about unemployment14.8% under-representedM F in the moreT skilled,M higherF paid occupaT - amongstJS those 58094with tertiary191652 education,249746 the unemployment23.3% Managerstions, that is not19,647 true in16,921 Botswana.36,568 Amongst10,210 the categories6,844 17,054 ratesSS there are not33783 as high:106524 14% for140307 those with24.1% vocational Professionals 21,017 21,341 42,358 8,995 9,190 18,185 Post-sec 536 3193 3729 14.4% Techniciansof Managers, 23,074Professionals29,257 and 52,331Technicians9,093 – which10,526 are the19,619 training,Sec NS and 11%199 for those 190with university389 / college51.2% educa- Clericalhighest paid in12,644 Botswana32,792 - women45,436 account4,939 for more12,748 than17,688 tion.Voc 7747 49207 56954 13.6% Servicehalf & Sales of total 58,306employment.83,783 Nevertheless,142,089 20,315 women21,228 are also41,543 Univ/Coll 16350 138896 155246 10.5% Skilled Agric 45,206 26,861 72,067 2,023 1,137 3,160 PG 298 7299 7597 3.9% Craftheavily workers represented55,259 amongst15,749 service71,008 & sales17,474 workers,3,189 and20,663 NF 754 Figure10639 3: 11393 6.6% Plant/machineelementary ops occupations,34,331 5,232 which 39,563are not well11,663 paid. 2,435 14,098 Unemployment Rates by Level of Education Elementary occs 75,306 107,310 182,616 10,492 26,237 36,729 NS 1123 4786 5909 19.0% Other/not stated 4,203 1,289 5,492 2,285 1,055 3,341 147206 689528 836734 17.6% Total 348,993 340,535 689,528 97,490 94,589 192,079 Figure 2: Employment by 30%
Armed Occupation,2,685 Gender298 and2,983 Average1,376 Earnings233 1,610 25% Not 1,518 991 2,509 909 822 1,731 20% 100% 18,000 15% 90% 16,000 80% 14,000 10% 70% 12,000 60% 10,000 50% 5% 8,000 40% 30% 6,000 0%
Gender Distribution 20% 4,000 10% 2,000 None Primary Pos tgra d 0% 0 Junior Sec. Senior Sec. Vocational Univ/college Non-formal Average(mean) monthly earnings Total Cleri ca l Managers Technicians Professionals Skilled Agric Service & Sales Craft workers ElementaryOther/not occs stated Plant/machine ops Occupation
Men Women Avg earnings Household incomes
The BMTHS presents results on average household in- come and expenditure. One of the important measures Unemployment is Household Disposable Income, which measures total household income in cash and in kind, minus income tax As noted above, the overall national unemployment rate paid and transfers/gifts to other households. In 2015/16, in 2015/16 was 17.6% of the labour force. This follows the average (median) household income in Botswana was international definitions of unemployment (from the Inter- P2,132 per month. (The median is an important average, national Labour Organisation), which covers those who are as in some sense it represents the “typical” household, in available and actively seeking work. A broader definition the mid-point of the income distribution, so that 50% of of unemployment also includes the “discouraged unem- households earn less than this and 50% earn more). There ployed”, who may have given up looking for work, having are big differences between urban areas (median P3,587), been unsuccessful. On this broader definition, the total un- urban villages (P2,480) and rural areas (P1,345). employment rate was 28.9%. Also worth noting is that any household with disposable in- The BMTHS also reports on unemployment by a wide range come over P13,500 is in the top 10% of the income distri- of categories of the labour force: by age, location, training, bution in Botswana. Another illustration of the high level of gender, disability etc. The BMTHS data makes it possible to inequality in Botswana is that mean household disposable calculate unemployment rates by the level of education of income is P5,836 a month. Around 75% of households those in the labour force (although for some strange reason have incomes below the mean (showing why the median is these results are not included in the report directly). Our a more useful average in these circumstances).
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SPECIAL FEATURE
Savings
The BMTHS also records what households spend their in- come on. The bulk (60% of gross income, on average) goes on consumption; we will discuss household consumption patterns in more detail in a later issue of the Review. The remainder goes on other outlays, such as savings, insur- ance, income tax, loan repayments, loans paid out, cash transfers etc.
Savings are defined as pension contributions plus invest- ments made. Interestingly, despite the pressure on house- hold incomes, the level of household savings has risen be- tween 2009/10 and 2015/16 – from 2.8% of disposable income to 5.1%.
Social safety nets
The government provides various social protection pack- ages, which together make up Botswana’s social safety PO Box 45016, Gaborone, Botswana net. The BMTHS gathers information on some of these, tel [+267] 390 0575 notably orphan care packages, school feeding programmes, fax [+267] 390 0585 the poverty eradication programme, destitute persons pro- email [email protected] [email protected] gramme etc. In total, these programmes reach 177 569 [email protected] households (representing 30% of Botswana’s 590,000 www.econsult.co.bw households in 2015/16). Of the social care packages, school feeding is by far the most important. The Econsult Economic Review is However, the results raise important questions about the sponsored by BIFM, Botswana’s largest asset manager. All content targeting and effectiveness of social safety nets. We learn and commentary in the Review is that 22,008 poor households receive government as- produced by Econsult and should not sistance. However, this is only 41% of the total number be attributed to BIFM. (53,075) of poor households – so most poor households do not receive government social protection assistance. Furthermore, the bulk of social protection packages go to non-poor households – 87% of the households receiving social packages are non-poor.
While there is justification in some non-poor households receiving social protection packages – as many households have incomes above but very close to the poverty line – these results suggest that attention needs to be paid to the targeting and effectiveness of the social safety net, to focus more on the needy.
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