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Local economy to register modest growth

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Local economy to register modest growth

The local economy is yet again forecast to register moderate growth this year driven by stabilization in the diamond market.

The projections were made by a local investment manager, Kgori Capital in its Fourth Quarter Insights Report.

It is forecast that the local economy will expand by 3.5 percent for the fiscal year 2019 and by 4.0 in 2019 driven mainly by stabilization in the diamond sector.

The sector, which is the mainstay of the economy accounting for over 80 percent of the total country exports faired terribly last year when international sales fell drastically.

Now, the sector is anticipated to pick up slightly this year after a challenging 2019 in which sales dropped badly.

When delivering the budget proposals for the financial year 2020/2021, the Minister of Finance and Economic Development Dr. Thapelo Matsheka indicated that the proposals were presented against the backdrop of continued uncertainty in the global economy.

He specifically mentioned that the continued tension between the United States of America (USA) and China, being the two major markets for Botswana diamonds continue to undermine the country’s economic performance in general and the fiscal position in particular.

Matsheka indicated that this calls for fast-tracking of measures to promote diversified exports to reduce the impact of external shocks on the domestic economy.

While Kgori anticipates the domestic economy to register 4.0 in 2020, the finance ministry, on the other hand, predicts a different figure.

Matsheka expects the domestic economy to continue to register positive growth despite some challenges arising from the weak and uncertain global economic environment.

He says the local economy id estimated to have grown by 3.6 percent in 2019 and to reach 4.4 percent in 2020 driven by faster growth in the services sector.

Meanwhile, Kgori Capital has noted in its report that it expects the central bank, Bank of Botswana to apply another bank rate cut in the first half of this year in order to spur economic activity.

Last year during its August Monetary Policy Meeting (MPC), the central bank cut the rate to a record low, slashing it by 25 basis points from 5 percent to 4.75 percent in an unexpected move after experts warned the rate was already low leaving BoB with little space to maneuver.

According to the Kgori Insights report, the August 2019 rate cut was effected in order to support growth as the bank now feels expectations of stable and low inflation are well anchored.

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ABSA in the money

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Bank registers 15 percent profit increase

Two months after its official name change, Absa Bank Botswana has announced a 15 percent jump in profits.

This week, the bank’s Managing Director, Keabetswe Pheko-Moshagane revealed that despite the challenges faced by the industry, Absa registered profit after tax of P678 million for the 12-month period ending 31 December 2019.

Highlighting the bank’s success, Finance Director, Mumba Kalifungwa explained it continued on a forward momentum of driving interest income growth through prudent lending across all segments.

“On a gross basis, interest income was up by 10 percent year-on-year (YoY). However, market liquidity in the year was thin and this resulted in increased costs of funds,” he said, adding overall net interest income increased by six percent.

Furthermore, according to Kalifungwa, Absa’s net trading remained flat despite an increase in trading volumes.

“This was due to the tough trading conditions and the global geo political challenges experienced in the year. To this end, in 2019 our net fee and commission income as a portion of total income represented 35 percent of total revenue which resonates with our strategy to diversify our revenue mix,” he said.

When it comes to credit losses or impairments, the bank’s expected year-on-year credit losses decreased by 64 percent in comparison to the prior period.

Kalifungwa attributed this to the Absa’s enhanced collections capability, conservative credit extension to high risk sectors especially in the Retail segment as well as significant recovery from one of their clients.

HAPPY BANKER: Kalifungwa

The Finance Director added that as they continue to pursue growth the overall balance sheet grew by 11 percent, ending the year at a whopping P18 billion.

“For the year under review, our customer loans and advances grew by 13 percent compared to market growth of 7.7 percent. This was achieved by growth in all our segments in line with our growth strategy,” he explained, noting the main driver behind the balance sheet’s growth continues to be loans and advances and customer liabilities which remain key drivers of the bank’s total revenue.

During the period, Absa’s loans and advances to customers increased by 13 percent YoY to P13billion.

“The growth was fairly distributed across the segments in line with our strategy and continues to be focused around prudent lending in our chosen business segments,” Kalifungwa concluded.

Meanwhile, the bank has set aside a total of P231 million as dividends for the year, with shareholders set to receive 25 Thebe per share.

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Local suppliers ally fears of shortages

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Fear marched menacingly into the country this week as the reality of COVID-19 began to hit home.

Botswana, which goes into lockdown this Friday, imports the majority of her basic commodities – including food, beverages and fuel – from South Africa (SA).

With SA embarking on a three-week lockdown last Thursday, it seems inevitable this will lead to a shortage of supplies here.

Although travel is restricted between the two countries, government has announced that movements of goods will be allowed.

However, it is feared the South African lockdown will lead to demand surpassing supply in the country, which in turn will drastically reduce the amount of goods available for export.

With South Africans engaging in widespread panic buying, emptying all the shelves in major stores, this could potentially prove disastrous for local supply.

The rapid spread of the virus, which has already reached many parts of the world, claiming thousands of lives in the process, has had unprecedented effects on the global economy.

While there is fear of shortage of foodstuffs, distributors have allayed such concerns, as they believe they have enough stock to supply the local market.

It will soon be seen if their confidence is well placed!

Claude Hassett, the Managing Director of one of the leading distribution companies, CA Sales and Distribution told The Voice on Wednesday this week that consumers need not worry as CA Sales has triple extra stock to supply the market.

“Besides, trucks are still allowed to get into the country,” said Hassett, adding that they are hoping that the situation will not get worse.

Hassett although the spread of the Covid-19 has affected virtually everyone they have enough stock in the inventory.

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