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Sub-Saharan Gloom

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Moody’s predict bad outlook for region

Credit Ratings and Research Agency, Moody’s has predicted tough times ahead for the Sub-Saharan region in terms of sovereign credit worthiness*.

A report published this week by the American-based Investors Service states that its 2020 outlook for sovereign credit worthiness remains negative.

Moody’s attributes this to the limited progress made in reducing risk related to increased debt burdens (a large amount of money that a country owes to another which they are struggling to repay)and debt servicing.

“While growth will remain solid, it will not meaningfully buttress income nor increase economic resilience,” predicts the respected institution, further adding that the external environment is becoming increasingly unpredictable, which aggregates existing challenges.

The rating agency warns even with the region not highly integrated into the global economy through direct trade linkages, it remains exposed through its sensitivity to changes in commodity prices and financial conditions.

“The limited capacity of most governments to respond to even modest negative external shocks exacerbates the region’s sensitivity to the more negative global environment,” it states.

Moody’s Investors service has identified three key areas which underpin its negative outlook for Sub-Saharan Africa (SSA).

These are: worsening external environment, weak government finances and subdued GDP growth.

It is reported weak government finances will continue to pose a constraint, with the rise in debt and interest burdens since 2015 having weakened the fiscal profiles of most Sub-Saharan region sovereigns.

“We expect modest fiscal consolidation for the region, with the median fiscal deficit improving to 3 percent of GDP in 2020 compared with 3.3 percent in 2019,” continues the report, further adding that while this will allow debt burdens to stabilize, fiscal profiles will remain weak overall and leave SSA sovereigns with limited capacity to employ counter fiscal policies.

The region’s debt burden is expected to decline to 51 percent of GDP this year from 54.5 seen in 2019. However, it remains significantly higher than the 40.4 percent recorded five years ago.

While there are some intra-regional differences, including Botswana, whose debt burden remains low, the general trend, according to Moody’s, implies that Sub Saharan African countries have less fiscal spaces to absorb future shocks.

Regarding GDP growth, the international rating agency predicts GDP will remain steady, but will not meaningfully buttress per capita incomes or support fiscal consolidation.

“We expect economic growth to accelerate modestly, with regional real GDP growth rising to 3.5 percent in 2020, compared with 3.1 percent in 2019,” says Moody’s.

It further outlines that the regional average is weighed down by sluggish growth in the region’s largest economies, Nigeria and South Africa, while growth in the rest of SSA will accelerate to 5.3 percent, albeit with significant variations by sub-region and economic structure.

It is alsoenvisioned that there will be a recovery in growth for commodity exporters. This is anticipated to be robust in non-energy commodity exporters like Niger, Ghana and Botswana.

A sovereign credit rating is an independent assessment of the creditworthiness of a country or sovereign entity.

Sovereign credit ratings can give investors insights into the level of risk associated with investing in the debt of a particular country/region including any political risk

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1 Comment

1 Comment

  1. Cheerful

    January 30, 2020 at 5:26 pm

    The other issue could be the way corruption is being handled in the region all the people at top exchanges hands with each other and leaving the ordinary people out? Failing to pay back debts is another issue that is not taken seriously by those at the very top

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Business

Letlole La Rona suspends CEO

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Letlole La Rona (LLR), a property company listed on the Botswana Stock Limited (BSEL), on Tuesday moved to suspend its Chief Executive Officer, Chikuni Shenjere-Mutiswa.

His suspension, according to a notice to shareholders, follows preliminary findings arising from an investigation into issues relating to the company’s Long-term Incentive Plan.

Mutiswa who was appointed LLR CEO in June 2018, is said to have been suspended with full benefits pending the outcome of the full investigations.

Commenting on the latest developments, LLR Board Chairperson, Boitumelo Mogopa noted good governance remains sacrosanct to the board and all staff of the company.

“The preliminary findings of the possible misconduct arising from the investigations relate to the circumstances around the company’s Long-term Incentive Plan during or around March this year and possible acts or omissions by an individual in a unique position of power,” said Mogopa.

Mogopa said this by no means reflects the integrity of the board, financial performance and company portfolio.

“For us, it remains business as usual as the due process takes its course,” said Mogopa.

Meanwhile, the board has in the interim appointed Botshelo Mokotedi to hold the fort on an acting basis while investigations continue.

Mokotedi is seconded from Botswana Development Corporation (BDC) – a major shareholder in LLR – where he is the Head of Risk.

He is described as a forward-thinking, highly motivated and results-oriented individual with more than a decade experience in the financial services sector across a variety of senior roles, including Business Development, Credit Analysis as well as Portfolio and Risk Management.

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Business

Inflation increases in April

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Inflation increases in April

Cities and towns experience rising rates

The latest figures from Statistics Botswana (SB) show that the annual inflation rate in April registered a slight increase.

Inflation for the month stood at 2.5 percent, up 0.3 percent from the 2.2 percent recorded in March.

However, SB stressed that data collection for the month was hampered by the on-going lockdown, enforced on 3 April.

The restriction on movement meant data collection for prices was primarily conducted through emails and telephone calls.

In the end, the data collected covered only 70 percent of goods in the Consumer Price Index (CPI) basket.

The most affected items in the basket were alcoholic beverages and tobacco – the sale of which is temporarily suspended – and clothing and footwear, as outlets were closed during the month of April.

The closure of such shops reportedly resulted in a number of missing or unobserved prices, which were imputed through variation of the observed prices.

According to SB, the biggest contributors to the April annual inflation rate were: housing, water, electricity, gas and other fuels, which went up by 1.1 percentage points, and food and non-alcoholic beverages, which increased by 0.4 percent.

By regions, the inflation rates between March and April indicates that cities and towns increased by 0.4 of a percentage point, rising from 2.3 percent to 2.7.

Rural villages’ rates rose from 2.0 percent to 2.3 percent while urban villages’ rates similarly registered an increase of 0.3 percentage point to 2.6 percent.

When addressing local media on Tuesday this week, the Competitions and Consumer Authority CEO, Tebelelo Pule said the Authority observed an increase in consumer good prices when the effects of Covid-19 started to be felt locally.

“Prices increased in an unusual manner which disturbed us as the Authority. On top of that, there was also a decrease in the quality of goods,” announced Pule, highlighting the example of sanitizers, which she noted were ‘manufactured by anybody’.

Pule revealed that the Authority went into shops around the country to compile a price list, which they published on their website and Facebook page to allow consumers to compare how different retail stores were pricing their goods.

The CEO cautioned that those found guilty of unfairly increasing prices face a possible five-year jail term or P100, 000 fine or even both.

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