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Bank of Botswana cuts the bank rate to 5 percent

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Bank of Botswana’s Monetary Policy Committee has on Tuesday this week reduced the bank rate from 5.5 percent to 5 percent. In a statement from the Committee late yesterday (Tuesday) reads, “the current state of the economy, both the domestic and external economic outlook as well as the inflation forecast, provides scope for easing monetary policy to support economic activity without undermining maintenance of inflation within the Bank’s medium-term objective range of 3 – 6 percent.”

The Committee therefore, urged all commercial banks to make the necessary interest rate adjustments with immediate effect to reflect this policy decision. It further indicates that, the outlook for price stability remains positive as inflation is forecast to be within the 3 – 6 percent objective range in the medium term. Meanwhile, inflation decreased from 3.4 percent in August to 3.2 percent in September 2017. Subdued domestic demand pressures and the modest increase in foreign prices contribute to the positive inflation outlook in the medium term.

This outlook is subject to downside risks emanating from sluggish global economic activity and the resultant low commodity prices. Conversely, any substantial unanticipated upward adjustment in administered prices and government levies and/or taxes and any increase in international commodity prices beyond current forecasts present upside risks to the inflation outlook. GDP in Botswana grew by 3.1 percent in the twelve months to June 2017 compared to a contraction of 0.7 percent in the corresponding period ending in June 2016.

The improvement in growth reflects a 4.9 percent increase in non-mining activity, from 3.3 percent in the same period. However, output in the mining sector contracted by 10.1 percent in the twelve months to June 2017 compared to a relatively large contraction of 22.9 percent in the corresponding period in the previous year. It is projected that domestic non-mining output will be below trend in the short-to-medium term, constrained by continued modest growth in household incomes and restrained economic expansion in major trading partners.

“Nevertheless, gradual economic recovery is expected in the medium term in response to anticipated improvement in external economic conditions,” reads the statement by the Committee. Global output is projected to grow by 3.6 percent in 2017, compared to an estimated 3.2 percent in 2016, and 3.7 percent in 2018, reflecting expected improvement in performance in both advanced and emerging market economies. However, uncertainty surrounding global trade policy and openness as well as moderation of growth in China could adversely affect the medium-term growth prospects. Regionally, the projected weak economic growth in South Africa in 2017 due to persistent subdued demand and low investor confidence could potentially undermine growth by constraining private investment and household consumption.

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‘Manufacturing holds key to economic growth’

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Barclays bank’s economist Naledi Madala has urged the country to consider manufacturing, as a key tailwind to drive the economy and reduce inequality.

She was speaking at a gathering organised by the bank which focused on economic outlook for 2019. “We should not make a mistake of leapfrogging without manufacturing,” said Madala, lamenting that the country’s diversification remains a pipeline dream, as the diamond is still the economy’s mainstay. She bemoaned that mining activities in the country could not spring forward diversification, though non-mining GDP has been steady over the years.

“Extractive industries are not good stepping stones for diversification, the sector does not prepare us for the next step,” said Madala at the Barclays’ Economic Outlook Forum Review 2019. The economist further noted that government should confront head-on challenges of productivity and competitiveness to attract the much needed Foreign Direct Investment (FDI). Though diversification efforts continue to hit a brick wall, Madala said the country should expect increased activities in the mining sector hinged to ramp up in coal production in the year ahead.

She also implored government to consider a welcoming attitude towards foreign investors and generous tax incentives to businesses that set up in the country. Madala is also upbeat that the use of public private partnership model could also help diversify the economy coupled with privitisation. “Privitisation will offer opportunities for growth, through the renewed optimism from government, as business confidence has improved,” said Madala.

She implored the government and the business community to access what is going to drive and hinder growth highlighting that key headwinds to growth are income inequality, diversification challenge and productivity, among others. “The pace of poverty reduction has slowed down, while income inequality goes up,” said Madala

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MINISTER BEWAILS BAD REPAYMENT BY YOUTH

Keikantse Lesemela

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Minister of Youth Empowerment, Sports and Culture Development, Tshekedi Khama has told parliament his ministry continues to face challenges on the repayment of Youth Development Fund (YDF) loans.

Recently presenting the budget to Parliament, Khama said this financial year the ministry has received a total of 2582 YDF applications and approved 983of them to the value of P98 million. He said the programme attracts a high level of interest from youth but the ministry is only limited to funding a maximum of 1200 youth projects annually due to budget limitations.

“However the greatest challenge for the Fund is the repayment of the loan component by the majority of the youth businesses. The youth have advanced number of challenges for this including high rentals for operating spaces, low market access owing to tight competition and limited production capacities,” said Tshekedi, adding that they continue to pursue beneficiaries to repay the loans.

Out of the 919 businesses funded 1058 jobs have been created. The minister highlighted that disbursements of funds will continue to be undertaken until the end of the financial year. “The YDF is currently under review in line with the pronouncement made by the President, Dr Mokgweetsi Masisi in the State of the Nation Address, to improve beneficiaries through training, and encourage consortia and cooperatives,” said Tshekedi.

The ministry assists YDF beneficiaries in marketing their products and services through fairs and exhibitions. The ministry also runs entrepreneurship-training seminars for youth and in the past year 3692 young people were trained. Over 600 youth businesses attended fairs and exhibitions to market their products and services. Currently the ministry is collaborating with Local Enterprise Authority (LEA), First National Bank Botswana and Citizen Entrepreneurial Development Agency (CEDA) on training in entrepreneurship development and mentorship of YDF beneficiaries.

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