Identifier
Created
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09GABORONE275
2009-04-03 04:25:00
UNCLASSIFIED
Embassy Gaborone
Cable title:  

BOTSWANA ECONOMIC BRIEFS APRIL 2009

Tags:  ECON ETRD EFIN EAIR PGOV BC 
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TAGS: ECON ETRD EFIN EAIR PGOV BC
SUBJECT: BOTSWANA ECONOMIC BRIEFS APRIL 2009

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TAGS: ECON ETRD EFIN EAIR PGOV BC
SUBJECT: BOTSWANA ECONOMIC BRIEFS APRIL 2009

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1. This is the fourth edition of U.S. Embassy Gaborone's Botswana
Economic Briefs, covering economic and commercial news from March

2009. Topics of this edition are:

- Moody's Downgrades Botswana
- Botswana Inflation likely to hit Single Digit in 2009
- Botswana Ranked No. 1 in Africa for Mining Investment
- Relief as BCL Mining company Reduces Retrenchment
- Diamond Trading Company Reverses Sales Initiative
- Aviation News: Changes in SAA and Air Botswana Service
- Botswana Tax Revenues to fall
- Botswana to come up with Anti-dumping Regulations


Moody's Downgrades Botswana
--------------

2. Botswana's foreign currency rating outlook has been cut from
positive to stable because of the slump in global diamond demand,
the country's main source of budget and export revenue. According
to Moody's, the current crisis represents a serious risk for
Botswana's diamond dependent economy. Moody's statement says that
the country's reserves are at a risk of being depleted by an
extended decline in diamond output and large ongoing budget
deficits. Last month Standard and Poor's reaffirmed Botswana's
investment grade sovereign credit rating of 'A/A-1' for foreign
currency and 'A+/A-1' for local currency but revised the outlook
from 'stable' to 'negative'. (Botswana Gazette, March 18-24 March
2009)


Botswana Inflation likely to Hit Single Digit in 2009
-------------- --------------

3. Data from the Central Statistics Office released this week
indicate that in the month of February, the inflation rate stood at
11.7 percent, down by 1.1 percentage points from 12.8 percent in
January 2009. Observers say the falling numbers are in line with
expectations as food and energy prices have been stabilizing. The
Fund Manager of Investec, Bakang Seretse pointed out that the
February 2009 inflation stood at 11.7 percent much better their
expectations of 12.2 percent from a previous 12.8 percent with the
biggest contributors being food and alcoholic beverages. The CSO
data showed that the urban villages inflation rate registered a
decrease of 0.6 of a percentage point, from 12.5 in January to 11.9

in February while the rural villages inflation rate dropped by 1.6
percentage points from 16.3 percent in January to 14.7 percent in
February. The cities and towns' inflation rate also went down by
1.0 percentage point from 11.5 percent in January to 10.5 percent in
February. Investec said with inflation coming down, it gives Bank
of Botswana an opportunity to cut rates aggressively. Their policy
setting is now geared towards stimulating non-inflation growth.
(Sunday Standard, March 22-28, 2009)


Botswana Ranked No. 1 in Africa Mining Investment
-------------- --------------

4. Botswana has once again been named the foremost preferred
destination for mining and mineral investment in Africa, according
to the recently released Fraser Institute Survey. This year's
Fraser Institute Survey of Mining companies involved more than 3000
mining entities. 2009 marks the fourth year in a row that Botswana
has been ranked the preferred mining destination in Africa starting
from the 2005/06 survey. According to the survey, mining companies
throughout the world ranked Botswana first in Africa in terms of
political stability, security, labor/employment agreements, taxation
and environmental regulations, though she ranked poorly in the
infrastructure development category. Botswana was rated ahead of
many African countries and eclipsed many developed countries with an
index score of 64.9. The survey of Mining Companies 2008/09 also
indicates that mining companies have a gloomy outlook for the
industry, with at least 30 percent of exploration companies expected
to shut down this year and in years to come. (Mmegi March 17, 2009)



Relief as BCL Mining Company Reduces Retrenchment
-------------- --------------

5. Botswana's mining sector continues to sink deeper into trouble,
but there was relief at BCL in Selebi Phikwe after the mine reduced
the number of employees to be retrenched from 348 to 200. The BCL
Public Relations and Communications Superintendent Mr. Tirelo
Kganela said the numbers were reduced after the mine froze external
recruitment for positions affected by the retrenchment. Despite the

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reduction in the number of retrenched employees, BCL remains in the
grips of a crippling recession caused by a sharp drop in metal
prices. An economic analyst said while the number of employees to
be retrenched at BCL is a lot less than expected, the town of
Selebi-Phikwe remains in dire need of new investment away from
mining. According to the General Manager Mr. Montwedi Phathi, the
BCL mine is tapping into its reserve for survival. He said
depressed copper and nickel prices are another factor which makes
diversification paramount. Comment: Economic analysts predict the
recession will last between 18 and 24 months, but also warn it will
take longer for the mining sector to recover. End comment. (Mmegi
March 13, 2009)


Diamond Trading Company (DTC) Reserves Sales Initiative
-------------- --------------

6. Botswana's Diamond Trading Company (DTC) has reversed a recent
sales policy initiative to sell diamonds outside its Sightholder
system. The DTC Managing Director Varda Shine announced the company
would explore options of making available to the secondary market
goods that are not taken up by the DTC Sightholders or selected
clients. The rough diamonds offered in this additional sales period
will include boxes remaining unsold from Sight week and will be made
available to all Sightholders wishing to inspect them. DTC is
estimated to have sold about US$ 125 million during its second 2009
Sight in February, bringing the first two months of 2009 to US$ 220
million. (Mmegi, March 10, 2009)


Aviation News: Changes in SAA and Air Botswana Service
-------------- --------------

7. On March 23 South African Airways began offering flights from
Johannesburg to Gaborone twice daily Sunday to Friday and once on
Saturdays. The airline is using an Airbus 319 on the route,
equipped with both economy and business class cabins and with a
passenger capacity of 110. SAA's sister airline South African
Express also continues to serve the Johannesburg-Gaborone route
daily using much smaller regional turboprops. Air Botswana
announced this month that it has purchased two new ATR 72-500
aircraft and began service on new routes March 31. Air Botswana has
added a roundtrip twice a week between the tourist destinations of
Maun and Kasane as well as new roundtrip service from Johannesburg
to Francistown and Johannesburg to Kasane. Kenya Airways opened an
office in Gaborone in late March and announced that they intend to
begin direct service from Nairobi to Gaborone in the near future.


8. COMMENT: Until this month, South African Express and Air
Botswana flights to Johannesburg were the only real options for
travelers who need to connect from Gaborone to the rest of the
world. The introduction of daily service on SAA using larger jets
has improved options for both tourists and business travelers. The
Airbus 319 has a much larger passenger and cargo capacity and this
brings new competition into the lucrative Gaborone-Johannesburg
route. SAA may also be priming the pump for the 2010 World Cup, as
its new service could allow some soccer fans to stay in Gaborone
hotels and also get to Johannesburg quickly. If Kenya Airways
follows through on its intent to offer direct service from Gaborone
to Nairobi, that would also give Botswana passengers a welcome new
option. Certainly some tourists may wish to see Botswana and Kenya
without transiting busy Oliver Tambo airport in Johannesburg, and
Botswana residents with business in East Africa or even North
Africa/Middle East may find a Nairobi connection very convenient.
END COMMENT.


Botswana's Tax Revenues to fall
--------------

9. Analysts have painted a gloomy picture for Botswana's earnings
in 2009. An analyst at Motswedi Securities said the current
economic situation will have an impact on the country's tax revenue.
The analyst said as the economy continues to slow down companies'
profitability will decline and thus pay lower taxes to the
Government. Corporate tax and Value Added Tax (VAT) earnings will
be low this year and will also fall largely because of the squeeze
on income which could reduce consumer purchasing power. The
analysts explained that the government will have to tap into the
foreign reserves in order to cover the deficit. He advised that in
order to counter the possible consequences of drawing on foreign
reserves the government should consider raising bonds in the local
markets to raise revenue so that if the crisis is prolonged the
government would not have to draw everything from the reserves.
(Botswana Gazette, March 11-17, 2009)


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Botswana to come up with Anti-Dumping Regulations
-------------- --------------

10. The Government intends to implement the Standard Import
Inspection Regulations (SIIR),in an attempt to effectively deal
with the dumping of substandard goods on Botswana's soil. The
Botswana Bureau of Standards (BOBS) warned that it had come to the
realization that Botswana is now being used as a dumping site
because of her dependence on foreign commodities. BOBS will be
implementing the SIIR with effect from April 1, 2009. The purpose of
these regulations is to reduce importing of substandard goods into
the country and also to health and safety of the people, animals,
plants and environment. The move is expected to get an overwhelming
support from the Southern African Customs Union (SACU),the Southern
African Development Community (SADC) and the European Economic
Partnership Agreements (EPAs),which want to level trading
arrangements between Botswana and its trading partners. The
Director of Regulatory Compliance at BOBS, Botsile Kebapetse said
the aim of the law is to align the government to good regulatory
practices applied world-wide, which call for the safety of products
for consumption. (Sunday World March 8-14, 2009)


NOLAN