Five things to watch for in 2018
Mbongeni Mguni | Friday January 12, 2018 16:04
Hole in the briefcase
Finance and Economic Development minister, Kenneth Matambo makes his annual walk through the aisles of the National Assembly to deliver what he and his lieutenants have already said should be an P8 billion deficit budget.
According to Matambo’s Budget Strategy Paper produced last September, the 2018-2019 budget should be dragged into the significant deficit by slower revenue growth and higher demand by line ministries.
At a budget pitso held after the release of the strategy paper, Matambo told stakeholders government was concerned about the widening budget deficits and would tighten spending supervision this year and beyond. The anticipated deficit, however, is within the planned budget balances for NDP 11, which ends in March 2023.
Austere or accommodative
Traditionally, the Monetary Policy Statement announcement takes place a week after the budget speech.
This year, governor Moses Pelaelo will be giving his second announcement since ascending to the top seat at the Bank of Botswana (BoB) in October 2016. Most market commentators expect the BoB to maintain an accommodative monetary policy stance under which the central bank seeks room for downward interest rate reviews in order to support economic activity.
From a contractionary policy stance the years before 2010, when the bank rate was raised to a record 16.5% to curb runaway inflation, the global recession forced the BoB to maintain first a neutral, then an accommodative policy stance to support demand.
This year, inflation opens the year at 2.9%, near the all-time low of 2.6%, the BoB is expected to continue the accommodative stance, particularly as it has noted continuing sluggish demand growth and below trend performance in non-mining. Although economic growth projections for 2018 are slightly better than 2017, any warming is unlikely to heat into inflation that would warrant a change in monetary policy stance.
BSE bounces back?
Having shed 5.75% in 2017, dragged down by losses in the prices of major counters on its main board, the Botswana Stock Exchange (BSE) will be hoping listed companies catch on the New Year jump in equities seen in major markets.
Across the globe, from the US to Japan, equities have begun 2018 hitting record territory. The World Bank’s forecasts, released on Wednesday, indicate that global growth should return to pre-recession levels for the first time this year, which again is expected to fuel equities.
The BSE, traditionally a stronger performer in Africa, will be hoping for a lift in the major counters that shed value last year, which is possible as some of the declines were due to price correction. Counters such as Letshego, Sefalana and the banks will be eyeing a turnaround in their share prices for this year.
Fingers on Debswana’s pulse
As in previous years, fiscal authorities and the private sector in turn, will eagerly be awaiting the announcement of Debswana’s production targets and trend analysis. Debswana remains a key contributor to budget revenues, foreign currency earnings, employment and downstream procurement. Annually, the production forecast dictates to what extent the diamond giant will be able to contribute to economy.
Last year, Debswana initially set a target of 20.5 million carats from its mines, before updating this in August to 22 million carats, a figure representing the highest production since 2014. This year kicks off with the expected reopening of Damtshaa Mine, an event that in itself suggests that the diamond giant will set another robust target for 2018.
Agriculture’s miskick
In briefings held in September and December, the Meteorological Services department raised the hopes of farmers countrywide with a forecast of healthy rains for the season.
Most areas would receive normal to above normal rainfall, which would have marked the second season of good rains and production, following the horrors of El Nino in the 2014-2015 and 2015-2016 seasons. Ploughing and planting activities proceeded cautiously countrywide, but a dry spell stretching through November and December, coupled with a New Year heatwave and continuing dry weather has farmers and the Agriculture Ministry worried.
“The country has experienced erratic rainfall, prolonged dry spells and high temperatures for the first part of the 2017-2018 ploughing season,” a release from the Ministry this week reads. “The Ministry advises the farming community and tractor owners/contractors to be very cautious when engaging in ploughing/planting activities.”
While the Ministry is advising farmers to plant drought tolerant, early maturing crops and avoid maize, it remains to be seen whether farmers will heed the warnings.