Bond ceiling increased
Parliament approved the Finance ministry’s request to raise government’s domestic borrowing limit to P55 billion in March. This was after the previous limit or ‘ceiling’ of P30 billion was reached in February.
Under the domestic note issuance programme, the Bank of Botswana raises debt from the local capital market on behalf of government, through the issuance of treasury bills and bonds. In September 2020, Parliament increased this programme to P30 billion from P15 billion, acknowledging the effects of the COVID-19 pandemic on the budget.
However, with mineral revenues sliding after their rebound in 2022, government has increasingly leaned on the capital market for funding, particularly as savings housed in the Government Investment Account have dwindled.
The accelerated spending in the most recent financial years, including the election-fuelled record budget of P102.3 billion announced in February, have also meant a faster depletion of savings and higher domestic borrowings.
Whilst the local capital market was initially flush with cash early in the year due to pension funds rushing to meet a December 2023 deadline for the repatriation of some of their offshore assets, government’s costs of borrowing have since climbed during the year as liquidity has tightened.
The central bank has failed to meet its debt targets at each of the monthly auctions since July, as the returns demanded by bidders has exceeded what government is willing to accommodate.
CEDA loans underperform
A revealing study by the Botswana Institute of Development Policy Analysis in March showed that Citizen Entrepreneurial Development Agency (CEDA) investment programmes in the last five years had underperformed, yielding few jobs and low returns for the amounts government was pumping in. According to the study, between 2017 and 2022, 5,600 youth enterprises received CEDA funding, but these yielded a cumulative job return of 7,700.
According to BIDPA senior researcher, David Mmopelwa, the average job creation rate for CEDA-funded youth enterprises is below two jobs per enterprise, a worryingly low figure for government.
BIDPA’s study found that the main reason for the slow job creation was the heavy funding of the services industry, which has proved to be a low-return industry. Of the 5,606 funded projects 3,789 were in the services industry which has over the years proved to be a low job creation industry unlike mature industries such as manufacturing and agriculture, BIDPA said.
Government efforts to invest in Small to Medium Enterprises in the country have been mainly towards job creation purposes, as the economy has long struggled with rising unemployment rates, particularly amongst youths.
BotsOil takes over
Botswana Oil on April 1 took over the exclusive right to import 90% of the country’s fuel supplies, with citizen firms sharing the remaining 10% stake.
BOL, the state oil company, had been angling for a dedicated quota for years, under which it would exclusively import most of the 1.2 billion litres of fuel consumed in the country every year, and resell this to retailers such as Engen, Total, Puma, Caltex, and the wholesalers.
As part of its readiness plan, BOL engaged 10 suppliers in South Africa, Namibia, and Mozambique, a move the firm said would improve security of supply and diversification of routes. The contracts were expected to run until the end of September, when BOL was due to float tenders in the market for longer-term supply contracts.
Although the market feared that BOL’s takeover would come with disruptions in supply, the transition was mostly seamless from the consumer point of view. However, in September, ULP93, a popular type of fuel, began running out across the country, causing panic amongst motorists.
BOL explained that ULP93 was produced in limited quantities only in South Africa’s National Petroleum Refiners of South Africa (NATREF) refinery and that other countries in the region such as Namibia, Mozambique, and Eswatini had discontinued its use after suffering shortages. BOL discontinued ULP93 in October.
BHP, Anglo, De Beers
Possibly the biggest story of the year was the world’s biggest mining group, BHP, unsuccessfully attempting to take over Anglo American for a whopping $49 billion. The only story bigger than that was Anglo American announcing, in the midst of the takeover battle, that it was selling its 85% stake in De Beers, ending a 90-year relationship between the two.
De Beers is the 50/50 partner with government in Debswana and the country’s single most important economic partner. The news of the BHP bid and the subsequent sale of De Beers rocked the country, coming as the economy struggled against a downturn in diamond sales.
Anglo’s sale of De Beers is part of a restructuring of assets designed to ensure the larger group focuses on its core. Amongst the disposals Anglo is planning, De Beers is expected to be amongst the last sale finalised, although a transaction team has already been established for De Beers.
Whilst precious few details have emerged since the initial announcement. Anglo American CEO, Duncan Wanblad, has disclosed that the De Beers exit is being “dual-tracked” i.e the mining group is weighing more than one option of how to exit the diamond business. Anglo is reportedly looking at both an outright sale of its equity to another entity as well as an Initial Public Offer or sale via stock exchange listing.
For government, its key interests are that any new partner in De Beers should have the patient capital needed to wait out the fluctuations of the diamond industry. Wanblad has already met with new president, Duma Boko, and engagements are expected to intensify, especially as Botswana has the option to increase its shareholding in De Beers from the current 15%.
Starlink sets up
Elon Musk’s satellite Internet company, Starlink, started operating in the country in August after receiving regulatory approval. The development followed months of speculation over Starlink’s application and assessments done by the Botswana Communications Regulatory Authority.
In May, President Mokgweetsi Masisi met with Starlink executives in Dallas, USA, and later announced that he wanted a fast-tracking of their licence to operate in the country.
Starlink is the world’s first and largest satellite constellation using a low Earth orbit to deliver broadband internet capable of providing download well over 100Mbps. The new service’s entry in the local market has shaken up competition significantly, with many Batswana signing up for the technology and abandoning their long-held contracts with local Internet Service Providers (ISP).
Starlink, as a satellite service, allows users to access the Internet wherever they are in the country, without the need to pull cables to remote areas which are often sparsely population.
Since its launch in the country, several local ISPs have entered partnerships to supply Starlink kits or service, as a way of riding the wave of the satellite-based technology.
