Botswana Investment and Trade Centre (BITC) – a state owned agency tasked with, amongst other things, to promote Foreign Direct Investment (FDI) in Botswana says the coronavirus outbreak will cause foreign direct investment in the country to shrink.
Following the outbreak, the agency has since suspended its international travels and now relies on the online platforms (email, linkedin, website, video and telephone conference) to engage with potential and existing clients to ensure business continuity.
BITC Chief Executive – Keletsositse Olebile says the pandemic will have a negative and rippling effect on their mandate as a foreign investment seeking agency.
“BITC will continue to monitor the situation and is finalizing a business impact analysis and guidelines that will assist us in addressing this high risk and putting in place measures to reduce execution of our mandate,” said Olebile.
Olebile however predict that the immediate impact on Foreign Direct Investment will be concentrated in countries that are most severely hit by the pandemic, although negative demand shocks and the economic impact of supply chain disruptions will affect investment prospects in other countries such as Botswana.
Amongst other things, Coronavirus is expected to affect market efficiency and resource-seeking investment alike. It is anticipated that FDI projects in extractive industries could be delayed worldwide as a result of negative demand shocks.
Meanwhile Kgori Capital – a local asset management firm based in the capital Gaborone says despite the current wave of global monetary and fiscal support, this is a time to remain relatively cautious on risk assets and focus on liquidity and capital preservation.
“As painful as major downward market moves may seem in the short run, there will be opportunities to add exposure to risk assets such as equities at very attractive valuation levels. So, investors should try stay calm and seek out the opportunities that market turbulence creates and mitigate potential risks as and when they are presented”, says Kgori’s Chief Investment Officer – Alphonse Ndzinge.
Ndzinge however cautions that the mix of shocks will probably result in a technical global recession (two consecutive quarters of negative GDP growth) in mid-2020.
He notes that the intensification of Coronavirus containment measures such as rising social distancing, the rising health and economic uncertainty, the continued financial market turmoil and the unprecedented oil price collapse could leave global growth close to zero or even slightly negative in 2020.
Ndzinge’s projection of a possible recession in 2020 is centred around the fact that since 1980, annual global growth has only been negative in 2009 and only below 1.0 percent in 1982. The last global recession was registered in 2008/09.
The capital markets guru says the short-term returns of offshore investments have varied greatly during the past couple of weeks, dependent on asset type, asset mix and exposure level to different investments markets.
“For instance, global equity indices are down significantly at nearly 20% whereas global bonds and the USD have fared significantly better”.
In the meantime, in Botswana, officials at BITC have since been directed to continue with facilitation of domestic investment.