Tuesday, January 19, 2021

BSE plunges on fears of a budget deficit

The Botswana Stock Exchange (BSE)┬áwas dragged lower by┬áblue chip┬áand dual listed-mining companies on Tuesday┬áas investors shunned government “stimulus“ packages that would attract a huge deficit.

The domestic board and the foreign company index both closed the day at 0.03 percent after Finance and Development Planning Minister, Baledzi Gaolathe, warned that, as a result of  his P 10.56 billion national budget, the country would incur a deficit of P 13 billion.

“Trades were observed in most counters on BSE, albeit in the negative territory, and on thin volumes as risk averse investors rushed to the market to off-load their holdings after the presentation of the┬á2009/10 budget statement,” a researcher at Motswedi Securities, Garry Juma, said.

 On the foreign counter, losers were the BSE and the Australian-listed Aviva that went down to 21 thebe from 40 thebe. The London and BSE listed African Diamonds eased 10 thebe, to 310 thebe, while A-Cap was off 6 thebe to 72 thebe.

On the domestic counter, the tourism outfit, Chobe Holdings, retreated by 6 thebe to 290 thebe, and Sechaba and Standard Chartered Bank of Botswana softened by  5 thebe  a piece to 1, 495 thebe and 1,795 thebe, respectively. While Barclays Bank of Botswana lost 3 thebe to 587 thebe per share.
The minister’s stimulus plan was also not well received by a consortium of organized business, Botswana Confederation of Commerce and Industry (BOCCIM).

“Precaution┬áis essential when tapping into the government’s accumulated reserves. These reserves are intended for securing a future source of income, and cushion the economy in difficult times, when revenue from the mineral sector has depleted,” BOCCIM said in a statement release Tuesday afternoon.
It added that government should ensure that deficits are sustainable and can be financed. Accessing reserves should be done strategically as the economic recovery may be a relatively slow process.

The diamond rich southern African nation has accumulated huge┬á foreign exchange reserves, which, according to government, were worth around P 72 billion by November last year. However, diamonds, the country’s major foreign exchange earner, have been badly hit by the ongoing┬áglobal┬ácredit crunch as the economy of the United States of America, the biggest diamond consumer market, is badly bruised by the crisis.
Revenue from diamond miningÔÇöa sector that contributes 33 percent to the GDP ÔÇô is expected to slouch-down by┬áas much as 50 percent while prices are┬áestimated to fall by 15 percent during the 2009/10 fiscal year. Government fiscal year starts at the beginning of April.

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