Wednesday, September 30, 2020

Impact of financial crisis more “severe” than originally thought

The impact of the global financial crisis will be more severe than originally thought as the banks, petroleum and tourism industries stocks are likely to come under pressure, head of Capital Assets Management, Leutwetse Tumelo, has said.

“All that we are seeing in the equity market right now are the same trends that we saw during the fourth quarter of last year. Investors are getting aware that banks, tourism and petroleum sectors are going to be greatly hit,” he said in an interview with Sunday Standard.

The global financial crisis that started in 2007 accelerated last year with the collapse of some of the world renowned financial houses and banks in the USA and other developed countries. The move prompted the developed countries to inject huge capital in a bid to resuscitate some of the ailing institutions ÔÇö leading to their nationalization.

“Tourism industry has been greatly hit. We are seeing big cancellations hence the industry is taking a hit.

He said the banking sector is expected to be tight fisted in as far as giving out loans fearing massive job losses triggered by the global financial crisis. So far, the mining sector in Botswana has been severely impacted as BCL, the copper/nickel mine shed 338 jobs in December and Tati Nickel mine lost at least 500 jobs directly and indirectly linked to the failed Activox project. The fledgling diamond cutting and polishing industry has not been spared as it embarked on massive retrenchments during the month of November and December last year.

Further, Debswana, which is the world producer of rough diamonds by value suspended some of its operations last year and put some of its employees on unpaid leave. The mining sector contributes over 40 percent to the country’s GDP and over 50 percent of government revenue.

The diamond industry was directly affected by what is taking place in the United States of America since 50 percent of the world’s diamond jewellery is consumed in that country.

“It is very clear that the economic slow-down would be quite severe than originally thought. All that we are seeing right now is going to have a ripple effect through the whole economy,” he said.

“There have been aggressive moves to sort-out the USA and the European economies and hope that eventually the world economy will turn around,” he added.

However, he urged the Botswana government to spend more on infrastructure development in a bid to cushion the effects of the down side in the economy.

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