Saturday, September 23, 2023

Inflation to make another uptick – Kgori Capital

Investment analysts at Kgori Capital, a local asset management company have crunched the numbers and have made a conclusion that when Statistics Botswana (SB) releases its Consumer Price Index (CPI) report for the month of April, the figure will be a double digit. 

Investment analyst at Kgori, Kitso Mokhurutshe pegs the April figure at around 10.1 percent, which is a marginal 0.2 percent uptick from the March rate (9.9%). 

Mokhurutshe says the April Inflation rate is expected to be influenced by an increase in administered prices that came into effect on 1st April 2023 which includes the reversion of the Valued Added Tax (VAT) back to 14 percent from 12 percent. 

VAT rate was first slashed to 12 percent in 2022 as part of the response to the rise in the prices of consumables by the Botswana government. At the time, the ministry of finance announced that it will slash VAT rate by 2 percent as part of the relief measures to the consumers and enterprises. The temporary measures were to last for a period of six months ending February 2023 with the VAT reduction further extended until March 31st 2023. Following the expiry of the extension on March 31st, the rate has since been pegged back at 14 percent. 

But now Kgori Capital says without any further fuel price adjustments in the near future, consumer inflation is expected to dip within the central bank’s 3-6 percent objective range in the third quarter of this year (Q3:2023) but increase beyond it again by early Q4:2023.

The March inflation rate was largely influenced by a rise in fuel prices following an upward adjustment by the Botswana Energy Regulatory Authority (BERA) in late February 2023. 

To date, BERA has adjusted fuel prices twice, – with one downward move made in mid-January which was followed by an upward adjustment on the 28th of February. The February 28 review saw unleaded petrol 93 going up by 95 thebe per litre while that for unleaded petrol 95 rose by 92 thebe, retail pump price of diesel 50ppm increased by 56 thebe per litre while retail pump price of illuminating paraffin increased by 72 thebe per litre. 

The energy regulator’s February price increases came at a time when the nation’s inflation rate was cooling from its painful 2022 peak. The inflation rate decelerated to 9.3 percent in January, dropping from 12.4 percent registered in December 2022. The fall in consumer prices was attributed to the dissipating effects of fuel prices after BERA made reductions in January this year, and three other downward adjustments last year in December, October and September. 


Read this week's paper