Thursday, October 1, 2020

Standard Chartered skeptical about Botswana global competitiveness

Standard Chartered Bank?s head of Africa research, Razia Khan, warned that Botswana has to improve its competitiveness in a bid to compete effectively in the globalised economy.

Speaking at Gaborone Sun Hotel on Thursday, Khan said Botswana is ranking low in a number of areas against its African peers and, as such, is likely to loose foreign direct investment.

?Competitiveness should not be about exchange rates alone. It should also include infrastructure development,? she said.

Botswana is ranked at bottom 31 out of 53 countries in Africa in terms of issuing of business permits, enforcing contracts at 13 and the cost of utilities is among the top expensive countries in the continent.

She said these factors outside exchange rate stability do influence would-be investors? decisions on where to invest.

The pula currency is expected to gain from the support of the Rand which form close to 64 percent of its composition. The pula is also pegged to other currencies, such as the US dollar, British Sterling, Euro, Japanese Yen and SDR.

The dollar is expected to tumble over the year as it gets hit by the bulging current account and trade deficits?against the Asian countries, especially China.

?There is enough diversification in the economy. It is still overly reliant on the mineral sector,? she said.

She said with limited diversification the country?s credit rating is unlikely to increase significantly. Botswana has the highest credit rating in Africa and ranks along side countries like Greece and Poland.
One of the problems she highlighted is the weak private sector in the country which is not able to direct the economy.

?The private sector is still not able to sustain its growth by its own. The private sector needs to emerge as an engine of the economy,? she stressed.
She further said that although Botswana has achieved growth rates of 8 percent since 1978 poverty is still a challenge.

She painted a blight picture of the interest rates? down-ward adjustment before the end of the first quarter saying that the credit extension in Botswana appears to be far much higher from the official figures from Central Statistics Office (CSO). The central bank, which is the custodian of the monetary policy has set itself a target range of 11?to?14 percent credit range but some unofficial figures suggest that the extension is as far as around 25 percent- largely propelled by corporate lending by the banks, household lending appetite driven by micro finance outfits, loan sharks and collective investments.

?Prospects of interest rates coming down are worrying. Commercial banks, which are cash rich out of Bank of Botswana, have started to lend more since the Banks? policy change on the Bobcs,? she said. ?The commercial banks have a lot of cash and have seen the opportunity to borrow. I see the Bank delaying the cut in interest rates until the second quarter.?

According to the United Nations Human Resources Development Report, Botswana ranks as number one in the whole of Africa in terms of access to loans or credit extension.

Khan said some of the spending drift is being influenced by the government?s stated objectives of spending over this coming fiscal year as stated in the finance minister?s spending budget. But, she cautioned that might not be true because of the capacity constraints that have afflicted the Enclave.
?Government has announced its intention to spend but we know from the previous statements that they have some constraints,? Khan said.

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