CNBC Africa is joined by Kealeboga Mogodi, Head: Business & Commercial Sales, Stanbic Bank Botswana for more.
This week, Botswana held its state-of-the-nation address, where newly elected President Boko sounded a positive tone on the country's current economic malaise. We know it has been triggered by the slump in diamond prices that constrained government revenue and also kept unemployment at elevated levels. Botswana also expected to cut interest rates at its last monetary policy meeting next month. But for more on the market over there, I'm joined by Kealeboga Mogodi, the Head of Business & Commercial Sales at Stanbic Bank Botswana. Kealeboga, thanks so much for your time. Perhaps let's start off with the politics and what the politics could potentially mean for the economics. I mean, just looking at President Boko's speech, he's just talking about how the country will overcome, overcome the economic malaise from the slump in diamond prices, overcome the challenges to government coffers as a result, but also overcome some of the unemployment challenges that the country is facing. Just your perspective, ultimately, and whether the investment case for Botswana has been improved under the new administration. Thank you for having me, Fifi. Absolutely. I think we're all aware of the challenges that the economy has had. And we were quite anxious to, and eager to see, to get the first glimpse of the new government's policies and plans, which were laid out at the state-of-the-nation address held this past week, which was, the theme of which was transforming Botswana for inclusive growth. These policies are anchored on economic and social programs, aimed at a much-needed diversification of the economy in a sustainable and inclusive manner. The backdrop of these policies coming into play comes in after a limited economic recovery post the pandemic, drought that has affected the economy over the past two consecutive years, declining revenues, as you had said, due to global market conditions, high unemployment levels, overall unemployment at 27.6%, and youth unemployment at 38.2%, as at the end of Q1, which is one of the highest we've recorded in the past few decades. The new government has highlighted that they will start with a forensic and financial audit to examine the efficiency and efficacy of systems and institutions with the aim of changing and modernizing any gaps that are found. They will also be strengthening anti-corruption institutions to ensure that they are adequately equipped and have a clear framework with which to deliver results. There's also a focus on economic revitalization to attract investment and encourage diversification of the economy. There will be a legal reform task force, which is going to be charged with drafting reforms to attract and promote foreign and domestic investment by doing away with overly bureaucratic processes that have previously hindered investment. Economic incentive packages will be used as well to attract investments in potential sectors, particularly in renewable energy, agriculture, tourism, manufacturing, and technology. This will go hand-in-hand with the fast-tracking of key infrastructure projects that are strategic in delivering national outcomes in transportation, energy, and digital connectivity in order to boost employment and economic activity. Interestingly, we're also looking to partner with local and global companies to accelerate this development, so we're eagerly looking to see who these parties that they're going to be partnering with will be. There's also a national housing scheme, which will be established to provide affordable housing in urban and rural areas with the target of providing 100,000 affordable houses over the next few years. This as well will go hand-in-hand with financing schemes such as low interest rates and rent-to-own terms. So, there's also a huge social aspect to some of these policies that are coming in place in order to make sure that the growth is inclusive. There's a considerable focus on solar energy, I beg your pardon, with Botswana receiving more than 3,200 hours of sunlight per annum. So, this is closely linked to the theme of renewable energy. And key in supporting these reforms is the establishment of a national development fund, which will finance key strategic national projects, help finance key sectors, and act as a partner for foreign investors. So, there's a huge drive to really attract foreign investment in Botswana, which I think we have struggled with in the past. However, I think this is going to be the basis of which in order to bring investors in and partner with them in order to really help grow the economy inclusively. There's also going to be reforms in... You know, just to jump in there, just to jump in there, Gela Bokhar, it remains to be seen how much of this can be achieved. I mean, quite a long list that the president and the new administration have committed themselves to in order to shore up Botswana's economy to its former glory. Notwithstanding the difficulties, just given the significance of revenue that the government does get, or the contribution of diamonds, as it were, to overall government coffers, around 48% of its foreign earnings. I want to tap into your point around foreign investors, because some would argue that what also has been a hindrance to a greater foreign investment participation, particularly in the mining sector, was the previous deal that was brokered by the previous administration with Anglo-Americans, De Beers, as it were. A lot of talk around that. I mean, we know that the CEO of De Beers and the new president had a meeting, and it seems like there's a bit of a positivity regarding what the future prospects of this partnership could be. Just what is your read on this? And how critical do you reckon this De Beers-Botswana deal could be for the investment appeal of the country? Certainly, I think it has been in the offing for a while, and they've been holding the cards pretty close to their chest. However, with the meeting of the Botswana government and the De Beers and Anglo-American representatives, the agreement has yet to be concluded and signed. However, it has been agreed in principle, with some outstanding details to be finalized, which they have not yet shared. However, there's been reassurance from both parties that they're eager to conclude and sign the agreement and strengthen the long-standing partnership between the government of Botswana and De Beers. They have highlighted that this could be done within a matter of weeks or months. And I think the sooner it gets done, the more positive sentiment it sends out to not just the local market, but the international market. I think it has been a little unsettling. There has been back and forth, a bit of rhetoric, particularly because they have been holding some of the cards closer to their chest. So, you know, we haven't really been knowing what's going on. However, I think it'll do a lot to show investors that we were able to get the deal done. Both parties are working together amicably. They will be working together for the foreseeable future in the development of Botswana. The partnership will continue, which bodes very well, because as you said, that's where the largest country of foreign income comes from. So once that's sorted out, and we can now move on to diverse, focusing on diversifying away from the diamond industry, because as we have seen, whenever the diamond industry goes to develop, the whole private sector suffers quite substantially. Okay. Gelibokha, we'll have to leave it there for now. Thanks so much for your time. Catch up, I am sure, in the wake of the latest Bank of Botswana Bank's decision for rates in December. We'll have a conversation regarding what you think then, but we'll leave it there. Gelibokha Mukhodi, the Head of Business and Commercial Sales over at Stanweg Bank Botswana.
Theme: Economic Revitalization and Inclusive Growth in Botswana
Botswana, known for its diamond industry, has faced economic challenges due to the recent slump in diamond prices, leading to reduced government revenue and increased unemployment rates. President Boko, in the state-of-the-nation address, expressed optimism about overcoming these hurdles through strategic policies and reforms. These initiatives aim to diversify the economy sustainably, address high unemployment rates, and attract foreign investment. Kealeboga Mogodi, Head of Business & Commercial Sales at Stanbic Bank Botswana, highlighted the government's focus on conducting forensic audits, strengthening anti-corruption measures, and reviving the economy through various sectors like renewable energy, agriculture, tourism, manufacturing, and technology. There will be a special emphasis on infrastructure projects to boost employment and economic activity, along with the establishment of a national housing scheme for affordable housing. The government plans to partner with local and global companies to accelerate development and achieve inclusive growth. Additionally, efforts will be made to attract foreign investment by reforming regulations and establishing a national development fund. However, the success of these initiatives remains to be seen as the country aims to reduce its dependency on the diamond industry. The potential agreement between Botswana and De Beers could play a crucial role in enhancing the country's investment appeal, signaling positive prospects for economic growth and stability.
"President Boko's policies aim to transform Botswana for inclusive growth by diversifying the economy and attracting investments in key sectors like renewable energy and technology."
['Botswana economy', 'diamond industry', 'economic diversification', 'foreign investment', 'inclusive growth']