1998 SOUTHERN AFRICA ECONOMIC ... - National Treasury

B O T S WA N A
restructuring during the 1990s. The government formed the
B o t swana Te l e c o m munications Authority in 1996, which is
governed by an act of parliament.The mandate of the body is,
among other things, to regulate competition and oversee the
p rovision of telecommunications equipment. A significant
upgrading of the telecommunications system is curre n t ly
u n d e r w ay. The programme is aimed at rural areas through the
Rural Te l e c o m munications Pro j e c t ,and also the envisaged linkup
with South A f r i c a ,Z i m b a b we, Zambia and Namibia once the
G a n t s i - M a muno microw ave radio is completed.The Internet has
re c e n t ly been intro d u c e d , and fo l l owing the aw a rding of two
licences for cellular phone networks these should become
available in the near future.
E C O N O M I C O V E R V I E W
I n t ro d u c t i o n
The discove ry of diamonds after independence in 1966 set the
c o u n t ry on a successful economic growth path leading to rising
living standard s . The diamond industry transformed Botsw a n a
f rom an agriculture-based economy to one in which diamonds
account for 80 percent of exports and 50 percent of
government reve nu e. A c k n owledging the risk of re ly i n g
p re d o m i n a n t ly on diamonds as a source of economic pro s p e r i t y,
the government has initiated steps aimed at broadening the
e x p o rt base of the economy by stimulating the development of
the small-scale sector as well as large industries. P romising fields
for diversification are the manufacturing and services sectors,
such as textiles, tourism and financial serv i c e s .
Recent Macro-Economic Deve l o p m e n t
A real GDP growth rate of 6.9 percent was re c o rded for the
fiscal year 1 Ju ly 1996 to 30 June 1997. This growth rate was
attributable in large part to the 7.5 percent real growth rate in
the non-mining sector, which was significantly higher than the
5.6 percent real growth re c o rded in 1996. While the mining
sector growth rate had dropped by 5.8 percent in the ye a r
ending June 1997 from 9.9 percent in the previous ye a r, g row t h
in the non-mining economy has been less err a t i c, s h owing a
sustained upward trend since 1993. In 1997, the highest grow t h
rate was re c o rded in the transport and trade, hotel and
restaurants sectors, which re c o rded real increases in output of
13.6 percent and 10.6 percent re s p e c t i ve ly. All other sectors,
with the sole exception of agriculture, re c o rded real grow t h
rates of 5 percent and above.This expansion is reflected stro n g ly
in Botsw a n a ’s export perfo r m a n c e.
With respect to the fiscal position, the 1996/97 budget fo re c a s t
s h owed a deficit of BWP636m (USD193m) and this was
s u b s e q u e n t ly revised at the end of 1996 to reflect an expected
surplus of about BWP400m (USD121m).The downgrading of
the estimate was on account of the 1996 Pula depreciation and
the improvement in mining output and receipts in 1996 and
1 9 9 7 .In fact, the actual outcome has been a budget surplus of
BWP1,302m (USD395m).This was due to both rapid growth in
government reve nues and lower than expected spending. T h e
latest estimates for the 1997/98 budget, fo recast a surplus of
BWP1,270m (USD385m) in the current fiscal ye a r, despite a
planned 22 percent increase in development spending.
B o t swana has established itself as a low-tax jurisdiction in re c e n t
years with a manufacturing company tax rate of 15 percent and
a personal income and basic company tax rate of 25 perc e n t .
C o n s e q u e n t ly, the 1998 budget did not include any changes to
the basic income tax structure. I n s t e a d ,the emphasis in the 1998
b u d g e t ,has been on upgrading the tax administration system,
the objective being to increase the efficiency of assessment and
to improve on the collection of outstanding income taxe s .
A sustained decline in the inflation rate in recent years has
s u p p o rted the positive growth tre n d . Since 1992, the annu a l
average inflation rate has declined each ye a r, falling from 16.1
p e rcent in 1992 to 8.9 percent in 1997. On a monthly basis,
a n nual average inflation dropped from a ten-year high of 17.7
p e rcent in June 1992, to 7 percent in Fe b r u a ry 1998. E x c h a n g e
rate stability (both nominal and real) has also improve d
s i g n i f i c a n t ly in 1997, when compared to developments in 1996.
In nominal terms, the Pula depreciated by just 4 percent against
the US Dollar in 1997, c o m p a red to the 23 percent depre c i a t i o n
re c o rded in 1996. Against SDR, it ap p reciated about 2 perc e n t
in 1997, c o m p a red to the 20 percent depreciation re c o rded in
1 9 9 6 .
In 1997 through March 1998, exchange rate policy focused on
real effe c t i ve exchange rate stability, while monetary policy
c o n t i nued to focus on maintaining positive real interest rates
that are in line with those prevailing in major international
c apital marke t s .These objectives we re largely achieve d .
Financial Institutions
Since 1975, the Bank of Botswana has acted as both the banke r
and financial advisor to the gove r n m e n t .The Bank also manages
the country ’s fo reign exchange re s e rve s , administers exchange
c o n t rols and regulates the country ’s overall financial system.
Since the Bank is the custodian of the Botswana curre n c y, it has
re c e n t ly been, t h rough a statutory prov i s i o n ,a l l owed to act as a
watchdog over counterfeiting and fo r g e ry of the local curre n c y.
The Bank of Botswana also conducts open market operations
to mop up superfluous liquidity in the banking system.
The country ’s financial sector has experienced grow i n g
c o m p e t i t i o n ,leading to a pro l i feration of financial products and
s e rv i c e s . T h e re are four main commercial banks in Botsw a n a :
B a rc l ay s ,S t a n b i c, First National and Standard Bank.These banks
c a rry out normal retail and commercial banking activities,
l e a s i n g ,p ro p e rty finance and merchant banking and also act as
authorized dealers of fo reign exchange. D evelopment finance
institutions supplement the commercial banks, o f fe r i n g
specialised services targeted to certain economic sectors.
B o t swana Stock Exchange
The Botswana Stock Exchange had a ve ry successful year in
1 9 9 7 . The number of listed companies on the Botswana Stock
Exchange has increased rap i d ly over the past ye a r s . To date the
exchange boasts about 20 listed companies compared with 11 in
1 9 9 3 ,an increase in excess of 67 perc e n t .
M a r ket capitalisation more than doubled in 1997 rising to more
than USD600m. Liquidity has also improved as seen by a
substantial surge in volume of shares traded. The number of
fo reign companies maintaining share custody accounts surged
c o n s i d e r a b ly to 50 in 1997 compared with 3 in 1993. A n o t h e r
significant milestone was the listing in December of the first
bond issue by the Botswana Development Corporation.
The top five domestic companies listed on the Botswana Stock
Exchange in terms of market capitalisation are Sechaba (a
consolidation of companies under the Botswana Deve l o p m e n t
C o r p o r a t i o n ) ,B a rc l ays Bank of Botsw a n a ,S t a n d a rd Chart e re d
B o t sw a n a ,First National Bank of Botswana and Metro Sefalana.
S everal new dual listings have been made in the first four months
of 1997, n a m e ly Regent, De Beers, M c C a rt hy and Av i s . In Marc h
Ellerine Holdings became the first South African company in
1998 to list on the Botswana exchange,i n c reasing the number of
fo reign companies with dual listings to nine. The Exchange is
expecting a substantial growth in 1998 fo l l owing re c e n t ly
announced exchange control re l a x a t i o n s .
28