Botswana's Economic Outlook: A Bright Spot in Southern Africa

Let's begin though with the story of Botswana, as I said, a story that shows inflation under control all around us. We are seeing central banks battling with inflation. So Kaneja, thanks for coming through and chatting to us about Botswana, whose numbers are due tomorrow. Let me get first of all your expectations for the number that's dropping tomorrow. Yeah, look, thanks Godfrey. It's good to be here. Look, I will give the disclaimer that I'm not an economist, so I don't have exactly, or I don't have the models or the tools to give an exact number. But our expectation is that disinflation is taking hold and is going to maintain its course in Botswana. I think we were expecting a cut the last meeting, which didn't happen, but that's fine. It's quite important to note that governments have an array of tools in both monetary policy and fiscal policy to kind of expand and contract the economy. And I think in Botswana's case, the interest rate, which is the monetary policy rate, which is reasonably low, wasn't exactly what they used. What we saw was they had reasonable sized auctions, but the government wasn't spending. So it kind of constricted fiscal policy, which helped tighten. But we're starting to see those taps open, and we're starting to see a lot more spending, which maybe will start to see a little bit more activity in the economy. So you said that disinflation that we've seen is likely to continue. So why is the government then being a little bit, shall I call them, ham-fisted by restricting when perhaps the economy needs a little bit of room to breathe? Well, yeah, exactly that. So we have started to see them spend a little bit more, which is going to feed into the economy, hopefully, all the way through into kind of the pockets of your everyday mom-and-pops. Yeah. So I'm seeing the focus for August here at 1.2 per cent. I therefore want to ask you, you do say that there are various tools that the government and the central bank authorities use to try to tame inflation. But given the focus for that number, 1.2 per cent, we know that their policy, actually their target range for inflation is 3 to 6 per cent. How strong then is the case perhaps for a cut at the next meeting? Look, I don't think they need to cut. I think, quite importantly, while base effects are still in order, they're going to start unwinding at some point. And that's where we're probably going to see inflation bounce a little bit. But we still expect it to kind of remain within the range. So, I mean, as we see kind of developments in the global macro scene, I think the RAND is quite an important one because there's that kind of direct feed through into Botswana. That will probably give Botswana a little bit more room to maybe loosen a little bit. But it will be kind of remiss of authorities in Botswana to start cutting before we start to see a little bit more stability in EM in general. What's your forecast for when they might then likely to begin cutting? We're still expecting some cuts later this year. Economists at least, yes. Okay, so that's interesting because we know on the South African side, the expectation is that perhaps we might see some cuts beginning to come through in the first quarter of next year. Could that also be part of the reasoning perhaps behind the authorities not moving earlier than Big Brother South Africa, given the interconnectivity between the economies and of course the flow of monetary policy impacts across the two countries? Certainly, but it's also quite important to note that just given obviously South Africa is Botswana's largest trading partner and the poor performance of the RAND that I think we're going to delve deeper into later this session, you find that the feed through into inflation to Botswana from a currency perspective hasn't been as adverse as maybe some other countries in the region. So they still have quite a bit of cushion and that's maybe a possible reason why they could move a little bit before South Africa. Let's talk about that wild RAND. One of your competitors calls it the rattlesnake. I don't know what the view is at Standard Bank in terms of the wildness of that currency. EMLY demonstrated today by the movements that we saw. We came in in the morning pretty strong and I thought we were going to stay comfortably below 19 and at the moment I'm looking at that number, I am seeing, what is it, 18.94. What are you guys expecting looking for the rest of the year? Yeah, I mean I think in the market the RAND is known as the widow maker, reading to that as you will. But in essence, I think the price action we've seen in the RAND specifically now has been a result of dollar strength. If you look at the dollar index, it's breached north of 105, which has been a quite key resistance level. So effectively, for once maybe I can say it isn't idiosyncratic factors in South Africa. I don't think it's necessarily stage six load shedding, it's just the RAND is selling off because the dollar is a little bit too strong. I'm going to dig a little further into that widow maker another time. I hope I find the answer and we can share it together. Before you go though, give me a sense of the growth outlook for Botswana, given obviously we've just mentioned the troubles that bigger neighbours facing. But I see the numbers for Botswana look much, much, much healthier. 5.4% was the number in Q1 2023. Q2 expectations for the rest of the year? Yeah, look, I think the outlook is quite sanguine for Botswana. We're expecting, I guess, probably amongst the strongest numbers across the continent on a relative basis, of course, to come from Botswana. I think obviously they have diamonds, which are forever, as the saying goes, which are going to continue buoying the economy, going to continue strengthening their reserves, the balance of payments position and so on and so forth. So I think, I mean, as opposed to some of the other neighbours in southern Africa, Botswana is a fantastic place and hopefully that stems into a lot more investment into Botswana, hopefully some spillovers into the rest of the region.

CNBC Africa is joined by Kaneja Amani, Trader: Global Markets, Standard Bank for more. 

Standard Bank’s economic outlook for Botswana

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Standard Bank’s economic outlook for Botswana

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