19 Sep 2024

Botswana’s economy is expected to grow by 1.1 per cent in 2024 due to weaker than expected diamond sector performance thus far.

Speaking during the announcement of Standard Charted Bank Botswana financial results  for the period ended June 30, 2024,  the bank’s Head of  Treasury, Ms Galeboi Sennanyana said local economy contracted by 5.3 per cent  in the first quarter of 2024, for the first time since quarter four of 2020, reflecting a sharper than expected contraction in mining and diamond trading.

She said the diamond sales remained sluggish in quarter two  of 2024  partly due to the weaker demand from China.

Botswana gets 30 per cent to 40 per cent of its revenue and 75 per cent of its foreign exchange earnings and a third of national output from diamonds.

However, sales of rough diamonds at Debswana Diamond Company fell by 49.2 per cent in the first half of 2024, as the downturn in the global diamond market continues.

While fiscal stimulus and monetary easing may support non-diamond growth, Ms Sennanyana said, the weak diamond revenue was also expected to weigh significantly on the government’s fiscal position.

She said  with elections approaching, significant expenditure cuts seem unlikely which would result in wider fiscal deficits.

Nonetheless,  Ms Sennanyana  said inflationary pressures had  also eased faster than expected, largely reflecting milder increases in administered prices. 

“Inflation is projected to average 3.4 per cent  and 4.2 per cent in 2024 and 2025 respectively, largely to reflect faster-than-expected disinflation,” she said.

Ms Sennanyana cautioned that high frequency data suggested sluggish domestic economic activity with the  Central  Bank  expecting a negative output gap and contained inflation. She therefore said further monetary policy easing was anticipated in the second half of 2024.

With regard to the global and regional economic environment, Ms Sennanyana indicated that a soft landing was expected for the global economy in the second half of 2024 as inflation slows and interest rates eases following a quick succession of economic shocks in recent years.

“A broadly flat global GDP growth of 3.1 per cent in 2024 and 3.2 per cent  in 2025 is anticipated, following the 3.2 per cent achieved in 2023. However, negative geopolitical incidents, including worsening US-China trade tensions and a possible widening of Middle East conflict pressuring oil prices, could put this benign soft-landing scenario at risk,” she cautioned.

Ms Sennanyana said a further escalation of trade tensions following the US election in November remained a key risk. his, she said would have direct implications for China’s economy, where external demand has partly offset the ongoing property-market correction and weak domestic sentiment this year.

Additionally, when reflecting on how the bank was navigating a contracted local economy characterised by weakened diamond sales and sluggish economic activity, the bank’s Chief Executive Officer, Mr Mpho Masupe said  the bank’s half year operating income closed at P548.2 million with cost to income ratio improving from 60 per cent to end the half year at 58.7 per cent.

That, he said signified the that bank’s returns were in line with the strategy of driving efficiency. 

“We are also maintaining a strong liquidity position, with all liquidity metrics kept at adequate levels and within management trigger limits,” he said.

Mr Masupe said it was testament that the market believed in how Standard Charted was executing on their  strategy as evidenced by the increase of share price by 57.9 per cent  from P4.13 per share in June 2023 to P6.52 in June 2024.

He said the corporate and investment banking business maintained a resilient performance driven by a diversified product suite and expanded client solutions. 

“For the second half of the year, we shall remain focused on delivering on the 2024 targets while creating exceptional long-term value,” Mr Masupe said.

He said the bank had a strong start to the year and was cognizant to the evolving micro-economic drivers thus remained well positioned to sustain business growth and deliver superior value to its clients, shareholders and partners. Ends