High food inflation & El Niño conditions affect Southern Africa

Southern Africa's economic landscape is a complex tapestry of mineral dependence, inflation challenges, and divergent monetary policies. In a recent interview on CNBC Africa, Jamie Stolker, Manager for Africa Region Structured Products at Standard Bank Group, provided insights into the economic outlook for Botswana and Zambia. Botswana is expected to see growth at 4.2% this year, driven largely by the diamond industry, which accounts for 80-90% of the country's exports. However, the sector faced challenges in 2023 due to decreased consumer demand and global economic shifts post-COVID-19. Despite this, a more positive long-term outlook is projected as major mines near depletion. In contrast, Zambia's economy relies heavily on copper production, with 2023 witnessing a decline in output leading to impacts on foreign exchange earnings and currency depreciation. The country is also grappling with debt restructuring following a default during the COVID-19 pandemic. However, the government has set ambitious targets for copper production by 2031, with private sector investments boosting prospects. In terms of inflation, Botswana and Zambia have varying levels, with Botswana's projected at 3.9% and Zambia at a high of 13.2%. The central banks have implemented different strategies to manage inflation, with Zambia raising rates while Botswana maintained a steady course. The recent revision of Southern Africa Customs Union (SACU) payments by South Africa is set to impact Botswana and other member countries, with a downward adjustment likely to influence budgetary decisions. The region's economic trajectory remains intertwined with global trends and local dynamics, presenting challenges and opportunities for sustainable growth.