## 1bwaea2019002

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---

### Summary of mission outcomes and priority recommendations
- A technical assistance (TA) mission was conducted by AFRITAC South (AFS) during February 4–15, 2019 in response to a request from Statistics Botswana (SB) to assist with updating the consumer price index (CPI) and to review progress with the development of the producer price index (PPI).
- An earlier mission to assist with developing PPIs was held in April–May 2018.
- Updated CPI and a broad range of representative price indexes are essential to understand inflationary pressure and to better-inform economic policy making. National accounts require PPIs to develop more reliable volume estimates of economic growth.
- SB are finalizing new CPI weights to be introduced by end February 2019. The mission reviewed supplementary data and adjustments made to the 2015/2016 Multi-Topic Household Survey (MTHS) expenditure data and recommended improvements, including removal of double-counted expenditure and recalculating the weights.
- SB have compiled a draft PPI for mining and quarrying and plan to disseminate these data in September 2019.
- Progress on PPI coverage has been slower than anticipated due to: 2017 census of economic activity data still not available; resources diverted to CPI update; and issues with price data collection.
- The price statistics unit in SB consists of three full time staff. Staff capability is evident but resources are limited; SB management should review staff and budgetary resources needed for PPI development and ongoing CPI improvement.

- Priority recommendation timeline (summary):
  - End February 2019 — Review adjustments applied to Multi-Topic Household Survey (MTHS) expenditure, in discussion with data suppliers and recalculate weights as necessary. (Responsible: SB)
  - End February 2019 — Finalize CPI weights based on 2015/2016 MTHS expenditure, validate with technical working group and publish updated CPI. (Responsible: SB)
  - March 2019 — Disseminate technical summary of the updating process for users. (Responsible: SB)
  - September 2019 — Improve the use of unit value price calculation in the draft PPI for mining. (Responsible: SB)
- Note: At the time of finalising this report SB were in the final stages of approving the updated CPI for dissemination. The rebased CPI was released on March 5, 2019.

### Consumer Price Index (CPI) — key findings and recommended actions
- Rebasing CPI — key findings:
  - CPI weights were based on expenditure data from the Botswana core welfare indicator survey during 2009/2010; these data are outdated and require updating.
  - 2015/2016 MTHS expenditure data are available and represent the most suitable and detailed source for updating CPI weights; expenditure period is 2015/2016 while the price reference period for the rebased CPI will be 2018.
  - MTHS expenditure has been augmented by other data sources to account for under reporting; additional, sometimes judgmental, adjustments by SB aim to ensure the augmented data represent only household expenditure (excluding businesses and government).
  - Initial 2015/2016-based CPI weights showed unexpected changes (e.g., apparent increase in weight for the food group in the ‘cities’ strata when other strata fell). Investigation found issues of double counting related to use of International Merchandise Trade Statistics to augment imported food expenditure; these issues were corrected and weights recalculated.
  - There is a need for more regular communication among the price statistics unit, MTHS colleagues, and national accounts; price statistics staff should be involved in planning and processing the next MTHS.
  - It has been six years since CPI weights were updated; recommendation is to update at least every five years and to validate large weight changes with the CPI RTWG.
  - The CPI basket and outlet sample have been updated; new items added and non-representative items removed.
  - SB would benefit from an instruction manual documenting the updating process, adjustments, and rationale to ensure consistency and avoid double-counting in future updates.

- Rebasing CPI — recommended actions:
  - SB should immediately review the data used to augment MTHS and the subsequent adjustments made to the weights.
  - CPI weights should be recalculated following the validation of adjustments.
  - A near-final iteration of CPI weights should be validated with the CPI RTWG.
  - A technical summary document of the rebasing should be prepared and disseminated, providing details on the source data, methodology used in rebasing, any notable changes in weights and what new items have been introduced to the basket.
  - The final set of weights should be used in the compilation of the January 2019 CPI and disseminated by end February 2019.
  - The price statistics unit should work closer with MTHS and national accounts for the next update of CPI.
  - SB should consider the production of an accompanying set of CPI update instructions.

- Rebasing CPI — CPI expenditure-based weights (structure notes):
  - Source: Statistics Botswana.
  - Total weights: 100.0 for all strata and periods shown.
  - (The report presents a comparison of 2009/10 weights and 2015/16 first draft weights across strata: Cities, Towns, Urban Villages, Rural, and National for COICOP divisions. Exact cell values were presented in the source table.)

- Dissemination of CPI — key findings and recommended actions:
  - SB disseminates a monthly CPI via the SB website; the CPI publication includes commentary explaining notable movements by COICOP division and displays component indexes by division, by core inflation, and by region (towns & cities, urban villages and rural villages).
  - No technical details regarding methodology or sources are currently included in CPI dissemination.
  - A technical summary describing CPI compilation methods was produced by SB in 1996 but never disseminated; a hard copy exists in the SB library and contains comprehensive methodology, data sources, and quality assurance information.
  - The mission demonstrated a system for calculating the contribution of each of the twelve COICOP divisions to the headline rate of inflation each month; SB will review and include this analysis in monthly CPI dissemination.
  - Recommended actions:
    - SB should include analysis of contributions to headline inflation in the monthly dissemination of the CPI.
    - The 1996 CPI technical guide should be updated to reflect the current methodology, data sources, and compilation process and disseminated.

- Owner Occupied Housing (OOH) — key findings and recommended actions:
  - The current CPI excludes owner occupied housing (OOH); inclusion is important and SB intend to use the rental equivalence approach.
  - The rental equivalence approach requires a robust private rental survey representative of owner-occupied properties and weighted to reflect the housing stock of owner occupiers in the weight reference period.
  - SB conducts a quarterly rental survey in Gaborone and Francistown collecting average rental prices for six representative housing types; the survey captures monthly price data and excludes utilities.
  - The rental survey may not broadly represent the total housing stock or owner-occupied properties; private rented and owner-occupied properties may differ.
  - National accounts produce imputed rental using benchmark housing data from the 2011 Census and pricing information by property type extrapolated forward annually; these data could be used to compile an initial set of weights for OOH.
  - Including OOH can have a large impact on headline inflation; accuracy and representativeness of OOH measurement are essential.
  - Recommended actions:
    - Investigate a suitable source of housing stock data to better understand the composition of OOH in Botswana.
    - Engage with national accounts and Census colleagues to discuss data requirements for OOH; ensure the next Census collects data on the stock of owner occupied and privately rented property.
    - Improve the collection of rent data to ensure a reliable and representative measure of price change.
    - In the medium-term, expand and improve coverage of the rent survey to more broadly represent the total housing stock.

### Producer Price Index (PPI) — findings, recommendations, and timetable
- Purpose and rationale:
  - The compilation and dissemination of a PPI is critical to support improvement of national accounts volume estimates and to augment monthly CPI data to provide a fuller assessment of inflationary pressure across the various sectors of the economy.

- Progress and current status:
  - Progress with the development of PPI has been slower than anticipated, particularly for manufacturing where final data from the 2017 census of economic activity are still being finalized.
  - Good progress has been made with the initial compilation of a PPI for mining and quarrying, which is almost ready for dissemination.
  - SB have finalized the basket and weights (2017 weight reference period) for a mining and quarrying PPI.
  - The mining and quarrying industry in Botswana is dominated by diamond mining, which represents over 90 percent of all mining activity according to the 2017 weights.
  - According to the 2016 national accounts, mining contributed 22 percent to total gross domestic product (GDP).
  - There are very little local sales for mined products in Botswana, with approximately 99 percent of sales to export markets.

- Short-term recommendation: disseminate mining and quarrying PPI:
  - SB should focus in the short-term on dissemination of a PPI for mining and quarrying to provide a sound basis for development of PPIs for other sectors and to build staff capacity.
  - SB would like to disseminate a PPI for mining and quarrying by end September 2019.
  - Preferred price measurement for the mining PPI is the unit value approach, with a recommendation to review this approach before dissemination of initial PPI estimates.
  - Unit value approach definition: total value of sales divided by total units of production (for mining this could be total tonnage, for example).
  - Unit values require product homogeneity; analysis identified a number of products displaying large movements in price driven by insufficient homogeneity.
  - Actions for SB regarding unit values:
    - Engage with mining establishments to assess if data can be grouped into more homogeneous groups.
    - If grouping is not possible, consider alternative measures of price.
    - If insufficient alternatives exist or establishments cannot provide more homogeneous products, consider removing volatile products from the initial dissemination of a mining PPI.
  - SB should initiate outreach activities with key data users (such as national accounts and the central bank) before dissemination to explain PPI concepts and methods.
  - SB have produced a short technical note to accompany dissemination; this technical document should include full details regarding methodology and data sources and should be expanded as more indexes are developed.

- Coverage: medium-term expansion:
  - In the medium-term, SB should expand PPI coverage to include agriculture, utilities and manufacturing; together with mining, these would represent approximately 30 percent of total GDP, based on 2016 Botswana national accounts data.
  - Weights have been compiled for agriculture and utilities (in addition to mining and quarrying). The weights reference period is 2017.
  - The revenue used to calculate the weights is only available at a total output level; initial PPI will be compiled on a total output basis.
  - Medium-term objective: work with respondents to collect data needed to develop separate weights for export versus domestic market.

- Sector-specific issues and recommendations:
  - Agriculture:
    - Development held up due to issues with collection of price data, especially horticulture where farmers have not been responding.
    - Prices for some crops provided by Botswana Agricultural Marketing Board are set for one year in advance and will only be updated once per year.
    - Livestock prices provided via Botswana Meat Commission by price per weight and type of livestock.
    - Recommendation: SB should visit farmers to negotiate ongoing supply of price data. In the medium-term release a PPI for agriculture that initially covers crops and livestock; in the longer-term expand coverage as horticulture data become available.
  - Poultry and eggs:
    - Price data collected from all Botswana poultry farms; revenue and quantities are collected for both broilers and eggs to derive unit values.
    - Unit values acceptable for broilers (price per kilogram), less reliable for eggs because quantity unit is per dozen and does not distinguish egg size.
    - Recommendation: SB meet with poultry farms to consider using average price per egg size if available and request estimated proportion of total revenue by size (or at least a ranking of egg size according to sales) to calculate weights accordingly.
  - Utilities:
    - Data on total value of sales and consumption collected from Botswana electricity and water companies; there is only one provider for each utility representing full coverage.
    - Electricity data are broken down by customer type; water data are not.
    - Recommendation: SB engage with the water establishment to identify if estimated proportions of sales by customer type can be provided for the 2017 weights compilation; investigate whether pricing strategy is uniform across customer types (if uniform, splitting revenue may be unnecessary).
    - Unit value approach is preferred for utilities, but sales data do not match consumption due to unpaid billed amounts. Authorities should collect total kilowatt paid for each period rather than total consumed.
    - Tariffs are regulated and set for 12 months; price per tariff (price per kilowatt) should be available and could be used as the price component in the short-term while collecting data for reliable unit values in the medium-term.
    - If sufficient progress is made, consider disseminating utilities PPI alongside mining PPI.
  - Manufacturing:
    - Development will continue after mining, utilities and agriculture PPIs are developed.
    - 2017 census of economic activity data will be used for weights and sampling.
    - SB should ensure manufacturing basket covers sufficient sales and products and consult national accounts on important areas to include.
    - Manufacturing PPI development likely to commence later in 2019.
    - Initial recruitment of establishments must capture sufficient price-determining characteristics and provide prices at basic prices; guidance and specimen price quotations were shared with SB.

- Recommended Actions (concise):
  - SB should review the use of unit prices across all PPIs for which it is currently used to ensure the products included are sufficiently homogeneous. If not, SB should consider what alternative measure of price change are available.
  - SB should plan to disseminate an initial PPI for mining and quarrying by September 2019.
  - Engagement with key users of PPI (such as national accounts and the central bank) should take place before any dissemination.
  - In the short-to-medium term, SB should resolve the issues with indexes for utilities and agriculture. If sufficient progress is made with the utilities PPI, this may be ready for dissemination alongside the PPI for mining.
  - In the medium-term, SB should commence the initial collection of price data for a manufacturing PPI.
  - SB should carefully consider the resources required to develop PPI.

- Staff resources and capacity:
  - The SB prices unit includes three permanent staff responsible for the compilation, dissemination and update of CPI alongside development of a PPI.
  - SB has committed to developing and disseminating a PPI initially covering mining and quarrying, with plans to expand coverage to manufacturing, utilities and agriculture. SB would also like to expand coverage of CPI to include OOH.
  - Ongoing development of PPI and CPI will put pressure on current staff; SB may wish to review resources required to deliver the work programme.

### Key milestones and target dates from the detailed workplan for PPI
- Finalize weighting scheme for agriculture, mining and utilities. — July 31, 2019
- Calculate base period prices — July 31, 2019
- Review the use of unit value pricing for PPI — July 31, 2019
- Collect price data for the period January – June 2019. — August 31, 2019
- Disseminate indexes for mining and if possible, also utilities. — September 30, 2019
- Disseminate indexes for Agriculture — October 31, 2019
- Develop weighting scheme for manufacturing. — October 31, 2019
- Develop sample frame of establishments using data from 2017 economic census. — October 31, 2019
- Draft questionnaires to be used for initiation/recruitment of establishments and monthly pricing. — November 30, 2019
- Develop and initiate outreach efforts to business groups, trade associations and other stakeholder users. — November 30, 2019
- Initiate/recruit establishments for the manufacturing PPI. — December 1, 2019 – June 30, 2020
- Develop and finalize weights at the product and transaction level for manufacturing PPI. — July 31, 2020
- Review all products and transactions selected for PPI pricing. — July 31, 2020
- Finalize base prices from establishments for each item/transaction selected. — August 31, 2020
- Begin regular price collection for Manufacturing PPI — November 15, 2020
- Design publication brochure and tables for publication. — November 15, 2020
- Release and publish indices for the period July - September 2019. — November 30, 2020
- Document complete PPI conceptual basis, data sources and compilation methodology. — December 31, 2020
- Classify products according to Central Product Classification (CPA). — January 31, 2021

*Source: Statistics Botswana / AFRITAC South mission report (February 4–15, 2019).*

### 1. Priority Recommendations _____________________________________________________________________ 5

### 1. Priority Recommendations

### Summary of mission outcomes and priority recommendations
- A technical assistance (TA) mission was conducted by AFRITAC South (AFS) during February 4–15, 2019 in response to a request from Statistics Botswana (SB) to assist with updating the consumer price index (CPI) and to review progress with the development of the producer price index (PPI).
- An earlier mission to assist with developing PPIs was held in April–May 2018.
- Updated CPI and a broad range of representative price indexes are essential to understand inflationary pressure and to better-inform economic policy making. National accounts require PPIs to develop more reliable volume estimates of economic growth.
- SB are finalizing new CPI weights to be introduced by end February 2019. The mission reviewed supplementary data and adjustments made to the 2015/2016 Multi-Topic Household Survey (MTHS) expenditure data and recommended improvements, including removal of double-counted expenditure and recalculating the weights.
- SB have compiled a draft PPI for mining and quarrying and plan to disseminate these data in September 2019.
- Progress on PPI coverage has been slower than anticipated due to: 2017 census of economic activity data still not available; resources diverted to CPI update; and issues with price data collection.
- The price statistics unit in SB consists of three full time staff. Staff capability is evident but resources are limited; SB management should review staff and budgetary resources needed for PPI development and ongoing CPI improvement.

### Table of priority recommendations (summary)
- End February 2019 — Review adjustments applied to Multi-Topic Household Survey (MTHS) expenditure, in discussion with data suppliers and recalculate weights as necessary. (Responsible: SB)
- End February 2019 — Finalize CPI weights based on 2015/2016 MTHS expenditure, validate with technical working group and publish updated CPI. (Responsible: SB)
- March 2019 — Disseminate technical summary of the updating process for users. (Responsible: SB)
- September 2019 — Improve the use of unit value price calculation in the draft PPI for mining. (Responsible: SB)
- Note: At the time of finalising this report SB were in the final stages of approving the updated CPI for dissemination. The rebased CPI was released on March 5, 2019.

### Consumer Price Index (CPI)

#### A. Rebasing CPI — key findings
- CPI weights were based on expenditure data from the Botswana core welfare indicator survey during 2009/2010; these data are outdated and require updating.
- 2015/2016 MTHS expenditure data are available and represent the most suitable and detailed source for updating CPI weights; expenditure period is 2015/2016 while the price reference period for the rebased CPI will be 2018.
- MTHS expenditure has been augmented by other data sources to account for under reporting; additional, sometimes judgmental, adjustments by SB aim to ensure the augmented data represent only household expenditure (excluding businesses and government).
- Initial 2015/2016-based CPI weights showed unexpected changes (e.g., apparent increase in weight for the food group in the ‘cities’ strata when other strata fell). Investigation found issues of double counting related to use of International Merchandise Trade Statistics to augment imported food expenditure; these issues were corrected and weights recalculated.
- There is a need for more regular communication among the price statistics unit, MTHS colleagues, and national accounts; price statistics staff should be involved in planning and processing the next MTHS.
- It has been six years since CPI weights were updated; recommendation is to update at least every five years and to validate large weight changes with the CPI RTWG.
- The CPI basket and outlet sample have been updated; new items added and non-representative items removed.
- SB would benefit from an instruction manual documenting the updating process, adjustments, and rationale to ensure consistency and avoid double-counting in future updates.

#### A. Rebasing CPI — recommended actions
- SB should immediately review the data used to augment MTHS and the subsequent adjustments made to the weights.
- CPI weights should be recalculated following the validation of adjustments.
- A near-final iteration of CPI weights should be validated with the CPI RTWG.
- A technical summary document of the rebasing should be prepared and disseminated, providing details on the source data, methodology used in rebasing, any notable changes in weights and what new items have been introduced to the basket.
- The final set of weights should be used in the compilation of the January 2019 CPI and disseminated by end February 2019.
- The price statistics unit should work closer with MTHS and national accounts for the next update of CPI.
- SB should consider the production of an accompanying set of CPI update instructions.

#### A. Rebasing CPI — CPI expenditure-based weights (selected table structure preserved)
- Source: Statistics Botswana.
- Total weights: 100.0 for all strata and periods shown.
- (The report presents a comparison of 2009/10 weights and 2015/16 first draft weights across strata: Cities, Towns, Urban Villages, Rural, and National for COICOP divisions such as Food, Alcohol and Tobacco, Clothing and Footwear, Housing Costs, Household Goods and Services, Medical/Health care, Transport, Communication, Recreation and Culture, Education, Restaurants and Hotels, Miscellaneous. Exact cell values were presented in the source table.)

#### B. Dissemination of CPI — key findings
- SB disseminates a monthly CPI via the SB website; the CPI publication includes commentary explaining notable movements by COICOP division and displays component indexes by division, by core inflation, and by region (towns & cities, urban villages and rural villages).
- No technical details regarding methodology or sources are currently included in CPI dissemination.
- A technical summary describing CPI compilation methods was produced by SB in 1996 but never disseminated; a hard copy exists in the SB library and contains comprehensive methodology, data sources, and quality assurance information.
- The mission demonstrated a system for calculating the contribution of each of the twelve COICOP divisions to the headline rate of inflation each month; SB will review and include this analysis in monthly CPI dissemination.

#### B. Dissemination of CPI — recommended actions
- SB should include analysis of contributions to headline inflation in the monthly dissemination of the CPI.
- The 1996 CPI technical guide should be updated to reflect the current methodology, data sources, and compilation process and disseminated.

#### C. Owner Occupied Housing (OOH) — key findings
- The current CPI excludes owner occupied housing (OOH); inclusion is important and SB intend to use the rental equivalence approach.
- The rental equivalence approach requires a robust private rental survey representative of owner-occupied properties and weighted to reflect the housing stock of owner occupiers in the weight reference period.
- SB conducts a quarterly rental survey in Gaborone and Francistown collecting average rental prices for six representative housing types; the survey captures monthly price data and excludes utilities.
- The rental survey may not broadly represent the total housing stock or owner-occupied properties; private rented and owner-occupied properties may differ.
- National accounts produce imputed rental using benchmark housing data from the 2011 Census and pricing information by property type extrapolated forward annually; these data could be used to compile an initial set of weights for OOH.
- Including OOH can have a large impact on headline inflation; accuracy and representativeness of OOH measurement are essential.

#### C. Owner Occupied Housing — recommended actions
- Investigate a suitable source of housing stock data to better understand the composition of OOH in Botswana.
- Engage with national accounts and Census colleagues to discuss data requirements for OOH; ensure the next Census collects data on the stock of owner occupied and privately rented property.
- Improve the collection of rent data to ensure a reliable and representative measure of price change.
- In the medium-term, expand and improve coverage of the rent survey to more broadly represent the total housing stock.

### Producer Price Index (PPI)

#### D. Mining and Quarrying — key findings
- SB does not currently disseminate a PPI.
- A TA mission in April–May 2018 reviewed progress on developing a PPI and a detailed workplan was agreed with the authorities for ongoing development.
- SB have compiled a draft PPI for mining and quarrying and plan to disseminate these data in September 2019.
- Further work to expand PPI coverage has been slower than anticipated because: data from the 2017 census of economic activity are not available; resources were diverted to support updating the CPI; and there are issues with the collection of price data.
- Improvements were identified in the compilation of the mining PPI. A detailed work plan for expanding PPIs was agreed and SB plan to initiate price collection for a manufacturing PPI towards the end of 2019 and may request TA to support this work.

*Source: Statistics Botswana / AFRITAC South mission report (February 4–15, 2019).*

### 25. The dissemination of a PPI is essential to broaden the range of inflation indicators

### 25. The dissemination of a PPI is essential to broaden the range of inflation indicators

### Purpose and rationale
- The compilation and dissemination of a PPI is critical to support improvement of national accounts volume estimates and to augment monthly CPI data to provide a fuller assessment of inflationary pressure across the various sectors of the economy.

### Progress and current status
- Progress with the development of PPI has been slower than anticipated, particularly for manufacturing where final data from the 2017 census of economic activity are still being finalized.
- Good progress has been made with the initial compilation of a PPI for mining and quarrying, which is almost ready for dissemination.
- SB have finalized the basket and weights (2017 weight reference period) for a mining and quarrying PPI.
- The mining and quarrying industry in Botswana is dominated by diamond mining, which represents over 90 percent of all mining activity according to the 2017 weights.
- According to the 2016 national accounts, mining contributed 22 percent to total gross domestic product (GDP).
- There are very little local sales for mined products in Botswana, with approximately 99 percent of sales to export markets.

### Short-term recommendation: disseminate mining and quarrying PPI
- SB should focus in the short-term on dissemination of a PPI for mining and quarrying to provide a sound basis for development of PPIs for other sectors and to build staff capacity.
- SB would like to disseminate a PPI for mining and quarrying by end September 2019.
- Preferred price measurement for the mining PPI is the unit value approach, with a recommendation to review this approach before dissemination of initial PPI estimates.
- Unit value approach definition: total value of sales divided by total units of production (for mining this could be total tonnage, for example).
- Unit values require product homogeneity; analysis identified a number of products displaying large movements in price driven by insufficient homogeneity.
- Actions for SB regarding unit values:
  - Engage with mining establishments to assess if data can be grouped into more homogeneous groups.
  - If grouping is not possible, consider alternative measures of price.
  - If insufficient alternatives exist or establishments cannot provide more homogeneous products, consider removing volatile products from the initial dissemination of a mining PPI.
- SB should initiate outreach activities with key data users (such as national accounts and the central bank) before dissemination to explain PPI concepts and methods.
- SB have produced a short technical note to accompany dissemination; this technical document should include full details regarding methodology and data sources and should be expanded as more indexes are developed.

### Coverage: medium-term expansion
- In the medium-term, SB should expand PPI coverage to include agriculture, utilities and manufacturing; together with mining, these would represent approximately 30 percent of total GDP, based on 2016 Botswana national accounts data.
- Weights have been compiled for agriculture and utilities (in addition to mining and quarrying). The weights reference period is 2017.
- The revenue used to calculate the weights is only available at a total output level; initial PPI will be compiled on a total output basis.
- Medium-term objective: work with respondents to collect data needed to develop separate weights for export versus domestic market.

### Sector-specific issues and recommendations
- Agriculture:
  - Development held up due to issues with collection of price data, especially horticulture where farmers have not been responding.
  - Prices for some crops provided by Botswana Agricultural Marketing Board are set for one year in advance and will only be updated once per year.
  - Livestock prices provided via Botswana Meat Commission by price per weight and type of livestock.
  - Recommendation: SB should visit farmers to negotiate ongoing supply of price data. In the medium-term release a PPI for agriculture that initially covers crops and livestock; in the longer-term expand coverage as horticulture data become available.
- Poultry and eggs:
  - Price data collected from all Botswana poultry farms; revenue and quantities are collected for both broilers and eggs to derive unit values.
  - Unit values acceptable for broilers (price per kilogram), less reliable for eggs because quantity unit is per dozen and does not distinguish egg size.
  - Recommendation: SB meet with poultry farms to consider using average price per egg size if available and request estimated proportion of total revenue by size (or at least a ranking of egg size according to sales) to calculate weights accordingly.
- Utilities:
  - Data on total value of sales and consumption collected from Botswana electricity and water companies; there is only one provider for each utility representing full coverage.
  - Electricity data are broken down by customer type; water data are not.
  - Recommendation: SB engage with the water establishment to identify if estimated proportions of sales by customer type can be provided for the 2017 weights compilation; investigate whether pricing strategy is uniform across customer types (if uniform, splitting revenue may be unnecessary).
  - Unit value approach is preferred for utilities, but sales data do not match consumption due to unpaid billed amounts. Authorities should collect total kilowatt paid for each period rather than total consumed.
  - Tariffs are regulated and set for 12 months; price per tariff (price per kilowatt) should be available and could be used as the price component in the short-term while collecting data for reliable unit values in the medium-term.
  - If sufficient progress is made, consider disseminating utilities PPI alongside mining PPI.
- Manufacturing:
  - Development will continue after mining, utilities and agriculture PPIs are developed.
  - 2017 census of economic activity data will be used for weights and sampling.
  - SB should ensure manufacturing basket covers sufficient sales and products and consult national accounts on important areas to include.
  - Manufacturing PPI development likely to commence later in 2019.
  - Initial recruitment of establishments must capture sufficient price-determining characteristics and provide prices at basic prices; guidance and specimen price quotations were shared with SB.

### Recommended Actions (as listed)
- SB should review the use of unit prices across all PPIs for which it is currently used to ensure the products included are sufficiently homogeneous. If not, SB should consider what alternative measure of price change are available.
- SB should plan to disseminate an initial PPI for mining and quarrying by September 2019.
- Engagement with key users of PPI (such as national accounts and the central bank) should take place before any dissemination.
- In the short-to-medium term, SB should resolve the issues with indexes for utilities and agriculture. If sufficient progress is made with the utilities PPI, this may be ready for dissemination alongside the PPI for mining.
- In the medium-term, SB should commence the initial collection of price data for a manufacturing PPI.
- SB should carefully consider the resources required to develop PPI.

### Staff resources and capacity
- The SB prices unit includes three permanent staff responsible for the compilation, dissemination and update of CPI alongside development of a PPI.
- SB has committed to developing and disseminating a PPI initially covering mining and quarrying, with plans to expand coverage to manufacturing, utilities and agriculture. SB would also like to expand coverage of CPI to include OOH.
- Ongoing development of PPI and CPI will put pressure on current staff; SB may wish to review resources required to deliver the work programme.

### Key milestones and target dates from the detailed workplan for PPI
- Finalize weighting scheme for agriculture, mining and utilities. — July 31, 2019
- Calculate base period prices — July 31, 2019
- Review the use of unit value pricing for PPI — July 31, 2019
- Collect price data for the period January – June 2019. — August 31, 2019
- Disseminate indexes for mining and if possible, also utilities. — September 30, 2019
- Disseminate indexes for Agriculture — October 31, 2019
- Develop weighting scheme for manufacturing. — October 31, 2019
- Develop sample frame of establishments using data from 2017 economic census. — October 31, 2019
- Draft questionnaires to be used for initiation/recruitment of establishments and monthly pricing. — November 30, 2019
- Develop and initiate outreach efforts to business groups, trade associations and other stakeholder users. — November 30, 2019
- Initiate/recruit establishments for the manufacturing PPI. — December 1, 2019 – June 30, 2020
- Develop and finalize weights at the product and transaction level for manufacturing PPI. — July 31, 2020
- Review all products and transactions selected for PPI pricing. — July 31, 2020
- Finalize base prices from establishments for each item/transaction selected. — August 31, 2020
- Begin regular price collection for Manufacturing PPI — November 15, 2020
- Design publication brochure and tables for publication. — November 15, 2020
- Release and publish indices for the period July - September 2019. — November 30, 2020
- Document complete PPI conceptual basis, data sources and compilation methodology. — December 31, 2020
- Classify products according to Central Product Classification (CPA). — January 31, 2021

*Source: 1bwaea2019002 - 25. The dissemination of a PPI is essential to broaden the range of inflation indicators*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/1bwaea2019002.pdf_