- Q3 GDP records 1,2%
- Mining picks 33.0%, however Copper/nickel industry records nil
- BCL closure to continue haunting Botswana
- Unemployment difficult to eradicate
- Eurozone warming up
Botswana’s economy still finds itself limping even after the 2008 economic recession, nine years later.
The country has just recorded a slight gross domestic product growth of 1.2 percent for the 2017 third quarter, which is against a slump of 0.9 percent realised consecutively in the first two quarters. The economy shrunk for two conservative quarters.
Even so, looking back the economy went into the deep in 2015 painting a gloomy picture as it recorded negatives; -0.3, -5.4 and -3.6 percent in its last three quarters. However, during the same quarters in 2016, it recorded an improved performance of 2.3 percent, 3.9 percent and 6.9 percent respectively.
The 1.2 percent under review is attributable to real value added of water & electricity, finance & business services, transport & communications and mining industries which increased by 15.7, 4.8, 4.5 and 4.4 percent respectively. All other industries recorded positive growths of more than 2.0 percent with the exception of trade, hotels and restaurants which decreased by 9.3 percent. Water and electricity value added at constant 2006 prices for the third quarter of 2017 was P98.3 million compared to P84.9 million registered in the same quarter of 2016, recording an increase of 15.7 percent.
The increase in the real mining value add of 4.4 percent was mainly driven by diamond and other mining value add which increased significantly by 32.9 and 37.4 percent respectively. Diamonds production in carats increased by 33.0 percent in the third quarter of 2017 compared to an increase of 9.3 percent recorded in the same quarter of 2016. The diamonds industry became lively in Q3 of 2017 after recording a depressive record of -28.9 percent in Q1 and a further -13.8 percent in Q2. The 33.0 record gives hope to the mining giants Debswana and other producers to increase their production.
In the quarter under review, Orapa diamond mine production increased by 60 percent mainly driven by the upgrading of Plant 1, which was previously on partial care and maintenance in response to trading conditions in late 2015. Jwaneng diamond production increased by 23.0 percent as a result of planned increases in feed to plant. Damtshaa mine which re-opened this year (2018) stopped production and went under care and maintenance programme in late 2015 for up to three years as part of the response to the trading conditions at the time, in which the diamond market was on a low. Since the second quarter of 2015, the company was experiencing a significant reduction in the sale of the diamonds due to weak demand as a result of global macro-economic slowdown and the strengthening of the US dollar which then put liquidity pressures on cutting and polishing centres.
On the other hand, statistics of the quarter under review depict that Copper/nickel production was zero due to the provisional liquidation of the BCL mine in October 2016. It seems the country is going to be haunted by the BCL aftermath for the longest time.
Motswedi Securities analyst, Garry Juma rules out recession as yet but he is however of the view that the current growth is not bad, although it is nowhere near ideal.
“Q4 of 2017 will be much the same trend, we expected muted growth. Things are still tough, economic landscape is still challenging. There still some job losses, disposable income is still under pressure, high impairments, increase in fuels amongst other components,” shares Juma. What is needed, he said, is the setting up of more local manufacturing firms, encourage growth on labour intensive activities, encourage growth in Agricultural sector and finance sectors.
On the Agricultural sector the government has over the years come up with numerous initiatives for both subsistence and commercial farmers, such as ISPAAD, LIMID, LAMPAAD. Financing agencies such as CEDA, NDB and commercial banks have also been financing the sector to push Agricultural production.
Though ISPAAD for instance has been receiving so much capital injection but with less output realised, Juma explains that Agric is a long-term investment, therefore the output of ISPAAD investments will be realised in the long term. There is still hope in the sector, he adds.
As for unemployment which is currently a hot potato, the analyst is of the view that it will continue to haunt Botswana in a long time. It will be difficult to eradicate unemployment; companies continue to shed off staff, graduates go unabsorbed, no meaningful jobs are created even though the government has come up with Ipelegeng and internship programmes.
Looking into the 2018/19 budget strategy paper, the real GDP has been projected to grow by 4.7 percent, 5.3 percent and 5.0 percent in 2017, 2018 and 2019 respectively. The positive outlook is attributable to projected improvements in the sectors of: Mining, Trade, Hotels and Restaurants; Transport and Communications, and Water and Electricity.
The mining sector is expected to recover in line with the positive global economic prospects, while other sectors will continue to benefit from the implementation of Economic Stimulus Programme adopted by government to boost growth, and create employment opportunities.
Looking into the year 2018, expectations are that it will be a tough year. For Botswana, its economic fortunes will be tied up to the South African economy, which is its biggest importer. With Cyril Ramaphosa recently elected the ruling party president, nothing much is expected in policy interventions, points out Juma.
Other trading partners like Namibia have recently gone through economic recession. This is after the country logged a contraction for the second consecutive quarter in 2017, mainly attributed to the sluggish performance of the construction industry, according to National Statistics Agency.
Namibia’s export key markets were South Africa, Switzerland, Botswana, Spain and Belgium, which made up 61.3 percent of the total export revenue.
Namibia mainly imported its goods from South Africa, Botswana, Bulgaria, Zambia and China, making up 79.8 percent of the total import.
The top export products were diamonds, copper ores, fish, copper cathodes and live animals, while the top import products were mineral fuels and oils, vehicles, boilers, diamonds and electrical machinery and equipment.
On the global note, EU economies, biggest consumers of Botswana beef are also showing a positive outlook. Its Q3 GDP has grown by 0.6 percent. The Eurozone is experiencing a cynical recovery after years of rolling in financial crisis.