The domestic economy is poised to grow strong this year despite a poisoned political landscape which has taken centre stage ahead of the highly-anticipated elections expected this October.
This is because unlike in previous years where mining was the only cog that drove the economy, that is becoming history as non-mining sectors such as retail, trade and energy and water are stepping up to pick the economy, which has recently been blowing hot and cold.
The latest economic data from Statistics Botswana shows that the country’s Gross Domestic Product (GDP) leapfrogged by 4,2 percent in the third quarter of 2018, reasonably higher than the 3,5 percent which was recorded in the same period in 2017. According to the statistics body, the increase was attributed to real value added of water & electricity, trade, hotels & restaurants and transport & communications which increased by 42.6, 6.9 and 5.8 percent respectively.
“All other industries recorded positive growths of more than 2.5 percent with the exception of mining which decreased by 2.7 percent,” said the Dr. Burton Mguni-led agency. According to experts, the GDP rise provides a perfect foundation for all things good to come in the medium to long term, especially given the expected social and economic policy changes that will come with the new administration.
In a response to Botswana Guardian questions this Wednesday, Portfolio Manager at Inkunzi Investments, Jonathan Paledi said there is no need to touch panic buttons since, diamonds, the main driver in the mining sector, which contributes nearly 30 percent to national GDP, appear to have come back strongly.
“Going forward we would expect growth to be driven by both the mining and non-mining sector. We are confident on the contribution of the mining sector to GDP growth given the increased production volumes in the diamond industry and rising prices for both rough and polished diamonds. The non-mining sector will continue to positively contribute to GDP growth with great resilience seen especially in the services sector,” said Paledi, who has worked for Botswana’s central bank in the past.
His view on the mining sector recovery is backed up by the fact that De Beers, a company which Botswana part-owns, closed 2018 on a high after netting $540 million in revenue in December, its biggest sight in three years. The confidence in the diamond subsector is even shown by De Beers’ plans to invest over P120 billion in expanding mines such as Jwaneng, Orapa and Venetia in South Africa. The expansion is predicted to boost the economy in the medium to long term.
When it comes to non-mining sectors, Bank of Botswana’s Governor, Moses Pelaelo noted that the services sector will also pull the economy through. “Furthermore, the projected accommodative monetary conditions in the domestic economy and increase in government expenditure are expected to support growth of economic activity in the non-mining sectors,” said Pelaelo at the end of the bank’s Monetary Policy Committee (MPC) meeting in December.
In his maiden state of the nation address President Dr Mokgweetsi Masisi added that among the non-mining activities where positive growth is expected are services, in particular the tourism and retail sub-sectors. “As much as the domestic economy will be boosted by most sectors, it is highly unlikely that when Statistical Botswana compiles all economic data for 2018 in a few months time, the economy will have grown by 5,3 percent predicted by Finance and Economic Development minister, Kenneth Matambo last February.
“We find it highly improbable that GDP for 2018 will grow at 5.3 percent. For that to happen, we would need to see a year-on-year GDP growth for Q4 of around 7 percent, which would be the highest for this year and significantly higher than the GDP growth of 5.2 percent realised in Q2. However GDP growth for 2018 will be better than that of 2017 which was 2.9 percent,” said Paledi.
Meanwhile, at the Botswana Stock Exchange, markets have opened on a high. According to a stock market report prepared by Stockbrokers Botswana, the Domestic Consumer Index (DCI), which tracks the performance of domestically listed firms, kicked off the New Year on the green after gaining 0.27 percent to close the week at 7874.41 points.
“Furnmart was the flavour of the week after the company exercised its share buyback at the offer price of 65thebe. 100,049,053 shares in Furnmart traded, representing 16.5 percent of total shares outstanding,” said Stockbrokers which is headed by Bokete Mokgosi. Other gainers during the first week of 2019 were Letshego, closing the week at 165 thebe, while Standard Chartered and G4S lost 3thebe and 4thebe to close at 380thebe and 360thebe respectively.