Saturday, September 19, 2020

BCL closure will not affect economic growth – Matambo

Finance Minister Kenneth Matambo told Parliament last week Wednesday that the economy would hardly feel the impact of the BCL shutdown going into 2017.  

Matambo said this when presenting the draft National Development Plan 11 (NDP 11) which contained in it the macroeconomic projections. 

“Without doubt, the liquidation of the BCL Group of companies will have economic and social implications, especially on employment. However, in terms of growth of the economy, exports and government revenues, the placement of BCL Group of companies under liquidation will have minimal direct impact; hence the projections of the macroeconomic variables such as GDP and government revenues contained in the draft Plan distributed to ourselves remain valid,” he declared. 

NDP 11, which represents the economic blueprint that guides the country to achieve its plans and goals, is expected to come into effect in 2017.   

The projections as contained in the draft cite an expected real GDP growth of 4.4 percent per annum. Of this growth, the mining sector is expected to grow at an annual average of 2.8 percent whereas the non-mining sector is expected to grow modestly by 4.6 percent annually to be driven mainly by the Water and Electricity sector (18.4 percent), Trade, Hotels and Restaurants sector (6.8 percent), Transport and Communications sector (6 percent) and Banking, Finance and Business (4.1). 

The third quarter (Q3) economic review compiled by Econsult in its analysis of the impact of the BCL liquidation concurs with Matambo’s forecast. “In the first half of 2016, copper/nickel mining accounted for 2.4 percent of Botswana’s total economic output (GDP). 

“The BCL closure will reduce GDP by this amount. If the mine remains closed, over a full year, it would reduce GDP growth from an estimated 3.5 to 4 percent and 1.0 to 1.5 percent in terms of the direct impact, and perhaps to zero once indirect impacts are taken into account. This would be a once-off impact and would not necessarily reduce future growth,” cites Econsult. 

In terms of contribution to exports, Econsult mentions that in the first half of 2016 copper/nickel made up 4.5 percent of total goods exports. The review presents an optimistic view that says that the loss of export earnings can be contained. 

“Although the loss of copper-nickel export earnings would harm the balance of payments, the impact can be accommodated given that in the first half of 2016 there was a total balance of trade surplus of P11.7 billion. Reduced copperÔÇônickel exports would also be offset to some extent by reduced imports, particularly of electricity,” says the review.    

Matambo and Econsult’s analysis speaks of the impact that can be expected into the future, however, the immediate effect, relating to the 2016/17 financial year is likely to have a significant pull on the economy’s growth. Based on the figures from the August 2016 Botswana Trade Report compiled by EY, the contribution of copper/nickel as a share of exports seemed to suggest that the economy would take a knock due to the loss of export revenue, which implies therefore that the economy’s growth would also be hammered, negating the optimistic expected growth rate of 4.3 percent Matambo had projected for the 2016/17 financial year.

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