Monday, May 27, 2024

Botswana consumers brace for tough year ahead ÔÇô report

Botswana consumers need to brace themselves for a tough year ahead, according to a report compiled by Business Monitor International (BMI).

The report states that while the outlook for consumers has slightly improved, they will continue to be squeezed as inflation remains high due to high international food and fuel prices and government administered price increases.

The report notes that passenger vehicles will continue to be the worst performing segment as consumers face price pressure from persistent inflation, fuel subsidies and rises in passenger vehicle prices.

“Commercial vehicles (CVs) are expected to outperform as mining and construction sectors burgeon as the economy diversifies away from a reliance on diamond exports,” states the report.

The researchers state that despite Botswana being one of the wealthiest non-oil producing countries in Africa, its power sector needs much work if it is to be financially viable over the long term.

Demand outstrips supply and this is to remain the case over BMI’s 10-year forecast period to 2023, although the deficit will have grown smaller.

The country’s reliance on coal for over 99 percent of its power means it has to rely on costly imports from neighbours, with its import needs to decrease to 2016, then increase over the remainder of the forecast period. Its slim project pipeline will do little to push the sector forwards.

BMI forecasts that between 2014 and 2023, Botswana’s overall power generation will increase by an annual average of 20.9 percent, to reach 5.3 terawatt hours (TWh).

However, this will not be spread evenly throughout the forecast period, with year-on-year (y-o-y) growth of 99.5 percent and 86.3 percent anticipated in 2014 and 2016 respectively.

“New capacity includes the long-delayed Morupule B power station and the thermal Mmashoro power station, both of which are scheduled to begin operations during our 10-year forecast period. However, the report states that Botswana’s frequent power outages threaten to disrupt productivity and investment potential. Botswana Power Corporation (BPC) has offered reassurances that these rolling blackouts have ended, but only time will tell if stability has been attained.”.

Between 2014 and 2023, NBMI forecasts that Botswana’s net power consumption will grow by an average of 4.5 percent per annum, from 3.6TWh to 5.4TWh.

“The mining sector is the most important consumer segment in Botswana in terms of electricity consumption, and lower taxes for non-diamond mining firms will offer potential investors added incentives to enter Botswana; however, the country is vulnerable to downward turns in diamond prices. Underlying the growing demand for energy in the country will be a steady increase in GDP, with BMI forecasting average annual growth of 4.7% between 2014 and 2023,” states the report.

The researchers note that the biggest source of value creation is likely to remain electricity and water investments.

“The country is working hard to reduce its reliance on South Africa for electricity supply and cater to growing domestic demand from its mining sector. There are a number of ongoing projects in the sector being developed, which are due to come online over the medium term. These include the long-delayed Morupule B coal-fired plant, which has had its implementation date pushed back several times,” says the report.

In the water sector, the researchers note that severe droughts have left water levels in existing dams extremely low, whilst ageing pipelines are preventing significant movement of water from areas with more supply. Consequently, water rationing occurs frequently.


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