While a few Southern Africa economies closed 2013 on an overall positive note, the African Development Bank (AfDB) places Botswana among the many that failed to meet growth levels achieved in 2012.
“In Botswana, weak global demand for diamonds and a severe drought significantly constrained fourth-quarter growth, placing overall performance in 2013 below 2012 growth,” the bank says in its Southern Africa Quarterly Review and Analysis 4TH QUARTER 2013.
On the whole, the bank says that early indications show that the region’s average growth rate for 2013 was 4.3 percent, only slightly lower than the 4.4 percent predicted in the third quarter. It notes that the overall external balance of the region continues to be negatively affected by the weak performance of the global economy, which affects export earnings in oil and mineral-rich countries.
On the upside, while most countries are failing to meet the Southern African Development Community’s target on international reserves, Angola and Botswana surpassed the set floor of six months of import cover, while South Africa’s position is boosted by large portfolio inflows, which fund part of the current account deficit.
In the quarter under review, Botswana observed significant developments in the diamond-mining sector, with the relocation from London to Gaborone of part of De Beer’s value chain operations, and the new Okavango Diamond Company commencing full-scale operations.
The review says that the better performance of the mining sector was mainly due to a 23.8 percent increase in diamond production compared to a decrease of 36.7 percent realized in the same quarter of 2012.
“As a result, in the third quarter of 2013, the mining sector’s contribution to GDP stood at 22.7 percent. Data for the fourth quarter are not yet available but it is estimated that the sound performance continued during the quarter, thereby leading to an increase in real GDP growth rate in 2013 to 5.0 percent from 4.2 percent in 2012,” says the bank, adding that Botswana’s economic performance rebounded strongly in the third quarter of 2013, with the real GDP growth rate estimated to have increased substantially to 7.1 percent from 2.9 percent in the corresponding quarter in 2012.
“This outcome mainly reflected a substantial growth of 68.2 percent in the water and electricity sector in contrast to a decline of 31.4 percent in the same period in 2012, as well as a sound performance by the mining sector, which recorded a growth of 21.2 percent,” the review says.
The annual rate of inflation continued with the declining trend that began in March 2013 and fell to 4.1 percent in December 2013. For the seventh consecutive month, inflation remained within the Bank of Botswana’s objective target range of 3-6 percent. AfDB’s analysis is that this lower rate of inflation mainly reflects declines in food and transport prices.