Twenty years ago, Botswana was regarded as one of the poorest countries in the world but today it is considered the richest in non-oil producing countries in Africa.
More remarkable growth is happening and was proven beyond reasonable doubt by the Economic Review, which was launched this week at Maharaja Conference Centre by Managing Director of Econsult, Keith Jefferis.
The economic development report shows good conditions in the mining sector. World commodity markets are very tight, and copper and nickel are at very high levels.
“There is a very good long-term prospect for the mineral growth sector and diversification,” said Keith Jefferis, the Managing Director of Econsult Botswana.
Though there are good conditions in the mining sector, there is still possible temporary weakness ahead, said the report. The report showed that markets for diamonds are slowly weakening due to slower sales and dependency on the US market only. Jefferis added that metal prizes are also expected to fall from current peaks. Despite the fact that medium terms are still positive Jefferis highlighted that long-term metal prizes expectations are all revised upwards.
The report said there are big investments in the mining sector, and outlined the projects in the pipeline, which included Diamondex Mine in the Tuli Block, which is expected to be opened early next year.
“There is also the African Diamonds AK6 in Orapa. Though mining expects are still prospecting, it has already shown that it is going to be a very big mine,” said Jefferis.
There is also African copper in Dukwe, which is expected to be fully operational by 2008. In addition, there is also the LionOre/Tati Nickel Activox refinery, which is going to be a massive investment ever.
The report stated that the other huge P5 billion investment is going to be the Mmamabula Coal/Power Mine, which will be exporting power to South Africa. The report said DTC is bringing serious economic boost through the diamond aggregation/cutting companies that are coming up.
In Ngamiland, there is the Mount Burgess, which will be dealing with zinc and silver. “Gas has been discovered around Mahalapye and Palapye, though we don’t know how big the deposits are,” said Jefferis.
However, Jefferis said weak conditions in non-mining sector had been discovered.
“There has been recession in manufacturing and trade due to the impact of declining real incomes in the private sector, and slow public growth,” he said. “The other factors contributing to this are the credit squeeze, devaluation and HIV/AIDS.”
According to Jefferis, all these factors have been contributing negatively to the economy.
BoB Business Expectations survey showed that there is less pessimism in 2006H1 compared to 2005H2. “This indicated that in 2005 there was a decline in business. Massive contrast is seen between domestics and exporting sectors. Overall confidence, which is below 50 percent, is slowly increasing,” says Jefferis.
In the Exchange rate, the report signifies that BWP crawl reduced slightly as forecast of inflation gap closes and the real exchange rate stabilized. According to the report there is no transparency on rate of crawl or basis for calculation.
On inflation, the report said that it rose sharply to 14.2 percent in April 2006, which was above expectations.
“The main cause here was the 2005 devaluation which was compounded by world fuel prizes, regional food prizes, telecoms tariffs, rebalancing and school fees,” explained Jefferis.
He said since April, there had been a steady decrease which went down to 9.2 percent in October.
“The decline is expected to continue to 7 ÔÇô 8 percent by Q1 2007,” he said.
The main risks discovered in inflation are the impact of telecoms tariffs, rebalancing and rising world and SA inflation. Though there is risk involves, Jefferis said there is a new CPI index, which is going to help more accurate measurement of inflation, and that fuel prizes are now supportive of lower inflation.
Jefferis stressed that Botswana’s economic prospects in 2006 ÔÇô 07 have been weighed down by slow disbursement of government spending.
Although data is poor, the report stated that 2007 is likely to show under-spend and budget surplus, slow structural reform and privatizations, and skill shortage. “BEAC reforms will be focusing on openness, competitiveness, policy and mindset change supported by major projects,” said Jefferis.
IMF forecasts show 4.2 percent in 2006 and 4.3 percent for 2007.