Wednesday, October 21, 2020

Budget to show significant surplus due to capacity constraint, mining

Government is expected to be awash with a lot of cash than originally expected, thanks to the buoyant performance of the mining sector, SACU revenues and its lack of capacity to spend under the current financial year, analyst said Friday.
They concurred that the outlook for the 2007/08 fiscal year will be dominated by the mineral sector across the board. This would include copper, diamonds, gold and nickel, which enjoyed a strong showing over the year thanks to the global economic picture.
“I think the budget surplus will be bigger than originally expected, partly because of mining and SACU revenue,” Keith Jefferies said.
The mining sector showed a strong performance including the red metal (copper) hitting US $ 6000 per tonne before the end of the year. However, it sagged slightly on January 4, this year following concerns of a glut in the market.
But analysts across the world were united saying that the January 4 factor was a temporary measure and the outlook of the year is that the copper prices will remain at the historical levels.
The most bullish outlook was from Goldman Sachs which said that over 2007, they expected the prices to reach US $ 7500 per tonne while JP Morgan did bet on US $ 6390 per tonne for the first half of the year.
The two attributed their forecasts on China’s economic performance which is expected to average out in 2006.
Even the most skeptical analysts said the price of copper would be closer to the 2006 prices.
Other minerals, such as nickel, also enjoyed a good run in 2006 as its prices hit US $ 30,000 per tonne as the stainless steel hungry China imported loads and loads of it to build bridges across the country.
“As I have said before, mining will lead the economy and I am not shy to say that again,” an analyst at Capital Securities, Leutlwetse Tumelo, said, adding that the budget showed some improvement over last year.
“The budget will largely depend on mining and the exchange rates,” he added.
Botswana is the world’s largest diamond producer and, through its partnership with De Beers ÔÇô Debswana, produces 31 million carats per annum. And government has largely benefited from the crawling peg system that was introduced some two years ago in a bid to realign the Pula with international currencies rather than taking a once off deep devaluation exercise.
He also pointed out that one of the critical challenges which government needed to address is the lack of implementation of projects, which has weighed heavily on the allocated funds. Last year government approved P5.8 billion under the developmental budget and only about 30 percent of the money was spent.
Head of PPADB, Almando Lionjanga, said his organization was faced with a lot of capacity constraint that leads to slow tender awarding and the implementation of government projects.
“I think the budget would try to focus on projects that need to be started and to be completed on time. And there are some bottle-necks which need to be cleaned-up in order to have an impact,” Tumelo said.
He added that one of the challenges that the country is facing is that while the economy is boomingÔÇöespecially in northern Botswana ÔÇô there is a mismatch with infrustractural development in terms of roads and airports to handle the anticipated developments.
“What is happening is that Batswana are winking in dark, including our councils. We have not prepared ourselves for the coming developments,” Iqbal Ibrahim, the President of the Botswana Confederation of Commerce and Industry (BOCCIM), said. “We have a shortage of schools, traffic lights are not working and roads are full of potholes. In Francistown alone, the situation is that if there are going to have 1000 more vehicle on the road the situation will be out of hand.”
His sentiments were echoed by the chief executive officer of Stockbroker Botswana, Geof Bakwena, who said with the expanded cabinet, he expects some delivery from government ministers.
“Overall, I do not anticipate any fireworks on the coming national budget. All what it needs to concentrate on is project implementation,” he said, further cautioning that some big companies are likely to scale-down their operations from Botswana and try to focus on South Africa’s 2010 World Cup Games projects.
“It is normal, and you would expect some big companies to scale-down their operations here and do some projects in South Africa which of course do have more money,” he said.
“All what we need is to import labour from other countries while organizations, such as PPADB, are still trying to find their feet,” he added.
Analysts further pointed out that tourism would show better than expected results given the mood over the 2010 World Cup Games and the improving political climate in the region. Chobe Holdings, the leading tourism outfit, declared dividends after two years of torrential losses due to Zimbabwe’s economic and political crisis.
“International tourists are now beginning to separate Botswana from what is going on in Zimbabwe and tourism in the northern parts of the country is beginning to benefit from that,” Tumelo said.

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