Wednesday, October 20, 2021

Effect of commodity price slump will last two years

A Rand Merchant Bank South Africa analyst has made a very grim forecast for the economy of Botswana and other commodity-dependent African nations.

Addressing the Botswana Stock Exchange’s Inaugural Listings Conference last Thursday, Celeste Fauconnier said that Africa will “face pain” for the next two years because of the downturn in commodity prices. For thousands of Batswana who work in mines, that pain would be in the form of staying jobless for that period of time.

The fall in commodity prices is a direct result of China’s economy slowing down. By one estimate, if China’s economic growth undershoots the International Monetary Fund’s projection of 6.3 percent for the year by 200 basis points, global commodity prices could slide by up to 31 percent in 2016. Botswana is already feeling the pinch. BCL copper mine in Selebi Phikwe is expected to cut a third of its employees as copper prices plummet and globally there has been a depressed demand for diamonds. Last year, Botswana cut its diamond production target from 23 million carats from 20 million carats. On the whole, the country’s mining revenues are expected to fall by 8 percent because of the slump in commodity prices.

As Africa Analyst at RMB, Fauconnier knows the continent very well and addressing delegates at the BSE conference, said that her bank collects information on African economies in a systematic and comprehensive that is unmatched even by United Kingdom and United States. That information is published in the annual “Where to Invest in Africa Report” which Fauconnier co-authors.  The 2015 edition showed that the BSE is one of Top 10 stock exchanges in Africa, that Botswana’s loadshedding is not as severe as Congo’s, that Botswana’s prime rent is lowest in the Southern African Development Community, that the cost of trading in Botswana 50 times higher than in Kenya, that more than 1 million Batswana are economically marginalised, that Botswana is one of Africa’s “Top 5 Deteriorators” in terms of infrastructure and by implication, that Botswana workers are the laziest in Africa.

If it is any consolation, the report in question says that regardless of the current cyclical problems, the demand for commodities will eventually pick up again ÔÇö although probably at a much slower pace than seen after the global financial crisis.

“Ultimately, natural resources will remain a significant player in African economic expansion and, with rising demand, the continent will benefit as it boasts some of the best quality and large-scale deposits in the world ÔÇö more reserves are being discovered every day,” the report says.

According to the United States Geological Survey, Botswana is one of the top reserve-holding countries on the continent.


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