The International Monetary Fund (IMF) has revised down the economic growth outlook for the sub- Saharan Africa region which includes Botswana and advised that under the current environment, efforts to diversify growth away from extractive industries take on renewed importance.
Hard hit are economies in the region that rely on commodities exports including the mineral rich Botswana as recent rough diamond demand has affected government coffers.
“A combination of supply shocks (for example, curtailed electricity production in Ghana, South Africa, and Zambia), more difficult financing conditions in a context of large domestic imbalances (Ghana and Zambia), and weaker commodity prices (Botswana, South Africa, Zambia) are set to lower growth,” IMF said in October 2015 Regional Economic Outlook for Sub-Saharan Africa, titled HYPERLINK “http://www.imf.org/external/pubs/ft/reo/2015/afr/eng/pdf/sreo1015.pdf”Dealing with the Gathering Clouds.
“Moreover, most commodity prices are projected to remain low, if not decline further, throughout 2016. Such prospects have already triggered a scaling down of existing activities in some countries (Botswana, Democratic Republic of Congo, Guinea, Sierra Leone, South Africa, Zambia) or of new projects in others (C├┤te d’Ivoire).”
The IMF said the decline in commodity prices has been underpinned by the rapid and likely persistent decrease in global demand for raw materials, in some cases combined with higher supply (such as for oil or copper).
Botswana is an exporter of copper and fall in prices has affected mining companies like BCL with news coming out of Selebi Phikwe that the company has failed to pay employees in the recent past.
“Most importantly, China, the largest single trade partner of sub- Saharan Africa, is rebalancing its growth away from manufacturing, construction, and exportsÔÇöwhere production inputs are highly skewed toward raw materialsÔÇötoward the services sector and consumption,” added the IMF.
“Against the backdrop of these global and domestic headwinds, the outlook for the region is clearly much less favorable than in the recent past.”
Activity in sub-Saharan Africa is projected to decelerate from 5 percent in 2013ÔÇô14 to 3┬¥ percent in 2015, before strengthening somewhat to 4┬╝ percent in 2016 on the back of the gradual pickup in global activity.
Earlier this week, Econsult revised forecast for real GDP growth for 2015 is now only 1%, lower than the revised projection of 2.6% released by the Ministry of Finance and Development Planning in its Budget Strategy Paper in September.
Frontier economies in sub-Saharan Africa region include Botswana, Democratic Republic of the Congo, C├┤te d’Ivoire, Gabon, Ghana, Kenya, Malawi, Mauritius, Namibia, Nigeria, Zambia, and Zimbabwe.