Sunday, June 23, 2024

Investec Botswana projects 4% growth in Economy through 2016

Investec Asset Management says Botswana’s economic performance will remain sound, growing 4-5 percent on average. The projection is mainly premised on improved prospects for the diamond industry.

On Wednesday, Investec Asset Management’s Portfolio Manager Kagiso Sedimo said domestic economic growth has been a disappointed due to a slump in commodity prices, water and electricity challenges, and a lackluster demand for diamonds. However he stated that inflation is expected to remain within the Bank of Botswana (BoB) target range, adding that they forecast a slight increase to the current levels due to drought and a pickup in oil prices.

Meanwhile latest figures released by the government statistics agency shows that on a year-on-year basis, gross domestic product (GDP) shrank 1.9 percent compared to a 3.9 percent contraction in 2014. The decline on an annual basis has been attributed to a fall in mining output, which slipped 30.5 percent in the fourth quarter. 

Due to low commodity prices, Botswana’s mining sector continues to face depressed sales, which has resulted in mines operating at a firm loss and heightened fears of job losses. Surviving mining companies and sub-contractors are desperately seeking cash injections to stay afloat.

Statistics Botswana says the real mining value added also decreased significantly in the third quarter of 2015 by 40.6 percent. The decline in the value added is attributed to the continued weak recovery in the global markets, particularly in the major markets for diamonds. In the quarter under review, copper and diamond production decreased by 59.7 and 20.4 percent respectively. During the fourth quarter of 2015, Mowana and Thakadu copper mines were on provisional liquidation while there was also a plant shutdown at the BCL copper mine during the months of August, September and October 2015. All other industries recorded positive growth with the exception of Mining, Manufacturing and Agriculture which decreased by 30.5, 1.9 and 0.7 percent respectively. 

Botswana mining sector is expected to shed thousands of jobs in a massive haemorrhage that runs across the sector, from copper to diamonds.

Investec’s projection follows that of the International Monetary Fund (IMF) which in March projected that the domestic economy will expand by 3.7 percent in 2016. This was in comparison to an estimated 0.3 percent contraction in 2015. In its latest communiqu├®, the IMF says Botswana will experience a gradual economic recovery in the next three years, based on an expected gradual increase in diamond prices and fiscal stimulus.



Read this week's paper