Saturday, September 25, 2021

Low interest rates push up non-mining sector

The non-mining sector could lead the way during the remainder of the year, but analysts have warned that water and electricity could still pressure economic growth and negate growth buoyed by the current low interest rate environment.

The Botswana GDP grew by 4.7 percent during Q4 2014 as revealed by data from Statistics Botswana. On a q/q basis, total GDP grew by 3.6 percent; the largest growth for all the quarters in 2013. The slower growth was mainly due to the decline in the electricity sub sector, which recorded the only negative growth of 205.5 percent relative to the 63.5 percent growth posted during Q3, reflecting the acute power and water shortages experienced in the country during the period.??Motswedi Securities First Quarter Bulletin- March 2014 showed however, on an annual basis, GDP for 2013 averaged a 5.9 percent which is quite modest than the growth of 4.3 percent in 2012.?”Going forward we expect the non-mining sector to tick up due to the lower interest rates which makes it conducive for local businesses including private entities to expand their assets by borrowing at cheaper rates,” said the research house in the note.

“However the electricity sub sector could continue generating a?negative growth to the economy as supply remains a major challenge,” it added.

Although now power seems to back to normality, the water and?electricity segment has been contributing negatively to the economy since Q1 2011 due to increased consumption and higher costs within households and businesses. Motswedi said on the global space, US have shown some resilience as the Fed continues to scale back its quantitative easing programme?following recent upbeat nonfarm payrolls and other economic?indicators.

“This uptick from the largest consumer of our diamonds could boost demand going forward and also the trade, hotels and restaurants sector, which contributed 15 percent to total GDP in 2013,” it said.?The U.S accounts to over 45 percent of Botswana diamond marketÔÇöwith the rest shared by other large economies in Asia and Europe. China’s growth remains subdued as the country has been recently facing some static growth in manufacturing activity. The mining sector has shown some resilience despite the sluggish?growth as compared to the previous quarter due to a 12.1 percent increase in production after Debswana recovered better grades at its Orapa and Jwaneng mines. The sluggish contribution of the mining sector also revealed the diversification strategy from diamond industry as the non-mining sector contributed 14.2 percent as compared to 13.6 percent on the prior quarter.

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