President Mokgweetsi Masisi is expected to win the 2019 General Elections however an outright majority may elude him ÔÇô a United Kingdom (UK) based research company has revealed.
According to the report by Fitch Solutions titled “Weaker Mining and Construction Prospects Weighing On Botswana’s Growth” investors will be closely watching the outcome of the October 2019 general elections.
The researchers maintained their expectation for incumbent President Mokgweetsi Masisi to be re-elected.
“However, with the elections likely to be challenging, we note risks of the ruling Botswana Democratic Party (BDP) failing to win an outright majority in parliament, which could weaken its policymaking power and by extension investor sentiment over the coming years,” reads the report.
This would be the second political term in a row that the ruling Botswana Democratic Party has failed to win with an outright majority.
The findings that Masisi will win the 2019 general elections albeit without an outright majority is also carried in the latest Standard Bank.
The report, which covers politics and economics of countries where the banking group has operations such as Botswana, was made public in February. The report stated that the BDP was likely to enter the elections divided largely due to the standoff between President Dr. Mokgweetsi Masisi and his predecessor, Dr Ian Khama.
“Despite the dispute between Ian Khama and Masisi, we still expect BDP to win the general elections in October 19, though perhaps not by an outright majority. “Chances of the UDC (Umbrella for Democratic Change) coalition strengthening before the 2019 general elections are slim, not while tensions about the constituencies persist,” said the report titled African Markets Revealed. BDP won 37 of the total 57 constituencies in the last general elections held in October 2014.
Following the results of the 2014 general election the BDP leadership was concerned by its declining popular vote as the party only managed 47 per cent of the popular vote, the party’s weakest performance since 1966.
The report further noted that, ‘lack of cooperation between the main opposition parties may provide some safe haven for the ruling party’. ‘
Touching on another topical issue, the researchers at Fitch Solutions forecast declining diamond production and below-trend construction sector growth to see Botswana’s real GDP growth slow to 3.9% and 4.1% in 2019 and 2020 respectively, from 4.5% in 2018.
“We expect stable growth in consumer-dependent sectors to help support economic growth. However, dry weather conditions across Southern Africa risks adding to pressure on food prices, boosting inflation and weighing on consumer incomes,” reads the report.It says declining diamond mine production will weigh on Botswana’s real GDP growth over the coming years.
“Following diamond output growth of an estimated 4.0% over 2018 (according to our Mining team), we forecast output to decline by an average of 2.0% annually between 2019 and 2021, before returning to expansion in 2021,” the report says.
The short-term decline will be driven by the Cut Nine project at the Jwaneng mine, Botswana’s largest mine in terms of value. The project will involve removing waste from the bottom of the mine, while both widening and deepening the pit to extend the mine’s lifespan to 2034.
However, the Cut 9 process will also entail reduced production from the Jwaneng mine, which will see a contraction in Botswana’s output over the coming years. With diamonds being Botswana’s primary export ÔÇô averaging 86.7% of total exports from 2014 to 2018 ÔÇô this will see economic growth slow over the short term.
The mining sector’s growth will become increasingly driven by coal mine production. However, coal only accounted for 0.3% of exports last year, and production growth will also be slowing from approximately 18.4% growth in 2018 to 15.0% in 2019 and 11.6% in 2020.
The report says growth in the construction sector will also be below-trend.
“Public investment into infrastructure development as part of the government’s National Development Plan 11 will be targeted towards ongoing or soon-to-be commenced projects, such as the construction of Mohembo and Kazungula bridges and the planned extension of power transmissions grids throughout the country’s north-west,” the report says.
However, the researchers expect fiscal constraints tied to weaker diamond revenues, still muted prospects for revenues from the Southern African Customs Union (SACU) and a higher wage bill to limit the government’s capacity to significantly bolster investment into development projects (see ‘Revenue Shortfalls, Wage Bill To Widen Botswana’s Deficit Over The Short Term’, April 24).
“Indeed, our Infrastructure Team forecasts the construction sector to see growth of 2.1% over 2019 and 3.2% over 2020, below the 2013-2018 average of 3.9% and further weighing on overall economic growth over the short term,” the report says.
Fitch Solutions expects consumer-dependent sectors to make a positive contribution to real GDP growth over the short term.
“Though details still need to be solidified, we believe higher public sector wages will help to support demand for retail and other service sectors, mitigating the extent to which real GDP growth slows,” the report says.
The report notes that dry weather conditions weighing on agricultural production across much of Southern Africa poses upside risks to food prices and inflation. Botswana is less exposed to these price pressures than most of its regional peers due to agriculture’s comparatively small contribution to its economy, the report says.
However, it warns that, imported price pressures from neighbouring countries could see inflation exceed our forecasts of accelerating from an average of 3.2% in 2018 to 3.8% in 2019 and 4.5% in 2020, posing greater headwinds to purchasing power and private sector demand.