With one of the oldest mines in the country, the BCL copper mine down, economic growth could make Minister of Finance Kenneth Matambo wish he had not been so optimistic about growth projections
With the exit of BCL from broad economic activities it is possible that the 2016 forecasted economic growth, which had been predicted at 4.2 percent, could either sink lower than the 2015 growth bottom of 1 percent or remain very close to the ground.
When Matambo presented the 2016 growth estimate at 4.2 percent earlier in February, the future outlook he painted did not have in its picture the closure of BCL. The economy had registered growth of 1 percent the previous year, which in the context of the country’s historical growth trajectory suggested that the meagre growth was as an anomaly. What also could have given credence to the 2015 perceived growth irregularity was the slightly higher growth that had been recorded in 2014 at 3.2 percent, which in contrast to 1 percent shows a clear wide difference.
The assumption Matambo based his prediction on at the time was, among other things, that the depressed commodity prices would ride out the low cycle and return to an upswing, which as a result would reverse the negative shock to the economy and take it back to its typical growth trend.
Eight months down the line, the economy’s challenge now extends far and beyond low commodity prices; the issue as dictated by the BCL blackout is that government, by extension the economy, will be starved of export revenue.
To put this into perspective, figures from the August 2016 Botswana Trade Report compiled by EY demonstrates the contribution copper/nickel makes to the economy as a share of exports which Botswana generates revenue from. BCL, prior to its premature closure, had been the country’s largest producer of copper/nickel. EY’s export breakdown figures show that copper/nickel, which falls under non-diamond metal exports, consistently contributed the highest share in that category over the five-year period between 2012 and 2015. The category includes metals such as gold and soda ash.
In 2012 copper/nickel as a percentage of total exports contributed 7.9 percent, which, however, fell to 6 percent in 2015. Over the five-month period into 2016 the figures show that copper/nickel contributed 4.7 percent.
The observed slump in contribution is attributable to the current depressed commodity market. Making a comparison to Gold and Soda Ash, the significance of copper/nickel is clearly seen. In 2012 gold contributed 1.4 percent whereas soda ash contributed 1 percent, indicating a wide stretch to the 7.9 percent contributed by copper/nickel.
In 2015, the contrast is still observed as demonstrated by the contribution of gold and soda ash at 0.4 percent and 0.9 percent respectively, which is significantly lower than copper/nickel at 6 percent. What could also be used to signify the considerable contribution copper/nickel makes to the economy is the fact that, as indicated by the EY figures, after diamonds copper/nickel comes second in terms of export breakdown.
Diamonds, as shown by the figures, contributed 78.7 percent in 2012, which increased to 83.1 percent in 2015. The diamond figures reflect two major things; the first obvious one is that the economy depends largely on its export revenue and two that taking out copper/nickel from the export base leaves the economy in a much more vulnerable position than it previously was in.
The figures from EY trade report gives weight to the suspicion that the economy could register growth much worse than in 2015, which makes Matambo’s growth estimate a fallacy. What had been known is that the economy will register a single digit growth but what could be revealed, due to recent changes, is that the official projections had been too overly ambitious.