Monday, July 4, 2022

Mining GDP still below pre-recession levels

Although it has recovered partially, Botswana’s real mining GDP is still languishing “well below the pre-recession levels” as a result of the global financial and economic crisis that started in 2009. When the crisis hit in that year, the mining sector contracted by 46.2 percent and at this point, is still struggling to get back to where it was before.

As a result of this crisis, foreign earnings dropped and faced with this situation, the government had to dig deep into its foreign reserves to stabilise the economy.

“At end of December 2012, foreign exchange reserves stood at P57.7 billion compared to P68.6 billion at the end of 2008, just before NDP 10 commenced. The end 2012 foreign exchange level is equivalent to 13 months of imports cover of goods and services which is still adequate for the growth of the economy,” says the Midterm Review of National Development Plan 10 which the National Assembly is currently discussing.

It goes farther to state that Botswana’s high dependence on diamonds in the face of the global financial and economic crisis was a major challenge to the economy’s ability to manage economic shocks and demonstrated the need to have an alternative source of economic livelihood.

For too long now, the government has been trying to diversify the national economy away from diamond mining and that goal is becoming even more important with the most profitable diamond deposits diminishing. The Review notes that the policy challenge that has to be tackled is that the non-mining sector depends, in part, on government spending which is, in turn, dependent on the mineral revenues. To this end, the Review recommends a robust diversification strategy that is not dependent on government spending.

A corollary challenge that the Review recognises with regard to diversifying the economy is that addition to impediments resulting from policy restrictions, both domestic and international investors experience problems in gaining access to serviced land and acquiring business licences. This has the effect of “limiting foreign direct investment inflows into the country, thus reducing economic growth and the competitiveness of Botswana products.”

Having started in the middle of the financial crisis, NDP 10 will not be implemented as originally planned and the Review proposes that it be revised. This revision would have significant implications for Vision 2016, a national political and socio-economic strategy that is scheduled to come to fruition in three years when Botswana turns 50. The end of NDP 10 coincides with the end of Vision 2016 and the current situation means that what former president Sir Ketumile Masire had hoped for would, at least for now, remain a pie in the sky. According to the Review, “the updated GDP data going back through the mid-1990s shows the growth of the economy falling far short of the ambitious target set in Vision 2016 of tripling real income per capita between 1996 and 2016. The review is the last opportunity to adjust the Plan and the associated policies, with a view to coming as close as possible to the targets set out in Vision 2016.”

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