Wednesday, September 23, 2020

Sub Sahara’s reliance on commodities not sustainable ÔÇô expert

Emerging Markets Economist at Stanlib South Africa, Kganya Kgare has said that while the Gross Domestic Product of the Sub-Saharan region remains positive, it will not keep up as long as the continent relies much on commodities.

Kgare made the sentiment last week when presenting at the Botswana Economic and Investment forum held in the capital Gaborone.

“We need proper policies, investment instruments to get the GDP numbers growing”, said Kgare.

Compared to other regional players, Botswana he said is still on the recovery path and is in an expansion space following the 2008 economic crisis, as it has high GDP per capita and is still able to increase incomes.

The country’s economy experienced a growth rate of 4.3 percent in 2016 after contracting by1.7 percent in 2015. Growth rates for 2017 and 2018 are forecast at 4.7 percent and 5.3 percent, respectively.

Official Statistics shows that real GDP in Botswana grew by 2.4 percent in 2017 compared to the faster growth of 4.3 percent in 2016. The slower growth reflects a lower increase of 4.2 percent in non-mining activity, compared to 5.5 percent in the previous year. Mining output, however, contracted significantly by 11.2 percent in 2017 compared to a decline of 3.5 percent in 2016. According to analysts, GDP is projected to expand at a faster rate in the short-to-medium term, driven largely by growth in the services sectors and recovery in mining activity, in line with the positive global economic prospects. Furthermore, the projected accommodative monetary conditions in the domestic economy and expansion in government expenditure, as well as relative stability in water and electricity supply, are expected to support economic activity in the non-mining sectors. Overall, the economy is expected to operate close to, but below full capacity in the medium term.

From Kgare’s point of view, Botswana has a broad base recovery and also concurs with local projections that the 2018 growth rate will be around 5 percent. With Namibia he said it is currently on the deep of recession as the economy is not doing well, with South Africa having slowed down.

South African GDP has contracted by 2.2 percent in the first quarter of 2018. However, growth is still expected to be better in 2018 than in 2017, against the backdrop of higher commodity prices and more positive investor sentiment.

Coming home, the central bank is currently pursuing an accommodative monetary policy in order to stimulate economic growth; and has kept on interest rate environment low. The latest sitting of the Monetary Policy Committee of the central bank which sat last month (June), decided to maintain the bank rate at 5 percent. The outlook for price stability remains positive as inflation is forecast to be within the 3 ÔÇô 6 percent objective range in the medium term.

Kgare praised Botswana’s administration for its good management in expenditure, which he compared to South Africa’s currently at 35 percent. Botswana has continued to maintain an “A” investment grade rating from both Moody’s Investor Service and Standard & Poor sovereign credit rating agencies.

“Botswana so far is the only country in the Sub Saharan Africa with an investment grade of A, whereas most are none or junk. We expect Botswana to be one of the best performing economies, and the consumers are expected to drive growth in this regard going forward at the back of the low interest rate. Botswana economy has always enjoyed a low interest rate environment, which is most likely to be cut again before the end of the year,” Kgare said.

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The Telegraph September 23

Digital edition of The Telegraph, September 23, 2020.