Thursday, September 28, 2023

What will pick the “Not-Quite-Right” economy….?

Due to improved global demand, it is expected that Botswana’s non-mining output will increase in 2018 and 2019. The central bank through its Monetary Policy Report (August 2018) has identified atleast eight sub-sectors of the economy that are expected to be drivers of Botswana’s non-mining sector during the 2018/9 fiscal year. These include amongst others ÔÇô Trade, Restaurants & Hotels, Finance and Business Services, Construction, Transport and Communication, Manufacturing, Water and Electricity, Agriculture as well as Social and Personal Services.       


According to the 2019 Budget Strategy Paper (BSP) that was made public this week, this sector registered the highest growth rate of 7.3 percent in 2017, compared to the 13.5 percent recorded in 2016. The authors of the BSP 2019 noted that the impact of the relocation of the Diamond Trading Company from London to Gaborone some six years ago continues to make positive contribution to the sub-sector. In 2017, the sector recorded a growth rate of 7.3 percent and is projected to reach 6.3 percent in 2018 and 5.9 percent by 2019.


Given the recent commitment by the government to introduce some reforms on ease of doing business in the country, the central Bank believes this could boost this sub-sector. The sector recorded an increase of up to 5.0 percent in 2017 compared to 3.3 percent that was registered in 2016. Looking ahead, the sector is expected to grow by 4.8, 4.9 percent in 201 and 2019 respectively. The central bank says there has been an increase in financial and business services in Botswana as a result of implementation of reforms and also improved business confidence level in the recent Business Expectations Survey (BES). At the same, BOB says FinTech developments such as electronic and cellphone banking services by some commercial banks will boost the sector and promote greater financial inclusion.


This sub-sector remains one of the few that have not recorded a negative growth in the past three years and is projected to continue on the positive lane. In 2016, the construction sector recorded 4.2 percent growth that was followed by another 3.5 percent growth in the following year (2017). The Budget Strategy Paper project a 3.9 percent growth during the current year and a further 4.3 percent during 2019. Recently the Botswana government was awarded P340 Million as grant by the Chinese government which has already been eyed for infrastructure development. Other key infrastructural developments that have already been unveiled include the North-South Water Carrier II, North-West Electricity Transmission Grid, Mohembo and Kazungula Bridges construction.


Just like constriction, the Transport and Communication sub-sector of the non-mining sector has also yielded positive numbers over the years. In 2016 the sector went as far as 6.6 percent before dropping to 4.7 percent in 2017 and projected to go up again in 2018 and reach 5.4 percent (2019:4.4%).


While the Manufacturing sector’s contribution to the country’s GDP remains low, economic prophets, and accurately – indicators point to it as the next messiah of the domestic economy. Econsult Botswana, an economic think tank based in the capital Gaborone believes that a shift away from mining by Botswana to the manufacturing sector should increase the overall labour share of income. In 2016 and 2017, the sector grew by 1.6 and 1.9 percent respectively. Projections show that this year the sector will slightly grow and reach just over 2 percent (2018:2.2%) before slowing down to 1.9 percent in the subsequent year (2019).


In 2015 when the domestic economy contracted by 1.7 percent the blame was partially put on this sector after the country experienced persistent power and water supply shortages. By 2017 the sector registered a steep -19.5 percent growth and is expected to bounce back to the positive line this year (2018:14.2%).


The central bank think-tanks mentions the Livestock Management and Infrastructure Development(LIMID) project and the Integrated Support Programme for Arable Agriculture Development (ISPAAD)as key to the 1.3 and 1.7 percent projected growth in this sector during 2018 and 2019 respectively. During the previous year, the sector registered 2.1 percent growth after a modest 0.5 percent upward movement in 2016.


Tokafala ÔÇô an entrepreneurship programme pioneered by mining giants ÔÇô De Beers and Debswana in partnership with the Botswana government has been identified as one of the drivers of this sub sector. Earlier this year, the government signed a Memorandum of Understanding (MoU) with the De Beers Group of companies to facilitate implementation of the Tokafala Enterprise Development Programme. The Programme is aimed at accelerating the growth of SMMEs through mentorship, advisory services and promoting business linkages, which are expected to improve productive capacity of local enterprises to supply both the domestic and export markets.


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