27 Dec 2012

 

BOPA business writers  reflect on what transpired in the country’s business environment in 2012.

 

Economy and Inflation

Given its global linkages, Botswana’s domestic economic dynamics to a larger extent received major blows for the year ending 2012. Botswana’s economic growth forecasts stands at 3.5 per cent in 2012 and five per cent percent in 2013, while advanced economies were expected to register growth of only 1.3 per cent this year and 1.5 per cent in 2013.

The slower growth was primarily due to a decline in the mining sector output. During the first quarter of 2012 mining output in real terms was 9.5 per cent less than in the first quarter of 2011, while in the second quarter it was 7.6 per cent less than in the same period a year earlier.

The global diamond market experienced negative performance during the first half of 2012, with reduced sales volumes and a softening in prices. However, most non-mining sectors recorded positive real growth rates for the same period, with construction growing by 19.7 per cent, utilities by 11.2 per cent, social and personal services by 10 per cent. In addition, inflation also declined, averaging 7 per cent during July-September, down from last year's average rate of 8.5 per cent.

As at July, the country also experienced low value exports because no rough diamonds were exported due to the relocation of Diamond Trading International (DTCI) to Botswana where rough diamond aggregation takes place as opposed to the past when it was done in London. Furthermore, Botswana continued to record trade deficits since the fourth quarter of 2008 with the exception of June 2010 and July 2011 where trade surpluses of P288.1 million and P769.1 million were recorded, respectively. However, in July a deficit of P2, 093.9 million was recorded.

 

Energy

Another noteworthy milestone was the progressive developments in the energy sector. Botswana Power Corporation (BPC) made quite some strides by putting together a comprehensive power supply plan for the period 2013 to 2020. Under the plan, BPC intends to rely on several sources such as; Morupule B, Morupule A, Orapa 90MW plant and Matshelagabedi 70MW plant and also to import from the region.

This development came upon realisation that BPC and Eskom’s power supply agreement would be ending on December 31, 2012. For this reason, Morupule A power station plant needed to be refurbished with the hope that by winter 2014 it would be at a point of producing 60 MW. Morupule B is expected to be in full operation by May 2013, while Matshelagabedi diesel generation plant was extended to December 31, 2013 to cover any contingencies. Botswana Power Corporation also continued its discussions with regional partners to import up to 100 MW from 2013 to 2015 and from 2017 measures would be in place to secure 300 MW of new generation capacity.

 

Mining

Due to rapidly deteriorating prices of rough diamonds and worsening economic climate, the production at the Lerala Diamond mine was suspended resulting in the mine receiving significantly less revenue from production than planned. The mine, which was commissioned in March, has been put on a care and maintenance basis so as to ensure that it is maintained and well placed to begin production again as soon as the economic conditions improve.

Following the suspension of production at the mine, 44 employees, of the 140, were retained for care and maintenance purposes. Still in 2012, the AK6s was renamed Karowe Diamond Mine at a time when the company was undergoing transformation from exploration to mining. The diamond mining site located at Mapete, south west of Letlhakane, was named Karowe Diamond Mining. The local school and the community were both engaged in renaming the mine, which plays a significant role in the development of the country as well as towards empowering the community and diversify the Boteti economy.

The new name, Karowe, came from Loiponeng Mabu - a form three student at Makgadikgadi Junior Secondary School in Mosu and it symbolises the strong relationship between the mine and the community. Karowe is a Sesarwa word which means stone. Fifteen-year-old Loiponeng, who hails from Mokubilo, pocketed P2 500 for his efforts.

 

New entities

In an effort to reduce public expenditure and improve cost efficiencies, the services that were previously offered by Botswana International Financial Services Centre (IFSC) and Botswana Export Development and Investment Authority (BEDIA) were with effect from April 1,  combined to form a new entity named Botswana Investment and Trade Centre (BITC).

This was also meant to improve the functioning, efficiency and policy coordination of national investment promotion and export development activities. Botswana Investment and Trade Centre is an integrated Investment Promotion Authority (IPA) that serves as a focal point for investment promotion, export development and nation branding. The new entity was also intended to enable improved service delivery and propel investment promotion and export development as key components of the economic diversification strategy. 

In the financial services sector, a major development was the establishment of the Automated Trading System (ATS) by Botswana Stock Exchange (BSE) to revolutionalise economic development. The Automated Trading System tool would be used by BSE market participants to trade shares and offer a pedestal that would enhance more trading by stock brokers. The system would also play a key role in increasing liquidity in the financial sector.

The Ministry of Trade and Industry launched the Competition Authority - a parastatal mandated to prevent anti-competition conduct as well as to remove anything that hinders free competition. The authority is also expect to investigate and resolve anti-competition conduct, advise government on all laws that have or might have anti-competition effect and also regulate businesses to ensure that firms that are in a strongly dominant position do not abuse their power.

The year 2012 also saw a grand launch of Botlhe Medical AID - a 100 per cent citizen owned medical aid powered by UNIGEM. Botlhe has joined seven other players in the industry with its major distinguishing trade mark being that registered traditional doctors stand to benefit as clients can now be covered when they consult them.

While with the other medical aid schemes in the market choosing whom to cover and not to cover, Botlhe Medical Aid covers all.  It also pays for some traditionally known ailments such as; thobega and phogwana. Ends