16 Jul 2020

Projections by both the Ministry of Finance and Economic Development and the International Monetary Fund (IMF) suggests a sharp deterioration in economic growth for Botswana in 2020.

 Speaking at the Bank of Botswana’s annual media briefing, the director of research and financial stability, Dr Tshokologo Kganetsano said the sharp deterioration in economic growth was mainly attributed to the weak performance of the diamond industry in the previous year.

 He said growth in mining output decelerated mainly due to the slow expansion of the diamond industry, which went from 3.2 per cent to 2.1 per cent in the review period.

Dr Kganetsano noted that the weak performance of the diamond industry in the year was mainly attributable to the decline in production at Orapa Mine following a planned shutdown in April 2019 as well as a decrease in production at Jwaneng Mine in the third quarter of 2019.

He said diamond production from Karowe Mine grew by 22.9 per cent in the 12 months to September 2019 compared to a faster growth of 30.3 per cent in the corresponding period ending in September 2018.

Dr Kganetsano explained that the global demand for rough diamonds was adversely affected by the trade dispute between the United States and China as well as social unrest in Hong Kong in 2019.

He also said growth in soda ash output decelerated from 19.9 per cent to 6.6 per cent while copper and coal production was lower in 2019 compared to 2018.

He noted that copper output fell by 90.5 per cent following cessation of production at the Mowana Mine in November 2018, and that coal output decreased due to lower demand at Morupule B Power Station, which continued to operate below capacity, with one of the units under care and maintenance for part of 2019.

Regarding the other mining sub-sector, Dr Kganetsano said growth in production fell with respect to other mining from 7.3 per cent to 1.6 per cent and prospecting from 2.3 per cent to 2 per cent.

He said the trade, hotels and restaurant sectors grew by 4.2 per cent during the reporting year to September 2019, down from the 7.8 per cent expansion in the prior year. He said the lower growth was mainly due to a contraction of 9.2 per cent in the wholesale sub-sector, reflecting weak performance in the diamond trading activities by the De Beers global sightholder sales and Okavango Diamond Company which were adversely affected by the general subdued performance of the diamond cutting and polishing industries.

Regarding the finance and business services sector, he said the sector expanded by 5.6 per cent in the review period compared to 4.7 per cent in the year ending September 2018.

 He added that it involved notable growth rates for some of the sub-sectors such as real estate at 6.5 per cent, business services 6.5 per cent and banks at 6.2 per cent.

Dr Kganetsano also said household debt expanded by three per cent in the 12 month period ending September 2019 compared to 5.4 per cent recorded in the corresponding period ending September 2018.

 He said household debt increase was a good sign as it contributed immensely in the growth of the economy because it showed that domestic demand was met. ENDS