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BCL closure dents economic growth

The economy is still reeling from the closure of BCL and Tati mines
The economy grew at a slower rate of just one percent in the second quarter of the year from 3.9% in the same period last year with the mining sector registering negative growth, as the effects of the closure of BCL and Tati mines linger on.

The BCL and Tati mines were closed in October last year, and there has been no copper nor nickel production in the country since then. Figures released by Statistics Botswana show that apart from the mining and manufacturing sectors, all other economic sectors recorded positive growth in the period.

“Most sectors reported growth of more than 1.2%, with the exception of the mining and manufacturing industries; which recorded -13.8% and -0.2% respectively. The slow-down in the mining sector is primarily attributed to the closure of copper/nickel mines towards the end of 2016, however diamond production increased by 12.9% over second quarter of 2017,” said Statistics Botswana.

On the positive side, the water and electricity sector recorded the highest growth in the period due to increased generation from Morupule B as well as the improvement in water supply.

During the period, the water and electricity, transport and communications and finance and business services increased by 6.0%, 5.9% and 5.6% respectively. According to Statistics Botswana, copper/nickel production was zero in the quarter due to the provisional liquidation of the BCL Mine in October 2016 leading to the 13.8% decline in mining sector. “The year on year growth compares the second quarter of 2016 value added which has copper contribution and the current period without copper value added. The copper/nickel statement will stay valid until publishing the third quarter of 2017,” said the statistics agency.

On the other hand, diamond value added increased by 12.9% during the quarter under review. Diamond production in carats increased by 12.9% in the second quarter of 2017 compared to a decrease of 12.1% recorded in the same quarter of 2016.  Soda Ash value added decreased by 25.4% because the mine was placed under care and maintenance in May 2017 in order to

remain in a state of readiness. According to the recently released Budget Strategy Paper (BSP) for the 2018/19 financial year, the real gross domestic product (GDP) is projected to grow by 4.7%, 5.3% and 5.0% in 2017, 2018 and 2019, respectively.

The latest projections are more optimistic than those announced by Finance Minister Kenneth Matambo when he unveiled the 2017/18 national budget in February.

According to the BSP, the positive outlook is attributed to projected improvements in the sectors of mining; trade, hotels and restaurants; transport and communication, and water and electricity. “The mining sector is expected to recover in line with the positive global economic prospects, while the other sectors will continue to benefit from the implementation of the Economic Stimulus Programme adopted by government to boost growth, and create employment opportunities,” reads the paper.

The International Monetary Fund expects the diamond-producer’s 2017 and 2018 economic growth forecast at 4.5 and 4.8% respectively.

The BSP has also projected a higher budget deficit for the 2018/19 financial year, which it says was triggered by higher expenditure due to the implementation of the stimulus programme and other government commitments.

In the next financial year, which begins in April 2018, a budget deficit of four percent (P8 billion) is predicted from a revised deficit of 3.52% (P6.5 billion) in 2017.

 In February, Matambo had projected a 2017 budget deficit of 1.43% (P2.35 billion).

 Botswana has been running budget deficits in the last three financial years, which have been funded by a combination of drawing down on savings as well as the issuance of bonds and Treasury Bills.

The drawdown on savings has led to a decline on the Government Investment Account (GIA) at the central bank from P35.5 billion in December 2015 to P30.6 billion in June 2017.




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