Power woes to restrict growth to under 5%
Brian Benza | Friday April 4, 2014 15:27
Powered by a rebound in diamond production, the economy beat analyst’s expectations to grow by an impressive 5.9 percent in 2013 reversing a three-year streak in which the economy grew at a slowing rate.
In 2010, the economy grew by 8.6 percent but slowed down to a growth rate of 6.2 percent the next year before further declining to 4.3 percent in 2012. However results of a brief survey by the Business Week point to a lower economic growth rate forecast for 2014 as ongoing power and water could curtail economic activity.
“Annual real GDP growth for 2013 came in at 5.9 percent, which was ahead of expectations which were generally in the range of four to five percent. This is entirely due to annual growth of 10.6 percent in the mining sector, which was ahead of expectations, and seems to be due to a strong recovery in diamond output.
In 2014, mining should continue to grow but it is unlikely to be at the same rate. We also expect non-mining growth to slow marginally, in part due to the disruptive effects of power and water shortages. Hence overall GDP growth in 2014 is likely to be lower, at around 5 percent,” said prominent economist Keith Jefferis.
According to figures released by Statistics Botswana this week there was a significant decrease in the value added to the economy by the water and electricity sector in the forth quarter of last year. The sector recorded a decrease of 205.5 percent in the fourth quarter of 2013 compared to a decrease of 60.5 percent recorded in the same quarter of the previous year.
“The decline is largely by the electricity sector which has been contributing negatively to the economy since first quarter of 2012 due to a substantial increase in intermediate consumption,” said the Statistics office.
In the past two years, water and power consumers have endured sporadic supply disruptions largely due to the generation problems at Morupule B and lack of adequate infrastructure to distribute water throughout the country.
The power supply disruptions worsened at the beginning of the year as the Morupule B power station faced severe boiler failure challenges which at one point led to the total shutdown of the plant.
Analyst at Stockbrokers Botswana, Gary Juma concurred with Jefferis that the power supply will result in softer economic growth.“The weaker growth numbers especially in the water and electric sub-sectors and manufacturing are in line with our expectations given the water and power cuts that the country experienced the greater part of last year.
“We are even more worried by the fact that the power situation is not yet stable and these power cuts might affects this year’s economic growth,” he said. Chief investment officer at Afena Capital, Alphonse Ndzinge also said the real GDP growth of 5.9 percent in 2013 was moderately ahead of expectations.
Ndzinge said that the composition of the growth was a bit more of a surprise with relatively strong mining output compensating for the generally weak performance of non-mining activity, particularly from water and electricity, agriculture, manufacturing and construction.
Going forward, Ndzinge says that their analysis suggests the country is likely to continue with the same economic trends of 2013 in 2014 with the mining sector providing the key stimulus for growth.
“Consumption should remain depressed by weak consumer activity with low real wage growth and high unemployment. Easier credit conditions should help cushion this weakness. But the wild card for our outlook is private sector fixed investment spending growth.
“Gross fixed capital formation contracted 6 percent in 2013 but we believe an improvement in outlook could come from the reduced fiscal restraint. This should hopefully stimulate much needed Government expenditure to revive or at least support private sector investment spending with construction, power, and other infrastructure related sectors directly benefiting,” he said.