Economy undergoes structural shift
Brian Benza | Friday October 17, 2014 16:50
According to prominent economist Keith Jefferies, the Botswana economy has now reached a relatively diversified position in terms of GDP but diamonds still precariously dominate exports.
Latest statistics show that the economy is now diversified in production terms with mining’s contribution to GDP having fallen to 26 percent from over 50 percent twenty years ago.
On the other hand, the services sector, which comprise of trade, finance and business services, transport and communication, has also significantly shored its contribution to GDP to about 45 percent from about 21 percent two decades ago.
According to Jefferies, government policy should now shift to facilitating diversification of exports, which are dominated by diamonds.
Latest Statistics Botswana (SB) figures show that both polished and rough diamonds contribute 70 percent of exports, a trend Jefferies said leaves the country highly susceptible to balance of trade shocks.
“The economy is now more diversified than it is often recognised. The share of mining in GDP in now less than half of its peak so to that extent diversification has been successful,” said Jefferies at the launch of the Deloitte CFO 2014 survey result in Gaborone this week.
With the structure of the economy shifting from mining driven to services driven, the economist says that the prevailing trend where services dominate growth but not exports will result in long-term sustainability problems.
The latest statistics reflect that while the services sector contributes 45 percent to GDP, its contribution to export stands a mere seven percent.
“With mining continuously declining, the economy is also transitioning from an exporting sector to a non exporting sector. This will in the future result in balance of trade deficits. So I believe government should be focusing more on facilitating export diversification rather than import substitution,” he added.
While the trade, transport, financial and business sectors have grown significantly; the services sector has primarily targeted the domestic market resulting in the sectors low contribution to the exports.
According to the results of the Deloitte CFO 2014 survey, business which have traditionally relied on government projects and tenders for sustainability, are cautious about investing in the rest of Africa in 2014.
Of the 34 respondents from Botswana indicated that companies favoured expanding within their region rather than other parts of the continent. Of those looking to expand into new markets in the rest of Africa, 29 percent favoured Southern Africa while only six percent indicated a desire to expand in each of East and West Africa.
This year 34 CFOs and Financial Directors participated in the Botswana survey with financial services (32 percent), construction (15 percent) and mining (12 percent) accounting for the majority of respondents.