Services sector anchors economic growth
Brian Benza | Friday October 2, 2015 18:00
Data released by Statistics Botswana (SB) this week shows that economic growth as measured by Real Gross Domestic Product (GDP) went up by 2.5 percent in the second quarter of 2015 compared to 3.4 percent realised in the same quarter in 2014.
Economic sectors that recorded positive economic growth include trade and hotel, finance and business services sector while the mining and electricity and water sector registered negative growth.
“The hotels and restaurants, finance and business services and general government sectors increased by 6.9, 5.8 and 5.8 percent respectively. All other industries recorded a positive growth over the period with the exception of the water and electricity and mining sectors, which recorded a decrease of 41.1 and 8 percent respectively,” stated SB.
The increase in the real value added of the trade, hotels and restaurants sector was mainly due to the increase realised in vehicle dealers, hotels and restaurants and filling stations, which went up by 10.2, 8.3 and 8.2 respectively.
The increase of 5.8 percent recorded by the finance and business services sector was due to the increase in banks and real estate, which registered a growth of 8.5 percent and 6.7 percent respectively.
On the other hand, the mining industry’s value added decreased by eight percent compared to a decline of three percent realised in the second quarter of 2014.
The negative growth rate of the mining sector was attributed to a decline in diamond production of 5.7 percent in the quarter under review while copper and nickel production decreased by 12.9 percent in the second quarter of 2015 compared to 21.3 percent recorded in the second quarter of 2014.
“The closure of Discovery Metals Limited (Boseto) copper mine in March 2015 also attributed to the decline in copper/nickel production. Soda Ash recorded a decrease of 55.2 percent. This was mainly because there was no Soda ash and Salt production in June 2015 due to plant refurbishment,” said SB.
The services sector was also the driver of a revised 3.8 percent economic growth rate in the first quarter of the year as production in the country’s traditional economic mainstay, mining, slowed.
The International Monetary Fund (IMF) forecast Botswana to grow by 4.5 percent in 2015 while government has trimmed down its growth target from 4.9 percent to 2.6 percent due to the downturn in the diamond market.
Although the dominant role played by the services sector is in part due to the slowdown in mining industry, the latest trend is also a reflection of a more diversified economy.
Statistics show that the economy is now more diversified in production terms with mining’s contribution to GDP having fallen to 26 percent from over 50 percent 20 years ago.
On the other hand, the services sector, which is comprised of trade, finance and business services as well as transport and communication, has significantly shored its contribution to GDP to about 45 percent from about 21 percent two decades ago.
Botswana’s biggest challenge, however, remains that while the services sector now contributes 45 percent to GDP, its contribution to export stands at a mere seven percent while diamonds make up 70 percent of exports.