Report predicts 5% GDP growth for Botswana

Brian Benza
Staff Writer | Tuesday January 22, 2008 00:00

 

'The mining sector encountered some problems in 2006 as output contracted, undermining GDP growth which came in at a little over 4 percent, the weakest performance for many years,' says the report.

'With mining output showing signs of recovering from the setback in 2006, GDP growth is expected to be between 4.5 percent and 5 percent.' Buoyed by strong mining earnings, Botswana's economic growth has been very vibrant in the past decades, averaging over 7 percent, with diamond mining accounting for a third of GDP and around 75 percent of export earnings.

The country's mining sector was at its peak in 2007 as multinationals like Discovery, A-Cap, Norilrisk , Aviva and Diamonex either mined or prospected  for uranium, copper, nickel and diamonds.

The Grant Thornton International Business Report examines the attitudes, plans and trends of 7, 200 businesses in 32 countries, across six continents. It shows that fewer and fewer businesses in Botswana now view globalisation as a threat to their existence, with 65 percent of those interviewed viewing it as an opportunity rather than a threat. In conformity with another business expectation survey recently carried out by the Bank of Botswana (BoB), local businesses expect energy costs to have a major impact on their cost structure this year, while over 50 percent of them also anticipate raw material costs and transport to increase significantly.

The BOB survey showed that a large majority of businesses expect a rise in input costs led by the cost of materials with a net balance of almost 93 percent.

 'The increased demand for materials, especially in South Africa, fuelled by the needs of the massive projects being undertaken in preparation for the 2010 World Cup, are likely to be a major factor underlying these sentiments.  'Expectations of rising transport costs are also very high, as indicated in net balances that average 80 percent for the first half of 2008, and are likely to reflect concerns about rising fuel costs,' the BoB report said. According to the Grant Thornton report, business owners are more optimistic about turnover prospects while they also anticipate an increase in selling prices.

'Forty-six percent more businesses in Botswana expect an increase in the trend in employment growth this year than the previous year,' the report says.

By comparison, the BoB survey arrived at a different finding as far as business expectations of GDP growth are concerned.

It said the businesses expect subdued overall economic growth due to higher input costs and more inflationary pressures subsequently. The survey revealed that although the general business confidence remains high in the economy,  respondents tended to be less optimistic about overall economic activity, expecting (on average) real GDP to grow by 4 percent in 2006/07.