Morupule B failures retard economic growth

Morupule B power station's four units broke down between September and October last year.
Morupule B power station's four units broke down between September and October last year.

The economy grew at a slower rate in the third quarter of last year compared to the same period in 2013 on the back of reduced production in the electricity and non-diamond mining sectors.

According to figures recently released by Statistics Botswana (SB), economic growth measured by real Gross Domestic Product (GDP) went up by 5.4 percent in the third quarter of 2014 compared to 6.9 percent accrued in the same quarter in 2013.

Despite robust economic activity in diamond production, trade and finance sectors, the break down of the Morupule B power station reduced the electricity sector’s value addition while pushing up power imports in the period.

Weak production in the copper and nickel industry on the other hand  also helped offset the third quarter GDP growth numbers in the period due to smelter outages at BCL Mine.

“At industry level, most of the increase was attributed to Trade, Hotels & Restaurants, Mining and Finance & Business services sectors, which increased by 7.8, 7.4 and 6.9 percent respectively.

“All other sectors recorded a positive growth of at least 1.4 percent over the period. The exception is Water & Electricity, which recorded a decrease of 57.3 percent.

“ The increase in real value added of the mining sector was attributed to diamond production which registered a growth of 14.7 percent.

The growth of the mining sector was offset by the copper/nickel industry which realised a negative growth of 52.1 percent because there was no production for the whole month of July, and the beginning of August due to the smelter outage,” said Statistics Botswana.

Two of the four units at the 600MW Morupule B Power station broke down in September last year, with the other two also failing in October placing the country in a precarious position of relying on imports for 100 percent of its electricity needs.

The failure of the plant heavily knocked down the real value added by the electricity sector due to the rise in intermediate consumption as imports jumped in the quarter.     

Morupule B, which was initially supposed to generate 600MW from October 2012, has been affected by technical glitches leading to a negative contribution to economic growth in the past two years.

The statistics agency is expected to release the fourth quarter GDP figures by the end of March this year, which will give a complete picture of the 2014 full year economic growth trend.  Earlier analysts’ forecasts see the 2014 economic growth at around five percent.

Meanwhile, SB also announced that as at the third quarter of last year, mining continued to be the largest contributor to GDP. Its contribution to GDP stood at 21.5 percent followed by Trade, Hotels & Restaurants and General Government at 15.6 and 14.9 percent respectively.

The economy now depicts a more diversified structure with the mining sector’s contribution halved from over 50 percent 20 years ago while the services sector has shored up.

On the other hand, the services sector, which comprises 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.

With the economy now relatively diversified in terms of output, economic pundits have however expressed concern   about the dominance of diamonds in exports.

Available statistics show that both polished and rough diamonds contribute 70 percent of the country’s exports with services at a mere seven percent, a trend analysts say leaves the country highly susceptible to balance of trade shocks.

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