Services sector drives economic growth


The services sector drove economic growth in the first quarter of the year as production in the country’s traditional economic mainstay, mining slowed.

According to figures released by Statistics Botswana this week, Real Gross Domestic Product (GDP) increased by 4.3 percent in the first quarter of 2015 compared to 3.6 percent accrued in the same quarter in 2014.

“At industry level, most of the increase was attributed to Trade, Hotels & Restaurants, General Government and Finance and Business services sectors which increased by 6.1, 5.6 and 5.4 percent respectively.

“Mining increased by 1.2 percent compared to 10.0 percent realised in the first quarter of 2014,” said SB in a statement.

 The slower growth in mining was attributed to a decline in diamond production by 2.5 percent compared to 33.9 percent registered in the same quarter of 2014. On the other hand, copper and nickel production increased by 14.9 percent on year-on- year basis and decreased by 15.3 percent on quarter-on-quarter comparison. “The decline was mainly attributed to the closure of Discovery Metals Limited (Boseto) copper mine in March 2015,” stated SB.

Boseto Mine early this year shut down after Discovery Metals was placed under provisional liquidation. In the period, there was a significant improvement in the value added by the water and electricity sector as it decreased slightly by 1.7 percent as compared to 236.4 percent decrease realised in the fourth quarter of 2014. The improvement was mainly attributed to the increase in local electricity production by 63.2 percent as two units were running at Morupule B while the country’s two-diesel power stations complemented supplies.

 Economist Keith Jefferis said that the first quarter growth figures were encouraging, especially given that mining growth slowed.

 “We still see growth for 2015 as a whole at around 4.5%.

So far, the main drivers of growth in 2015 are services (wholesale, retail, hotels, transport, communications, finance, business services), but we see growth in most of these sectors falling during the year,” said Jefferis. 

The International Monetary Fund (IMF) forecast Botswana to grow by 4.5 percent in 2015 while government’s estimate is slightly higher at 4.9 percent. The first quarter growth figures mirror analysts’ views that the 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 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.

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