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State of economic crunch to be revealed

Empty streets: The first lockdown is credited with stemming the initial onslaught of COVID-19 PIC: KENNEDY RAMOKONE
Statistics Botswana is scheduled to unveil Gross Domestic Product (GDP) figures for 2020 on March 31, revealing the official depth of the hole the local economy has climb out from due to (the coronavirus) COVID-19, BusinessWeek has established.

Statistics Botswana will release the fourth quarter GDP figures next week, which will in turn show the full year economic performance.

Ahead of the official figures, forecasts by different authorities indicate the economy will be shown to have contracted by between 7.7 percent and 8.9 percent in 2020. Should the March 31 figures indicate an 8.9 percent fall, the economy will have recorded its worst contraction in history on an annual basis, higher than the -7.7 percent seen in 2009 during the global recession.

 The African Development Bank (AfDB) in a recent report, said the local economy’s performance in 2020 was expected to be severely impacted by COVID-19 lockdowns and movement restrictions.

The Bank’s researchers expect that the economy shrank by 8.9 percent last year and will rebound by 7.5 percent this year. Both forecasts are less optimistic than government’s own predictions of a 7.7 percent contraction last year and an 8.8 percent rebound this year.

“On the supply side, mining output declined significantly, mainly due to falling global demand for diamonds,” AfDB researchers said in the African Economic Outlook released recently.

“Non-mining output also shrank, from both the pandemic-induced domestic restrictions and weaker global markets.

“The subsectors most affected were trade, construction, manufacturing, hotels and restaurants, and transport.

“Subdued aggregate demand also hurt investment and consumption.”

The Bank’s researchers said the economic rebound expected this year would ride on the receding effects of COVID-19, as well as the rebound in commodity prices as economies reopen.

“Upside risks to the growth outlook hinge on the steadfast implementation of business environment reforms and government interventions against COVID–19, including the Economic Recovery and Transformation Plan (ERTP).

“Downside risks include lower diamond demand if the global economic recovery is weakened by renewed waves of infection.”

Ratings agency, Standard & Poor’s meanwhile, expects that the local economy shrank by 7.7 percent last year and will rebound by six percent this year. In a weekend commentary accompanying a recent decision that kept Botswana’s sovereign credit rating as one of Africa’s

highest, S&P’s said it was expected that Botswana’s economy would return to pre-pandemic levels in 2022, led by the mining sector’s recovery.

“At the same time, we think that the tourism sector, another important sector, accounting for about 10% of the country’s exports before the pandemic, will recover only slowly starting in 2022 and hinges on the pace of global vaccination,” S&P’s analysts said. The analysts, however, said they expected the non-mining sectors, excluding government services, to continue underperforming in 2021 compared with pre-pandemic growth due to intermittent restrictions in the country, “given that the vaccine rollout is gradual”.

Government, meanwhile, is feeling slightly more buoyant about the economic performance in 2020, with Mineral Resources, Green Technology and Energy Security minister, Lefoko Moagi noting a stronger than expected recovery in mining in the last quarter of the year.

Revenues from mining activities went up from an initial forecast of P4.7 billion to P5.3 billion due to the recovery seen in the late stages of the year.

“The mining sector is now showing signs of recovery after the devastating 2020 COVID-19 pandemic affected both production and sales of minerals,” he told Parliament last week.

“The signs of recovery are mainly due to companies re-arranging their operations and recovering from the COVID-19 impact which had earlier led to restrictive containment measures, including social distancing, remote working and the closure of commercial activities that resulted in operational challenges.”

Moagi said investors were also showing more confidence in the country’s minerals sector, with Maatla Energy Resources having been granted a licence for a coal mine in the Mmamabula coalfields.

“Some other existing companies are also investing money to increase the life of mine and production such as Karowe diamond underground mine expansion, Morupule coal open cast extension and Jwaneng Mine post Cut 9 studies which are focused on an underground mine,” he said.

Lucara on Tuesday evening announced a $220 million (P2.5 billion) funding package for its project to take Karowe Mine underground.


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