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GDP takes a knock

Impact of BCL closure felt two years later

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GDP takes a knock
POSITIVE OUTLOOK: Dr Kganetsano

There has been a minimal increase in Botswana’s Total Gross Domestic Product in the last two years.

While output of all non-mining sectors registered a positive growth in the first quarter of 2018, mining is still the main contributor to the national purse.

According to the Bank of Botswana 2017 Annual report, real GDP grew by an estimated 1.8 percent in the 12 months to September 2017, in comparison to a more rapid growth of 2.3 percent in the corresponding period ending September 2016.

In an economic briefing for the Francistown business community held at Cresta Thapama Hotel on Monday, Director of Banking Supervision Department Dr Lesetedi Senatla said this variation in output was due to a contraction in the mining sector.

The report shows that GDP grew by 2.4 percent in 2017 compared to 4.3 percent in 2016, and further shows that mining output fell by 11.2 percent in 2017, compared to a contraction of 3.5 percent in 2016.

“The contraction of 11.2 percent in mining output in 2017 had a negative impact on water and electricity output,” said Senatla.

He said the negative growth experienced by Water Utilities and Botswana Power Corporation was directly linked to the closure of Tati Nickel and BCL mines in October 2016.

“BCL was the biggest consumer of electricity and water, and its closure saw a decline in both sectors,” he said.

Output growth of the water and electricity sector slowed from a substantial increase of 95.2 percent in the 12 month-period to September 2016 to 19.5 percent in the year to September 2017.

The temporary closure of Soda Ash, which saw a contraction of 11.8 percent during a period of the plant’s refurbishment.

“In the first quarter f 2018, all sectors experienced a lower growth compared to the previous period. It is now in 2018 where we are feeling the effects of the closure of the BCL mine and others across the country,” Senatla said, adding that there’s a strong correlation between mining and total GDP.

While the continued negative output in the mining sector is adversely affecting the country’s total GDP, the reports however paints positive economic growth prospects.

A 5.3 percent growth is projected for the year 2018, driven largely by the recovery in mining activity, accommodative monetary conditions in the domestic economy, budgeted expansion in government expenditure, as well as stability in the supply of key inputs, such as water and electricity.

Global output growth is also projected at 3.9 percent compared to 3.7 in 2017.

“This positive global outlook is mainly supported by accommodative monetary policy and fiscal expansion in advanced economies,” said Director of Research and Financial Stability Department, Dr Tshokologo Kganetsano.

He further added that for emerging markets and developing economies like Botswana, the forecast expansion in output reflects the impact of anticipated rebound in prices of some commodity exports and improved growth in some key export markets.

“Domestically, government revenue continues to be heavily dominated by mineral and customs and exercise receipts which are susceptible to market fluctuations. However, prospective recovery of commodity prices and improved global demand should support performance of the domestic economy,” said Kganetsano.