Economic Outlook dampened by Utility Shortage

We now expect the economy to grow below trend in 2015 and 2016 due to the intensification of the power and water shortages as well as a slowdown in regional trade and a battling mining sector. These dynamics came through strongly in the 2Q15 GDP number where growth slowed to 2.5% y/y (3.4% in the same time last year), with both the mining and utility sectors contracting.

Mining activity, which accounts for approximately 22% of GDP and 36% of fiscal revenue, has slowed due to the struggling diamond industry (80% of Botswana’s mining revenue), falling copper and nickel output (following the closure of Discovery Metals Limited (Boseto)) and lower production of soda ash. Specifically, diamond revenues are being negatively affected by weak global demand, high rough diamond prices, elevated stock levels and tight credit conditions for diamond site holders. Worryingly, while Debswana has cut its 2015 production (and sales) forecasts by around 15%, current sales levels are only hitting 60% of revised expectations. If this trend continues, it poses additional downside risk to next year’s GDP growth forecast.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top
Scroll to Top