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GDP swells

The year 2019 started with positive growth in the economy albeit at a slower pace.  Even though mining production increased in the first quarter of 2019 it was not the major factor in the swelling Gross Domestic Product (GDP) as is always expected, according to Statistic Botswana. The national statistics agency also reveals a rise in generation of electricity for the first quarter of the year.

According to Statistics Botswana, when looking at the GDP crossover between years of 2018 and 2019, a narrow increase of 0.5 percent was realized. This is the estimated GDP at current prices for the first quarter of 2019 which was P48, 728.9 million compared to P48, 491.6 million registered in the fourth quarter of 2018. The statistical release contains the first quarter of 2019 Gross Domestic Product estimates by economic activity and components of final demand at current and constant prices.

According to the national statistics custodian, during the quarter under review, Trade, Hotels & Restaurants remained the major contributor to GDP by 19.1 percent. The mining and quarrying which was placed with General Government and Finance & Business services at 16.6, 14.5 and 14.3 percent respectively trailed behind the named top contributors of the GDP. Other sectors contribution was below 6.7 percent with Water & Electricity being the lowest at 1.2 percent.

Statistics Botswana says Real Gross Domestic Product for the first quarter of 2019 increased by 4.3 percent and this increase was attributed to the significant growth in real value added of Transport & Communications and Trade, Hotels & Restaurants and industries by 5.9 and 5.7 percent respectively.

Transport and Communications value added increased by 5.9 percent in the first quarter of 2019, according to Statistics Botswana and growth was mainly attributed to the increase in real value added of Post & Communications, Air transport and Road Transport by 7.6, 6.2 and 5.6 percent respectively. According to Statistics Botswana, Trade, Hotels and Restaurants real value added increased by 5.7 percent in the first quarter of 2019 compared to a decrease of 2.0 percent registered in the same quarter of the previous year.

This recorded positive growth is attributed to an increase in real value added of Retail Trade, Hotels & Restaurants and Vehicle Dealers sub industries by 7.1, 6.2 and 4.7 percent respectively. In the first quarter of 2019 Airport Junction undergone rapid expansion and this is said by Statistics Botswana to have been vital in boosting the increase in the Retail Trade value added. New mall around the county were also opened in this quarter of the year also contributing to increase in the Retail Trade Value hence the growth in GDP.

Despite being admired as one of the biggest participant of the local economy Banks was trailing behind at 5.8 percent while Business Services and Real Estate each scored 6.4 and 6.2 percent respectively while contributing in the 5.4 percent increase in the real value added of the Finance and Business Services industry.

The Manufacturing real value added increased by 4.1 percent in the first quarter of 2019 compared to an increase of 4.6 percent registered in the same quarter of the previous year, according to Statistics Botswana. This depiction rounds up an increase in real value added of Other Manufacturing and Beverages sub industries by 4.8 and 1.5 percent respectively. Other Manufacturing comprises of all manufacturing entities except those dealing with Production, processing & preserving of meat, Beverages, Textiles and Leather & leather products. Also, the Other Manufacturing sub industry includes diamond cutting and polishing value added.

In mining whose real value added increased by 3.3 percent was driven by Soda Ash. In production of these two minerals, Soda Ash produced the most with 14.3 percent increase in tonnes while diamond production in carats rose by 3.3 percent. This all happened in the first quarter of 2019. Debswana production increased by 2.0 percent and this was spiked by 12.0 percent increase in production at Jwaneng mine. Orapa was once again an impediment in diamond production

Soda AshThe increase in the real value added of Mining by 3.3 percent was mainly driven by Soda Ash and Diamond value added. Soda Ash production in tonnes went up by 14.3 percent while Diamond production in carats rose by 3.3 percent in the first quarter of 2019 compared to an increase of 11.6 percent recorded in the same quarter of 2018. Debswana production increased by 2.0 percent and this was driven by Jwaneng production which increased by 12.0 percent. Orapa production decreased by 7.0 percent as a result of plant shut down in March 2019. According to Statistics Botswana, non-mining GDP increased by 4.4 percent in the first quarter of 2019 compared to 3.7 percent registered in the same quarter of the previous year.

The Water and Electricity value added at constant 2006 prices for the first quarter of 2019 was P266.2 million compared to P256.3 million registered in the same quarter of 2018, recording an increase of 3.9 percent, according to Statistics Botswana.  The national statistics centre says in the first quarter of 2019, Electricity recorded a positive value added of P31.0 million compared to P30.1 million registered in the same quarter of 2018 leading to a positive growth of 3.0 percent.

Statistics Botswana said the increase in the electricity real value added is attributed to a rise in the local electricity production by 13.8 percent. This depiction also sees imports of Electricity going down by 31.8 percent during the first quarter of this year. According to Statistics Botswana, the significant increase in local Electricity production were largely attributed to improved performance of the Morupule B Power Station with a view to meet the country’s electricity demand.

 Electricity Generation increases

According to Statistics Botswana, the Index of Electricity Generation (IEG) stood at 184.8 during the first quarter of 2019, reflecting a year-on year increase of 13.8 percent compared to 162.3 recorded during the corresponding quarter in 2018. The quarter-on-quarter comparison shows an increase of 71.5 percent, from 107.7 during the fourth quarter of 2018 to 184.8 during the current quarter.

This statistical brief is intended to apprise on Electricity Generation, Importation and Distribution by presenting Monthly, Quarterly and Yearly Volumes as well as Indices for Electricity Generation in Botswana. Also included are Year-on-Year and Quarter-on-Quarter Percentage Changes in Indices of Electricity Generation from 2009 to the first quarter of 2019. In subsequent sections of this report, emphasis will be on the first quarter of 2019, compared to the fourth quarter in 2018, and the corresponding quarter in 2018.

This report uses 2013 as the base year. The release further shows changes in the volume of electricity generation in a given period against the base year (2013), and hence provides a reflection of the trend in the local electricity sector. Statistics Botswana also studies the local generation and imported electricity to come up with electricity that is available for distribution in Botswana. This does not take into account electricity used for auxiliary services, pumping, network losses as well as production of electricity through incineration of waste, according to Statistics Botswana.

An increase of 0.6 percent (6,068 MWH), from 959,650 MWH during the first quarter of 2018 to 965,718 MWH during the first quarter of 2019 was recorded by Statistics Botswana. From a quarter-on-quarter perspective, distributed electricity increased by 0.3 percent (2,482 MWH), from 963,235 MWH during the fourth quarter of 2018 to 965,718 MWH during the quarter under review, according to Statistics Botswana.

Electricity generated locally contributed 80.4 percent to electricity distributed during the first quarter of 2019, compared to a contribution of 71.1 percent during the same quarter in 2018, according to the statistics parastatal, this gives an increase of 9.3 percentage points. According to Statistics Botswana, on the other hand, a quarter-on-quarter comparison shows that the contribution of electricity generated to electricity distributed during the current quarter increased by 33.4 percentage points compared to the 47.0 percent contribution of locally generated electricity during the fourth quarter of 2018.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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