SADC Faces Bleak Future

Gaborone ‑ The Southern African Development Community (SADC) is facing major risks, Botswana’s Finance Minister, Kenneth Matambo, warned in his budget speech recently.

These risks include increasing inflation pressures, as a result of rising commodity prices ‑ particularly food and oil; depreciating exchange rates in the face of constrained foreign exchange reserves; and a narrow fiscal policy space due to low revenues and declining aid flows.
He said the region remains predominantly undiversified with primary production sectors based mainly on mining and agriculture, adding that during 2012, economic growth in the SADC region averaged 4.5 percent while average inflation rate for the region stood at 7.8 percent.
During the same year, overall fiscal balance amounted to a deficit of 2.6 percent of GDP, while public debt stood at 36.4 percent of GDP.
Since launching of the SADC Free Trade Area (FTA) in 2008, focus has been on consolidation of the FTA to ensure that it is effective in promoting intra-SADC trade.
“To this end, a comprehensive audit for 2012 on the FTA is underway.
The audit will look at all aspects of the Trade Protocol implementation; assess progress made; and identify weaknesses and opportunities, as the region strives to advance its integration process,” he said.
Further, following the launch of a number of initiatives aimed at improving the SADC Investment Climate and promoting the region as an investment destination, a SADC Investment Portal has been developed to serve as an information database on the SADC investment climate and available opportunities.
The SADC Regional Infrastructure Development Master Plan has finally been completed.
“The Plan is a key strategic framework to guide the implementation of trans-boundary infrastructure networks in an integrated and co-ordinated manner.
“The framework also identifies priority projects in the six sectors of Energy, Transport, Water, ICT, Tourism and Meteorology,” said Minister Matambo.
But the economic challenges are not unique to SADC. According to the World Economic Outlook released in October 2012 by the International Monetary Fund (IMF), global economic growth forecasts have been revised downwards.
The Outlook indicated that the global economy was forecast to grow by 3.3 percent in 2012 down from 3.8 percent recorded in 2011.
For advanced economies, output growth was forecast to be 1.3 percent in 2012 compared to 1.6 percent achieved in 2011.
Growth in Emerging Markets was projected to slow down significantly to 5.3 percent in 2012 from 6.2 percent achieved in 2011. The latest IMF World Economic Outlook of January 2013 moderately reduced the projected growth rates for 2013 and 2014, and warned that downside risks in major Advanced Economies remain significant.
Growth of world trade volume was anticipated to substantially slow down to 5.8 percent in 2012 compared to 12.6 percent in 2011.
This was expected to result in reduced revenues particularly for Sub-Saharan countries, as imports by Advanced Economies were expected to slow down to a growth rate of 1.7 percent in 2012 compared to 4.4 percent growth recorded in 2011.
“Given this subdued prospect of economic growth in the global economy and the threat of a possible Euro crisis, many economies are reducing their fiscal deficits as a precautionary measure.
“For Botswana, it remains crucial to exercise restraint in Government spending, focusing only on national priority areas and replenishing our reserves to levels that can sustain unforeseeable future shocks,” said Minister Matambo.


February 2013
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