Economists ring warning bells over Bots’ declining export revenue

By Mpho Tebele

Gaborone – A US$1.3 billion (about 13.2 billion Pula) decline in Botswana export revenue during the first six months of 2017 is extremely worrying, economists have warned.

The warning was made by Econsult, a firm led by former Bank of Botswana deputy governor Keith Jefferies, in a quarterly report.

The report says exports between January and June 2017 were down by 25 percent compared to the corresponding period in 2016.

According to the review compiled by Jefferies and his colleague Sethunya Sejoe, the trend is “extremely worrying” given the fundamental role export-led growth plays in the local economy.

“It will be important to observe this closely and see if the trend continues or if data adjustments cause it to disappear,” the review observed.

The economists cautioned that should the trend continue throughout the remaining half of the year, it would be bad for the economy.

Exports from mining are the main contributor to government revenue and any shortfall in that respect affects government’s expectations.

The economists further noted that the decline was in part due to exchange rate changes, while most of it was due to lower export volumes.

They said the global market for rough diamonds was seasonally slow in the third quarter of 2017.

“There was reduced activity in the downstream diamond market, with polished inventories restocked to sufficient levels in the early part of the quarter,” the economists said.

De Beers Global Sightholder Sales (DBGSS) recorded sales valued at US$1.081 million in Q3 2017, 7.4 percent lower than sales recorded in the same period in the previous year.

The global demand for diamonds was generally stable during the first half of 2017. However, total exports of diamonds in Q2 2017 declined compared to both the previous quarter and to Q2 2016.

Notwithstanding this, the report by Econsult says that several sectors recorded higher annual growth rates than in the previous quarter. These include transport and communications, finance and business services.

Meanwhile, Bank of Botswana Governor, Moses Pelaelo, has said Botswana’s Gross Domestic Product (GDP) grew by 3.1 percent in the 12 months to June 2017 compared to a contraction of 0.7 percent in the corresponding period ending in June 2016.

He said the improvement in growth reflects a 4.9 percent increase in non-mining activity, from 3.3 percent in the same period.

However, the governor said output in the mining sector contracted by 10.1 percent in the 12 months to June 2017 compared to a relatively large contraction of 22.9 percent in the corresponding period the previous year. Botswana, which relies heavily on mining, has been hit hard, by among others, a collapse in commodity prices with a number of mines forced to close or downsides. In recent years, BCL and Mowana Copper mines were on provisional liquidation.

According to Pelaelo, at a meeting held on October 24, 2017, the Monetary Policy Committee (MPC) of the Bank of Botswana decided to reduce the Bank Rate from 5.5 percent to 5 percent.

He said the outlook for price stability remains positive, as inflation is forecast to be within the 3-6 percent objective range in the medium term.

November 2017
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