Economy grew 11.4% in 2021, fastest since 1989
Mbongeni Mguni | Sunday May 15, 2022 21:02
Figures provided by Statistics Botswana recently indicate that diamonds anchored growth last year, as both resurgent demand for the precious stones and relaxed border movements helped the sector’s performance.
“Diamond Traders recorded a massive growth of 78% as opposed to a decline of 36.7% recorded in the previous year,” Statistics Botswana researchers said in an update.
“The positive growth is due to improved demand for diamonds from the global markets and sales appetite during the year 2021.
“The increase of 29.9% in the real value-added of the Mining and Quarrying industry was mainly due to the significant growth in the real value-added of diamonds by 31.4%.”
Debswana, the country’s primary producer of diamonds, enjoyed a 35% jump in production last year to 22.3 million, the highest output level since 2019, as global demand for the precious stones reawakened. State-owned diamond trader, Okavango Diamond Company also sold $963 million (P11.8 billion) worth of rough diamonds in 2021, an all-time high for the 10-year-old company.
Statistics Botswana numbers indicate that nearly all economic sectors rebounded from the COVID-19 induced slump last year, with the only contractions recorded in agriculture as well as accommodation and food services.
Besides minerals, other high performing economic sectors for the year include wholesale and retail (14.6%), water and electricity (9.7 percent), administration and support services (8.9 percent) as well as manufacturing with 8.1 percent growth.
In terms of contributions to the economy by the different economic activities, the public administration and defence sector led the pack with 18.8%, followed by construction, wholesale and retail and finally, mining and quarrying.
The economy's expansion by 11.4% exceeds the government’s own projections of 9.7 percent growth for 2021, although late last year, the finance ministry said it expected that the economy could rebound by more than 10% based on the performance of diamonds.
While the rebound in 2021 is among the highest in Africa, it comes after an 8.7 percent contraction in 2020, the country’s worst economic recession since Independence.
Prominent economist, Sennye Obuseng told BusinessWeek that while the robust growth recorded in 2021 was a reason for cheer, there were several caveats.
“What should excite is that it is a strong rebound from a deep recession which is important because sometimes loss can entail a certain permanence about it and if you lose something, you want to be able to recover as quickly as possible,” he said.
“However, at the same time, we should be mindful of the reality that most of this rebound represents the return to work of capacity that had been idle.
“It does not represent incremental capacity.
“What’s happening is that the economy is working its way back to its trend path but it is not back to where it was in 2019 before COVID-19 arrived.”
Obuseng said despite the high growth in 2021, the economy was still inferior to where it would have been had the 'deep shock' of COVID-19 not happened.
“Of course, we don’t want to say it’s only COVID-19 that’s a problem because there are many factors.
“We should be happy that we are recovering as the 11.4% suggests but we should not be over-excited because it is a claw-back to that trend path and we are still far from that,” he said.
Government and the International Monetary Fund expect the local economy to expand by 4.3 percent this year, slightly above the four percent base case target for the National Development Plan (NDP) 11. NDP 11 ends on March 31 next year, with the economy having exceeded the target only in 2018 and 2021.