Economy powers past pre-COVID levels

Mbongeni Mguni - Lewanika Timothy | Monday July 10, 2023 06:00

Gross Domestic Product (GDP) figures released by Statistics Botswana indicate that while all sectors monitored by the data agency recorded positive growth of more than 0.3 percent in the first quarter, electricity and mining and quarrying led the pack with 19.3% and 10.8% respectively.

The electricity sector’s performance was anchored in greater generation at the Morupule power stations, which saw the volume of electricity imports drop by 25.1% in the first quarter. Statistics Botswana estimates that generation at Morupule A and B increased by nearly 40% in the first quarter. However, the country suffered short-lived power blackouts in the second quarter due to transmission line failures.

The GDP figures indicate that resurgent copper production lifted the country’s economic performance, with other data showing that exports of the base metal reached P1.4 billion in the first quarter of the year, more than double the corresponding period last year.

Khoemacau Copper, the country’s sole copper producer, put out its first concentrate in June 2021 and has now ramped up to full processing capacity of 3.65 million tonnes per annum, which is expected to produce as much as 65,000 tonnes of copper in concentrate this year.

The increase in copper exports is also riding on a favourable price tide, as demand for the red metal grows in global markets. In a recent research note, economists at Wolfe Research, a global data firm, said the reopening of China following the pandemic and the growing energy transition momentum globally, have stoked demand for the limited copper production, strengthening prices of the metal.

Diamond production also helped first-quarter GDP growth, with the output from the country’s mines increasing by 10.9 carats, as global demand for the shiny stones continued its post-pandemic rebound.

Other sectors with significant expansions in the first quarter include education, accommodation and food services, as well as transport and storage. The agriculture, forestry and fishing sector registered a growth of 2.3 percent, bucking a trend of usually underperforming in the economy.

“The overall performance was mainly due to the increase in real value added of crop farming & horticulture and livestock farming by 2.4 and 2.2 percent respectively. “The growth in the livestock farming sub-industry was attributable to the more cattle marketed during the quarter under review. “Cattle sold to Botswana Meat Commission registered a significant growth of 63.7%,” Statistics Botswana researchers noted.

Overall, the non-mining GDP increased by four percent in the first quarter of the year, compared to 3.9 percent in the same quarter of last year.

BA ISAGO Economics lecturer, Lovemore Taonezvi, told BusinessWeek that the 5.4 percent GDP growth in the first quarter suggests the economy is expanding at a significantly faster pace than pre-pandemic levels.

“Compared to the 2.7 percent historical average for the pre-pandemic five-year period running from 2015–2019, based on the World Bank database, the current growth rate indicates the economy is rebounding strongly from the pandemic-induced slowdown,” he said. “However, the level of GDP may still need to recover further to match where it would have been without the pandemic.

He added: “The GDP figures show an economy that is accelerating rapidly and exceeding pre-pandemic trends. “The 5.4 percent quarterly growth, which follows 5.9 percent growth in the previous quarter, puts the economy on track for annual growth well above the historical 2.7 percent average. “The growth seems broad-based but still uneven across sectors.”

Taonezvi said sustaining high growth will require continued policy support along with strong private sector activity and investment, especially in non-mining sectors.

“Other indicators should be monitored to ensure the benefits of growth are shared widely since high GDP growth alone does not mean living standards and job opportunities are also improving across the economy,” he said. “Inequality and poverty are still major concerns in the economy.”