Botswana’s GDP expanded strongly during Q2 2013, growing by 7.9% y/y, from a revised growth of 3.3% y/y during Q1, data from Statistics Botswana reveals. On a quarterly basis, the GDP numbers also came out strong, showing a growth of 4.1% q/q from a contraction of -2.1% during Q1.
Motswedi Securities said the robust Q2 GDP numbers exceeded ‘our expectations’ but shows that the local economy is on the mend as all sectors expanded with the nonmining private sector continuing on an upward trend, growing by 7.7% y/y from a revised 8.2% y/y during Q1.
“It is interesting to note that these strong GDP growth numbers from the non mining private sector comes at a time when business confidence is relatively weak as shown by the last released Bank of Botswana Business Expectations Survey – March 2013 which showed a subdued overall confidence on current business conditions. Only 47% of the respondents showed confidence in the current business conditions,” added the brokerage and research firm.
The manufacturing sector grew by 4.9% y/y from a contraction of -7.8% y/y during the previous quarter and this was mainly led by growth in the meat and meat products due to increased output from Botswana Meat Commission (BMC) and municipal abattoirs. The other manufacturing sub sectors also grew reflecting growth in the diamond polishing and cutting companies.
The Water and Electricity sector which has been in heavy contraction the last two quarters (-121.8% during Q4 2012 and -154.6% during Q1 2013) recovered to a growth of 2.3% y/y during Q2 and this is attributed to a decline in imported electricity which in turn reduced intermediate consumption which was substantially high in the previous quarters against a backdrop of a rise in local electricity generation.
The mining sector whose contribution to GDP increased to 27% during Q2 (19% – Q1) expanded strongly by 15.6% y/y during the quarter from a contraction of -3.6% y/y during Q1. The growth is attributed to a 19.2% increase in diamond production as well as better diamond grades that were recovered during the period from Debswana Diamond mines in Orapa and Jwaneng mines. It is our hope that the increase in diamond production will be met by the corresponding increase in diamond demand on the international market so that the country’s economic recovery is sustained.
Diamond demand in the US, the major diamond market has remained relatively stable although the country’s economic uncertainty is pushing some consumers to gravitate toward cheaper jewellery and smaller stones.
“We however, get comfort from the steady rise in demand for diamonds from new markets such as in China. China (including Hong Kong) is now the world’s second-largest diamond jewellery market after the US. Diamonds have grown in popularity in China’s jewellery sector as affluent Chinese increasingly opt for diamond jewellery over gold as gifts for special occasions and diamonds accounted for 30% of the sector this year, up from 25% in 2008, according to research firm Euromonitor,” Motswedi Securities said.
Projections are that world diamond demand will grow at an average annual rate of 5.9% by 2020, with India and China expected to account for 50% of incremental global demand by 2020, overtaking the US as the largest diamond jewelry market. (Article By Motswedi Securities)
