Water & Electricity sector drags GDP growth during Q1 2014

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Morupule Power StationBotswana GDP grew by 4.7% during q4 as revealed by data from Statistics Botswana. On a q/q basis the total GDP grew by 3.6%; the largest growth for all the quarters in 2013. The slower growth was mainly due to the decline in the Electricity sub sector, which recorded the only negative growth of 205.5% relative to the 63.5% growth posted during q3 reflecting the acute power and water shortages experienced in the country during the period.

Although other sectors such as mining and manufacturing grew, the rate of growth was slower than the previous quarter on a y/y basis. For example, the mining sector, which is the biggest contributor to the country’s GDP (at 19.5%) grew by 9.8% y/y during Q4 from a higher growth of 21.2% y/y during Q3.

The manufacturing sector grew by 3.4% y/y during Q4 from a higher growth of 5.3% y/y the previous quarter. Real exports of goods and services rose by 14.7% (as compared to a 10.6% increase posted in q4; 2012) whereas imports soared by 12.5% (relative to the 27.3% posted q4: 2012).

On an annual basis, GDP for 2013 averaged a 5.9% which is quite modest than the growth of 4.3% in 2012.

The mining sector has shown some resilience despite the sluggish growth as compared to the previous quarter due to a 12.1% increase production after Debswana recovered better grades at its Orapa and Jwaneng mines. The sluggish contribution of the mining sector also revealed the diversification strategy from diamond industry as the non-mining sector contributed 14.2% as compared to 13.6% on the prior quarter.

Going forward we expect the non-mining sector to tick up due to the lower interest rates which makes it conducive for local businesses including private entities to expand their assets by borrowing at cheaper rates. However the Electricity sub sector could continue generating a negative growth to the economy as supply remains a major challenge.

The Water and Electricity segment has been contributing negatively to the economy since q1 2011 due to the increased consumption and higher costs within households and businesses. On the global space, US have shown some resilience as the Fed continues to scale back its quantitative easing programme following recent upbeat nonfarm payrolls and other economic indicators.

This uptick from the largest consumer of our diamonds could boost demand going forward and also the Trade, Hotels & Restaurants sector which contributed 15% to total GDP in 2013. Meanwhile China’s growth remains subdued as the country has been recently facing some static growth in manufacturing activity. China which is the second largest consumer of diamonds recorded a PMI of 50.4 March; a slight uptick from February, revealing some paltry rebound on the manufacturing activity. (Motswedi Securities)

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