Diamonds, base metals to drive growth

SHARE   |   Monday, 29 January 2018   |   By Kabelo Adamson
Moatlhodi Sebabole Moatlhodi Sebabole

There is likely to be an improvement in economic growth which is expected to be driven by pick up global demand for commodities such as diamonds and other base metals. Government forecasts the economy will register a 4.7 percent and 5.3 percent growth in 2017 and 2018 respectively, however economists argue the figures may be overly optimistic, saying the numbers realistically will be below those provided by government. A Research Manager at FNBB, Moatlhodi Sebabole, said the figures projected are too high considering that the dynamics that spur growth have changed. He said even diamonds which are the biggest revenue earner for government are no longer being produced at the levels prior to 2015 and therefore it would not be wise to expect such numbers. He said growth will be impacted by limited exports which have not been diversified even after efforts have been made to achieve diversification. Government, through the ministry of finance and economic development, has said growth will be driven mainly by services sector while the mining sector is expected to recover in line with the positive global economic prospects. Sebabole said at FNBB they project growth of 3.8 percent in 2018, which is lower than figures forecast by government. He agreed that the mining sector, in particular diamonds would see an improvement this year which is in line with global economic prospects and also said prices for base metals such as copper and nickel are expected to improve. According to the FNBB economist, diamond trading will be boosted by emergence of new markets besides traditional consumers such as China, the US and India. Business confidence is growing and with water and electricity supply stabilising, Sebabole said this will further improve economic prospects of the country this year.

Budget speech
In two weeks the minister of finance and economic development is expected to present budget speech for the 2018/19 financial year. Sebabole said this is going to be an interesting one, firstly because it is the second year of NDP 11 and secondly the last year of the Economic Stimulus Package (ESP). Mostly it is the budget in which the country will have a new President as President Ian Khama is to step down on the 31st of March with Vice President Mokgweetsi Masisi taking over the next day in line with the constitution. Sebabole said he expects the coming budget to be expansionary in that spending is likely to increase with a large amount of money going towards social expenditure. He said social expenditure is likely to increase as the new president might come up with programmes as he seeks to make himself popular with the citizens, adding that with the general elections approaching next year. Sebabole said government revenue is expected to be boosted by prospects of improvement in diamond sales which will see government raking in more royalties and taxes as global prospects are improving.

The ESP was introduced by the outgoing president Ian Khama in 2015 at a political event meant to jumps-start the economy. Targeted areas included tourism, agriculture, construction and manufacturing among others. The programme was meant to run for three years and the upcoming financial year would be the last of the programme which on the ground has been mainly focusing on the construction side while other sectors appear to be neglected or aborted. On whether the ESP has achieved its envisaged results, Sebabole said it would be difficult to assess whether the ESP has been able to jump-start the economy or not, simply because the ESP was just part of the existing expenditure and did not improve exports in anyway. According to Sebabole, ESP was a good initiative but not in the current form where expenditure has gone into areas that would have otherwise gone into building of hospitals and nurses houses is something that was always going to be done regardless of the circumstances. He said ESP should have been regarded as a success if at all it has substituted exports and stimulated economic activity with activities that generate value, including bolstering the private sector. Sebabole said the absence of Public Private Partnership (PPP) Act has made it difficult for the ESP to achieve intended results.