November 24, 2017

Power and Water shortages halt Botswana’s economic growth

Botswana’s economic growth on the decline

Power and water shortages in Botswana seem to be putting more strain on already fragile economy, and this is on the backdrop of decline in minerals revenues. Mining and mainly the diamond industry have been the major export earners, but have declined lately as demand has softened.

Standard and Poor recently revealed that Botswana’ s GDP growth will slow down between 2015-2018 as a result of weaker performance of diamond and prices. In addition, the Botswana economy continues to face water and power shortages, leading to water rationing and power cuts, thus affecting all the industries in the country.

The challenges facing China as well as the declining liquidity in emerging markets resulting in weaker performance of diamond demand and sales has fueled Botswana’ situation.

It is estimated that the diamond industry represents less than one-third of Botswana’s GDP, about one-third of its fiscal receipts, and more than two-thirds of exports.

It is envisaged that the real GDP growth will slow to 2.6% in 2015 before picking up again to 4% by 2018. On a weighted per capita basis, we expect real GDP per capita growth to average 2.3% over 2015-2018, in line with that of peers. We also expect that wealth levels, measured by GDP per capita, will remain below US$8, 000 in 2015.

This has led the government to adjust downwards to 2.6% the expected domestic growth for 2015, and this was revealed by President Ian Khama when delivering his state of the nation address in November 2015.

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