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Botswana to catch cold from SA struggling economy

Publishing Date : 03 December, 2019

Author : AUBREY LUTE

South Africa, one of Africa’s biggest economies and most advanced is projected to go into significant slowdown in the coming year 2020, this is because of a weak economic growth, deteriorating debt situation and other setbacks for state-owned enterprises currently besieging the over 50 million population country.

Leading global economic think tanks, the International Monetary Fund (IMF) and S&P Global Ratings, have called on South Africa to enact urgent economic reforms. A report issued by the IMF released on Monday following a recent research mission predicted that on current policies, the medium-term growth outlook would remain subdued, accompanied by muted inflationary pressures. According to the IMF, economic growth is set to remain below population growth for the sixth consecutive year in 2020.


In their 2020 Outlook for Emerging market also released this week US rating agency Moody’s revealed that South Africa‘s persisting high unemployment, income inequality and the social and political challenges are proving to be strong obstacles to the government’s plans to raise potential growth. This week at the African Securities and Exchange Association Conference hosted by Botswana Stock Exchange (BSE) in Kasane, First National Bank Botswana (FNBB) Chief Economist, Moathodi Sebabole said the subdued economic growth in South Africa will affect Botswana negatively.


The leading Botswana Economist noted that South Africa is third largest in terms of buying power in the region trailing behind Nigeria and Egypt. When South African economy shakes, households in Botswana feel the imapct, this is because the former is the latter’s biggest trading partner. The trade is a one way street as over 80 percent of Botswana‘s imports and in particular domestic commodities and food supplies are from South Africa.


Between 2014 and 2018, South Africa and Botswana traded R291.9 billion (about P212.2 billion) with Botswana receiving R 263.8 billion (P191.8 billion) worth of goods and services from South Africa, whilst South Africa received only R 28.2 billion (P20.5 billion) worth of goods and services from Botswana.  At the South Africa-Botswana Business Forum during the 2019 Global Expo it emerged that between 2014 and 2018 South Africa enjoyed a trade surplus of R 235.7 billion. However, trade between the two countries has been muted, growing at a compound annual growth rate of 1.1 per annum since 2014.


Sebabole observed that the forecasted slow economic growth in South Africa could constrain private investment and household consumption further depressing the country’s ability to produce goods. Potential negative spillovers into Botswana include higher inflation, lower exports and decline in SACU revenue, although the risks are considered to be moderate in the overall depending on growth waves.


Botswana’s trade composition with Africa is relatively concentrated in a few products for exports and diversified for imports. In 2017, intra-Africa exports and imports were valued at about US$757 million and US$3.9 billion, respectively. Intra-Africa exports account for 13% of Botswana’s global exports while intra-Africa imports account for 73% of Botswana’s global imports.


The bulk of exports (90%) were destined to SACU with South Africa accounting for 71% and Namibia 19% of total exports. Other exports were destined to SADC with Zimbabwe Zambia and Malawi as top destinations. Top 10 export destinations accounted for 97% of Botswana’s total intra-Africa exports. In terms of import sources, again SACU members dominated as suppliers with South Africa accounting for 88% share and Namibia another 9% share of total intra-Africa imports. SADC members Mozambique; Zambia and Zimbabwe also feature as top suppliers of Botswana albeit at low base.


Botswana's trade deficit rose to BWP 1,370.8 million in August 2019 from BWP 1,223.5 million in the corresponding month of the previous year. Exports fell 4.2 percent to BWP 3,700.4 million, mainly dragged down by shipments of meat & meat products  which declined 48.6 percent , machinery & electrical equipment lowered by 15.4 percent while the main export commodity  diamonds  reduced by 0.8 percent.


Main export partners were the United Arab Emirates accounting for 25.3 percent of total overseas sales, India coming second at 19.7 percent , Belgium third at 12.6 percent and South Africa just behind at 2.4 percent. This according to Moathodi Sebabole clearly indicates how South Africa is an important trading partner to Botswana


Meanwhile, imports decreased only 0.3 percent to BWP 5,071.2 million, as lower purchases of diamonds -9.3 percent and fuels -9 percent were partly offset by rises in those of food, beverages & tobacco at 19.1 percent; machinery & electrical equipment at 0.4 percent and chemicals and rubber products 8.5 percent.


In the imports fronts South Africa came first at 67.4 percent of total acquisitions, Namibia came second at 10.5 percent and Canada (3.7 percent). Balance of Trade in Botswana averaged -123.06 BWP Million from 2005 until 2019, reaching an all time high of 4102.21 BWP Million in March of 2007 and a record low of -6683 BWP Million in July of 2012.

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