Embed Size (px)
DESCRIPTION
Thabelo Nemaorani, Economist, from Econsult Botswana has presented at the Botswana Coal and Energy Conference. If you would like more information about the conference, please visit the website: http://bit.ly/13MkVsy
Citation preview
Thabelo Nemaorani
April, 2013
Economic Background
Upper-middle income economy, GDP/cap around $7500 – among the highest in SSA
Long period of rapid growth since independence in 1966
Diamond mining historical the largest economic sector – around 30% of GDP
A dominant role for government in the economy – largely financed by mineral revenues
Economic Growth - 5year averages
0%
2%
4%
6%
8%
10%
12%
14%
16%
GDP Growth
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
Gro
wth
ra
te
GDP Mining Non Mining Priv. Sect.
Sluggish growth
Total GDP grew by 3.7% in 2012, slowing down from 6.1% in 2011
NMPS recorded growth of 7.5% in 2012 (9.7% in 2011)
Mining output contracted by 8.1% in 2012 (-2.4% in 2011)
Sources of growth 2003-2012 (economy diversified?)
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
co
ntr
ibu
tio
n t
o O
vera
ll g
row
th
International Trade
Share of Exports in 2012 (Need for Export Diversification?)
Meat 1%
Soda Ash 2%
Gold 2%
Textiles 1% Vehicles and
parts 2%
Machinery & electrical eq.
3%
Other manufactures
5%
Copper-nickel 9%
Polished Diamonds
14%
Rough Diamonds
61%
Exports, Imports & Trade Balance
Both imports and exports have growth steadily since early 2009
Imports driven by higher fuel prices
Exports spiked in 2012 H2 due to recovery in diamonds, but have since fallen back
Perpetual trade deficit
-10000
-5000
0
5000
10000
15000
20000
25000
BW
P m
illi
on
Balance Imports Exports
Fiscal Position
Sources of Government Revenue SACU largest
share (34%) in 2012/13, first time since 1970’s
Mineral’s share declining
Fell from 48% in 2006/07 to 29% in 2012/13
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Mineral SACU NMIT VAT Other
Employment
Formal Employment levels
0
50000
100000
150000
200000
250000
300000
350000
Private Parastal Government
Most recent data-June 2011
Total of 335,156 jobs Formal employment
growth slow – 1.5% in year to June 2011
Job creation insufficient: 4,828 new jobs in
12 months Approx 15-20,000
new jobs needed each year
Official unemployment rate (2009/10) 17.8%
Share of formal employment – June 2011
44%
4%
11%
14%
5%
22%
Govt
Mining
Manufacturing
W/sale &Retail Trade
Hotels & Rest.
Other
335 156 jobs in to formal employment
Relative to GDP shares, govt has high employment, while mining share is low
Mining share 4 %
(11,688)
Botswana faces challenges of;
Undiversified exports
Fiscal dependency on Mineral revenues
High unemployment
Is Coal the answer to Botswana’s Challenges?
Coal Economic opportunities
Coal mining- large reserves ( estimated 212 billion tonnes)
Coal exports (India and China is potential markets)
Electricity generation for domestic use and export
Coal exports need dedicated railway line and Port
Faced with 3 Options: Through Zimbabwe to
Mozambique in East (complex)
Trans-Kalahari through Namibia (simpler)
Through South Africa’s (Waterberg area) and use existing infrastructure (limited capacity)
Projected Mineral Exports (real)
Coal exports projected to grow steadily till they plateau at P 15.9 bn in 2024
At peak of Mineral export in 2025, coal’s share is 23% (diamond’s share is 60%)
Coal becomes increasingly important as Diamond export deteriorates
However, coal cant replace diamond exports
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
BW
P m
illi
on
s
Coal Other minerals Diamond
Projected Real Govt Revenues from Mining
0
5,000
10,000
15,000
20,000
25,000
30,000
Go
vt
reve
nu
e (
mn
)
Coal Other Diamond
Mineral Govt revenues to increase until they plateau at around P26 bn
Remains fairly stable from 2017 until 2026
The decline brought upon by fall in Diamond sector
Projected Employment levels
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
Non-mining Other mining Coal
Coals contribution to employment low
Coal employment to peak in 2024 (6,759 )
At peak, only accounts for 2% of total employment & 35% of employment in mining
Barriers /challenges
Narrow window of opportunity Increased efforts to reduce Green House Gas emissions
Renewable energy (solar and wind) getting cheaper
High risk High investment on uncertain future
No real alternative use of infrastructure
Coal can’t fully replace diamonds as source of Govt revenues Relative profitability (coal much less profitable to mine than
diamonds)
Tax rates (lower on coal compared to diamonds)
Diamonds Vs Coal
If you replace a BWP 1 bn worth of Diamonds with a BWP 1 bn worth of Coal, Govt stands to make less
Diamond have a higher profit margin and taxed more than Coal.
Diamonds Coal
Profit rate
80% 30%
Tax rate 80% 30%
Govt revenue
64% 9%
Conclusion
Coal alone can’t replace Diamonds, especially with respect to:
Exports
Government Revenue
But it can make a significant contribution – along with other activities – to economic diversification
Need for swift action on providing the necessary infrastructure
Railway line (West or East)
Dedicated Port
