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
GDP Growth
 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?)
International Trade
Share of Exports in 2012
(Need for Export Diversification?)
Meat Soda Ash
1%
2%
Rough
Diamonds
61%
Gold Textiles
2%
1%
Vehicles and
parts
2%
Machinery &
electrical eq.
3%
Other
manufactures
5%
Copper-nickel
9%
Polished
Diamonds
14%
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
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
Employment
Formal Employment levels
 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
 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
Projected Real Govt Revenues from
Mining
 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
 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
Diamonds
Coal
Profit
rate
80%
30%
Tax rate
80%
30%
Govt
revenue
64%
9%
 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.
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
Thabelo Nemaorani
thabelo@econsult.co.bw