Given uncertainties surrounding the mining sector, particularly the diamond industry, it is important that the potential of the nonmining sector be developed, Botswana’s Minister of Finance and Development Planning, Kenneth Mata-mbo, said as he delivered the 2013 budget speech to the national assembly on February 4.

Matambo pointed out that that there had been some significant growth in the country’s nonmining sector.

“The latest available data show that in real terms, the gross domestic product (GDP) grew by 8% in 2011, which was slightly lower than the 8.1% growth achieved in 2010. “The fastest-growing sectors in 2011 were construction, general government, trade, hotels and restaurants, which grew by more than 10%.

“Preliminary data for the four quarters through September 2012 indicate that GDP grew by 7.7%, compared to 7.3% over the same period in 2011. The mining sector declined by 12.5%, while the rest of the economy grew at a rate of 11.6%,” he said.

Matambo said it remained crucial to exercise restraint in government spending, focusing only on national-priority areas and replenishing its reserves to levels that can sustain unforeseeable future shocks.

“One of the developments worth noting is that increasing growth of some emerging economies in the past five years, especially China, India and Brazil, has resulted in new growth poles, which are redefining the global economic landscape.

“The pace and strength of growth for emerging economies places them at the centre of the global economy. “It is critical that Botswana positions itself to take advantage of opportunities presented by the changing global economic structure, both in terms of market access and foreign direct investment,” he stated.

Matambo added that major risks the region currently faces include increasing inflation pressures as a result of rising commodity prices (particularly food and oil), depreciating exchange rates in the face of constrained foreign exchange reserves and a narrow fiscal policy space owing to low revenue and declining aid flows.

“Further, the region remains predominantly undiversified, with primary production sectors based mainly on mining and agriculture,” he added.

Under the crawling exchange rate mechanism, the exchange rate of the pula against a basket of international and regional currencies is adjusted gradually, based on the expected inflation differential with Botswana’s trading partners, consistent with the Bank of Botswana’s monetary policy, said Matambo.

He noted that given higher expected inflation in the country than in trading partner countries, the pula has been crawling downwards to prevent a loss in competitiveness.

“To foster transparency of Botswana’s exchange rate mechanism, government has taken a deliberate decision to disclose both the crawl of the pula and the weights of the currencies in the basket.

“The current rate of crawl is -0.16% a year, which is intended to [reduce] the impact of the exchange rate adjustment on inflation. The weights of the currencies in the basket are 55% rand, and 45% for the currencies that make up the International Monetary Fund’s drawing rights,” he stated.

He added that the rate of crawl and the weights of currencies would be adjusted when underlying conditions changed, and that such changes would be announced at the time they were made.

“It is important to emphasise that, while exchange rate adjustment is a short-term measure; the best way for domestic producers to achieve sustainable international competitiveness is through gains in productivity. “To achieve efficiency in the use of available resources is critical and must be an issue of concern for government and the private sector,” said Matambo.

He noted further that the domestic economy experienced depressing developments in 2012 ranging from a decline in the diamond sector, to a countrywide drought and damage caused by recent floods.

Further, Matambo noted there were delays in megaprojects such as the Morupule B power station and the connection of additional power supply to the national grid.

“Given these challenges, prospects for the domestic economy, therefore, remain fragile, as it faces global economic volatilities, particularly diamond exports which are destined for developed countries,” he stated.

Overall, Matambo said the Ministry estimated a GDP growth of 5.9% for 2013.

“It is, however, unlikely that in the next few years the economy will reach the prefinancial and economic crisis real growth rates of nearly 9%. Nominal GDP is anticipated to reach about P130-billion in 2013,” he said.

Matambo said it remained critical that adequately skilled human resources be trained if Botswana is to achieve enhanced economic growth and diversification.

“To facilitate this, the Botswana Qualifications Auth-ority is being established to [tackle] issues of relevance, quality, accreditation, articulation, coordination and management of skills development programmes.

“Further, the preparation of a comprehensive Education and Training Strategic Sector Plan, which was officially launched in August 2012, is expected to be completed during 2014/2015,” he said, adding that the plan would provide a wide policy and strategic framework, guide the prioritisation and resource allocation process and ensure delivery of improved education and skills development,” he said.

In closing, Matambo said he expected the economy to continue its recovery in the final three years of the National Development Plan of 2010.

“Real GDP is expected to grow at an average rate of 5.7% during this period and the share of [the] nonmineral private and parastatal sectors in the economy to reach 70%.

“Unfortunately, it is unlikely that we will be able to achieve the aspiration of Vision 2016 that real GDP per capita in 2016 would triple that of 1996. “This makes it even more urgent to put effort on the reforms necessary to achieve our ambitions,” he concluded.