TRALAC - Trade Law Centre

Botswana: Power outages threaten growth

Wednesday, 06 February 2008

Source: Government of Botswana - News

Unannounced power cuts throughout the country will certainly stifle economic growth over the next financial year, economic experts have said.

Due to increasing demand of power, most consumers have had to buy fuel-operated generators as contingency measures for the ailing power system.

But just this week diesel and petrol prices were hiked while demand for generators has also gone up, Dr Keith Jefferis of E-Consult noted at a budget speech review breakfast seminar.

His main worry was that the ongoing expansion of Morupule Power Plant will only yield results around 2011 while other factors continue to negate such envisaged prospects.

Among other negativities mentioned was the reduction in power supply from South African based Eskom plus the annual contracts signed with suppliers from Mozambique.

While we are uncertain about supplies from Mozambique on whether we will keep renewing yearly contracts, we also face stiff competition from South Africa for the same electricity from Mozambique, regretted Dr Jefferis.

To add salt to injury, he said was the fact that the Mozambique route goes through Zimbabwe, which presently is almost impassable.

Another specialist at the First National Bank sponsored event added that power cuts were bound to frustrate the countrys acceleration to Vision 2016.

We need to act with speed and government should plan in the long term for sustainable power supply. The private sector should also rise to the opportunity presented by this crisis to venture into independent power producing, noted BFIM chief executive officer Mr Victor Sennye.

He called on government to boost private sector participation by engaging the latter on lucrative projects such as Morupule power plant expansion.

Prior to Mr Sennye s contribution, Dr Jefferis had noted that the Monday budget speech presented a healthy picture where mining did not dominate the economic growth.

This marks a positive development in this era of economic diversification as the non-mining sector grew at a feat never achieved in the last 10 years, he said.

Dr Jefferis further said it was encouraging when the value of exports swelled without the dominance of diamonds, rather other commodities such as gold, nickel, beef and textiles, a move driven by growing demand from the United States of America.

The new exchange rate regime was also commended as a contributory factor to the growth of exports against imports.

However, Dr Jefferis warned of a possible rise in inflation due to power and fuel hikes plus an expected rise in rentals charged by Botswana Housing Corporation.

He also cautioned of an uncertain future owing to the slowing down of economic growth internationally and recession in the US.

Such a setback, he said was inevitable given that the US currently accounts for 40 per cent of the worlds diamond consumption, which market relies on Botswana among other big suppliers.

Textile exports under the Africa Growth and Opportunity Act (AGOA) were also likely to be affected due to the US recession while copper and nickel will decline due to a reduction of prices.

The countrys foreign reserves, he said were protected despite all this international economic slowdown since they were held in several currencies other than the US dollar.

The US recession is not a major macro-economic problem because we have huge foreign reserves that might cushion us while the international markets recover in the meantime, he said.

Mr Sennye added that transport and communication were lead performers in the non-mining sector. He nonetheless queried that the upgrading of airports was long overdue, as a good transport network is a necessity for a landlocked country.

Mr Sennye s main theme was for government to engage private sector in all projects that could boost private sector participation, as in some cases government red tape might frustrate effectiveness.

Another hitch noted by Mr Sennye was the appalling state of roads in Botswana that might scare off potential investors.

One can actually bath a child in all these potholes and that might frighten those wishing to pursue toll gates as a business, he said.

He condemned government for thinking small in most cases such as in tourism projects that might indebt most operators to financial institutions.

It is amazing that we still charge a tourism levy of P2 while our neighbours are making a killing out of this sector, he said.



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