BOTSWANA ECONOMIC BRIEFS MAY 2009

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SUBJECT: BOTSWANA ECONOMIC BRIEFS MAY 2009


1. This is the fifth edition of U.S. Embassy Gaborone's Botswana
Economic Briefs, covering economic and commercial news from May

2009. Topics of this edition are:

- China - Botswana's Potential Diamond Market
- World Bank Praises BEDIA
- Botswana Edges Closer to Recession
- A Boost for Morupule Power Station Project

China - Botswana's Potential Diamond Market?
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2. China could become a major diamond market for Botswana,
according to the Chinese Minister of Commerce. A delegation of
Chinese experts visited Botswana in late May to assess how best they
could help in boosting Botswana's economy to cushion it against the
current economic slump. The delegation leader, Chinese Minister of
Commerce Mr. Zhing Shan, said that China considers Botswana to be a
valuable economic partner. During Shan's visit to Botswana, the two
governments signed an agreement on economic and technical
cooperation to facilitate a grant of over 10 million pula
(approximately USD 1.67 million) which will be used to implement
projects agreed upon by the two governments. Mr. Shan explained
that Botswana was China's strongest economic partner in Southern
Africa and therefore his government would like to promote
cooperation on investment, manufacturing, minerals, education and
medical care. He further said despite the current recession, China
was ready to provide soft loans to Botswana in order to continue to
improve the livelihoods of Botswana's citizens and encourage
economic growth. The visiting Chinese team also included
agricultural technicians who came in to assess how they could assist
the government of Botswana in developing agriculture in order to
reduce the country's dependence on food imports. (Daily News, 28th
May, 2009)

World Bank Praises BEDIA
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3. According to the recently released Global Investment Promotion
Benchmarking (GIPB) 2009 Report, World Bank researchers have ranked
Botswana as Africa's leader in terms of investment promotion
activities. The GIPB report is solely focused on the Investment
Promotion Intermediaries (IPIs) of each country. The Botswana
Export Development and Investment Authority (BEDIA) is Botswana's
IPI and was among those evaluated for the GIPB 2009. The report
hailed Botswana as a 'star performer' noting that the country had
improved its overall score in the GIPB's criteria to an excellent 70
percent. In 2009, Botswana was ranked 23rd in the world in terms of
global national IPIs, making it the highest ranking country in
Africa and placing it among the 25 elite in the world. The elite
list is headed by Austria, Sweden, Germany, Canada and the United
Kingdom. The report noted that only Botswana and Mauritius excelled
in the GIPB's assessment criteria within the continent. The report
praised BEDIA for improving its website substantially and making it
more business-focused and user friendly, as well as for making the
understanding of the investment process easy. (Mmegi Business Week,
May 15th 2009)

Botswana Edges Closer to Recession
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4. In the face of massive effects of the current global economic
crisis on Botswana's diamond sales, the country is not yet in a
recession, but it is edging closer. Speaking at the release of the
Bank of Botswana's 2008 Annual Report, the Bank's Head of Research,
Andrew Motsomi, said that according to the latest figures from the
Central Statistics Office (CSO),Botswana's GDP growth was at 2.9
percent in the last quarter of 2008, meaning that the country was
still enjoying positive economic growth. However, Motsomi said, it
is highly likely that the country's GDP will soon begin to contract,
as the global crisis continues to squeeze Botswana's revenue
streams. Due to the crash in diamond demand and resulting revenue
losses, Botswana is now importing more than it is exporting, leading
to a trade deficit which has seen the country's foreign exchange
reserves drop from 30 months of import cover a year ago to about 20
months worth of imports today. The latest statistics from
Botswana's Central Statistical Office show that trade deficits have
been recorded consistently from October 2008 to April 2009, while
diamonds revenues plummeted heavily particularly in the last quarter
of 2008. Deputy Head of Research, Kealeboga Masalila said that
despite food prices not falling as much a fuel prices have, the bank
is confident that Botswana can achieve an annual inflation rate of
close to six percent by year's end. Comment: The Bank of Botswana's
inflation objective target rate stands at 3 - 6 percent. End

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Comment. (Mmegi Business Week, May 15th May, 2009)

A Boost for Morupule Power Station Project
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5. The Morupule B Power Station is a USD 1.6 billion project, a
Botswana government initiative driven by the Botswana Power
Corporation (BPC). The planned power station expansion got a major
boost recently with the announcement that Standard Bank and the
Industrial and Commercial Bank of China (ICBC) have been mandated as
joint lead arrangers to finance the project. The China National
Electric Equipment Corporation (CNEEC),which is one of ICBCs top
corporate clients, has been awarded a USD 970 million contract to
supply and build a significant portion of the power station. The
Morupule Power B station is one of the many initiatives BPC is
undertaking to restore a healthy power demand/supply balance in
Botswana. According to statistics from the Ministry of Minerals,
Energy and Water Resources, Botswana's energy needs will rise to 610
megawatts (MW) in 2009 from 530 MW in 2008 and above a planned
capacity of 510 MW in 2009. Sino Sure, the official Export Credit
Agency of China, in collaboration with the World Bank, will provide
a credit guarantee to ICBC's facility to Botswana Power Corporation.
The President of Sino Sure, Wang Yi, said the Morupule Power
station project is destined to be a milestone in the history of
bilateral economic cooperation between China and Botswana. The
Morupule Project, which involves the installation of four generating
units of 150 MW capacity each, is aimed at boosting Botswana's power
generation capacity as South Africa's Eskom continues to reduce the
power it will supply to Botswana. (Mmegi May 15th 2009)

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