Diamonds spur another surplus

12 Aug 2018

Botswana’s has recorded another trade surplus during the second quarter as demand for diamonds remains strong. This information is contained in the latest International Merchandise Trade Statistics for May released by Statistics Botswana.

According to the monthly report, the total imports for May were valued at P4.1 billion, down 11.6 percent from the P4.7billion registered in April. The decrease was on the back of diamond imports, which fell by 70.7 percent.  Most of diamonds imports come from South Africa, Namibia and Canada, where they are sorted here in Botswana before being exported again.

Comparison of import figures for May2018 and May 2017 shows a minimal increase of 1.1 percent as imports of machinery & electrical equipment increased 36.1 percent compared to last year’s 15 percent decline. Local busineses have been holding back on large expenditure while assessing the country’s macroeconomics which does not inspire huge investments. However, earlier this year the central bank reported that business confidence was up in anticipation of increased government expenditure.

On the other hand, total exports continued to surge, up 21.2 percent to P6.6 billion for the five months under review. Again it was diamonds that led the increase, up 21.2 percent from April’s P4.9 billion to May’s P6 billion. Diamonds remained the main export, representing 91 percent of total exports.

The total exports value for the period under review, compared to that of May 2017 shows an increase of 21.1 percent on the account of increased demand for diamonds.

The latest May figures show that the country registered a trade surplus of P2.4 billion, an improvement from April’s trade surplus of P736 million. The first two trade surpluses in the second quarter of the year is a reversal of the P954.8 million trade deficit recorded in the first quarter of the year.

According to forecasts from the African Development Bank Group, Botswana’s economy is projected to see a sustained pickup in the medium term, with real GDP growth projected to rise to nearly 5 percent in 2018. The good performance in non-mining and the continued recovery in mining are expected to support growth.

“Although mineral exports are likely to continue to rebound gradually, growth in non-mining is driven largely by service-oriented sectors, notably trade, hotels and restaurants, and transport and communications, supported by accommodative fiscal and monetary policies. The continued expansion of construction, associated with the economic stimulus program and planned upgrades of electricity and water infrastructure, is expected to further boost growth. Manufacturing will recover moderately, benefiting from improvements in electricity generation and water supply. The performance of these sectors will outweigh the sluggish performance in agriculture. Despite good weather, agricultural output will remain subdued as crop production continues to be hampered by traditional farming methods, erosion, and disease,” the bank said its outlook released earlier this year.

The bank however warned that the downside risks to the positive medium-term outlook remain elevated. They noted that the dependence on diamonds for export and growth makes Botswana extremely vulnerable to external shocks. The bank cited key risks which include the sluggish recovery of the global economy and uncertainty surrounding global trade and openness, which could reduce export earnings.

“The underwhelming economic conditions in South Africa could adversely affect SACU receipts, and adverse weather could further weaken agricultural growth and lead to water supply challenges. Delays in construction projects in electricity and water and a slow pace of structural reforms are also downside risks and underscore the need to resolve the energy and water crises and accelerate structural reforms—including reforms to reduce skill mismatches to facilitate economic diversification and increase productivity. Accomplishing these initiatives will promote economic transformation and enhance the resilience of medium-term growth prospects.”