Sunday, February 9, 2025

Botswana falls deep into the deficit abyss

As data continues to trickle in, the previous year is proving to have been tough with Botswana’s trade deficits widening and hitting lows last seen a decade ago as the diamond industry’s impact reverberates across the economy, reveals Statistics Botswana.

According to the recently released International Merchandise Trade Statistics October report, total exports in the tenth month came at P2.2 billion – a massive decrease of 49.3 percent from the P4.3 billion recorded in September. The decrease in trade receipts was down to a 54.2 percent plunge in diamond exports, the country’s economic mainstay. Nonetheless, diamonds remained the main export, representing 79.2 percent of total exports.

The total exports value for the year ending October 2019 shows a decline of 65.2 percent on the account of falling diamond demand, fuelled by the recession in the diamond industry which has been characterised by disappointing sales in the midstream-made up of the diamond cutting and polishing industries, which are struggling to get rid of excess inventories.

Asia was the major destination for Botswana exports having received 61 percent of total exports, with the continent accounting for 99.8 percent of the diamonds shipped from Botswana. Asia is home to major diamond cutting operations that include India, United Arab Emirates (UAE) received 28.8 percent, Israel and Hong Kong.

On the other hand, the total imports for October were valued at P5.6 billion, advancing marginally by 3.8 percent from September imports. The increase was attributed to diamonds, which leapt by 14.7 percent. Gaborone has now emerged as an important rough sales centre after the decision to move De Beers’ sorting operations and sight location to Gaborone in 2013. It imports diamonds from other De Beers mines outside Botswana.

Another recognisable surge in imports was recorded for vehicles and transport equipment, up by 17.4 percent during the period under review. Imports of food, beverages and tobacco went up

by 5 percent.

Comparison of import figures for October and corresponding period in 2018 shows a big fall of 25.9 percent in total imports, with the fall attributed to slowed diamond imports. Other commodities which contributed to the decreases are fuel and machinery and electrical equipment with decreases of 22.2 percent and 13 percent respectively.

As usual, the Southern African Customs Union (SACU) was the lead imports supplier, representing 76.6 percent of total imports to Botswana. The top most imported commodity group from the SACU region was food, beverages and tobacco, with a contribution of 18.2 percent, followed by diamonds with 17.9 percent of total imports from the region.

The continent’s economic giant, South Africa, was the largest source of imports within the SACU region, with a contribution of 65.4 percent during the month under review.

Given the decrease in exports and slight upward tick in imports, the country once more recorded another monthly trade deficit of P3.4 billion, making it the second largest shortfall so far recorded in 2019. This is on the back of another P381.7 million deficit registered in September, which was an improvement to August’s huge shortfall of P1.4 billion, and July’s massive trade deficit of P3.2 billion.

In the first quarter of 2019, the country recorded a trade deficit of P2.1 billion but recovered slightly in the second quarter with a trade surplus of P57.2 million. The third quarter’s deficit is now P5.2 billion, making it the largest quarterly deficit since the 2008 financial crises. With October’s data showing the largest monthly trade deficit of 2019, the tone has been set for the fourth quarter which is likely to be worse after figures for November and December are released later this year.

The country is expected to run budget deficits in the next two financial years as government ramps up on job creation and improving civil service salaries. The budget deficit for 2019/20 is estimated at P7.7 billion or 3.8 percent of GDP, while the expected deficit for 2020/21 is set at P6.9 billion or 3.1 percent of GDP, and then another deficit of P4.4 billion in 2021/22.

RELATED STORIES

Read this week's paper