Wednesday, June 7, 2023

Crisis to make Botswana diversification drive more urgent

The global credit crisis that has stifled Botswana economic growth due to the collapse in rough diamond prices of up to 50% is likely to provide opportunities for the country, especially in regards to diversification.

The crisis took the country off guard because of it’s over reliance on diamond exports and lip service to diversify the economy.

This week, Razia Khan, Standard Chartered Bank’s London-based Regional Head of Research for Africa, who was in Botswana, said that the crisis will make diversification more urgent.
“There has been a real need for diversification for a long time. But, because of diamonds, the private sector never grabbed the agency of diversification,” Khan told reporters in Gabion.

“We think the crisis will make diversification more urgent,” she added.

Her comments follow several attempts by government to diversify the economy from AN over reliance on the mining sector, especially diamonds, which have shown that when there are problems in the sector the whole economy is affected.

Diamonds are the number one revenue earner for government accounting for 33 percent of the Gross Domestic Products, while tourism comes second since the collapse of the auto mobile industry (Hyundai).

Tourism, as another sector where government wants to see growth, contributes between 10-16 percent of the non mining Gross Domestic Product.
Since 2006, the tourism industry has been making $500 million or P2 billion for the country as compared to the beef industry that rakes in less than P500 million annually.

Since the credit crunch, Botswana has been sent into a scare because previous recessions are ‘shallow’ as compared to the current one that originated from bad investments in the US’s Wall Street.

“For Botswana, the key thing is how long the slump will last,” she said. “It is pretty worrying on what happened to Botswana diamonds. The problem that Botswana faces are diversification,” she noted.

She pointed out that it was positive at how Botswana is looking at the crisis because it is not only a question of crisis management, but ‘how the country emerges in the long term’.

Khan, however, is impressed by the projects that the government is undertaking, like Morupule B project, which she said would, in future, help diversify the economy through the export of power to neighbouring countries.

Another project that has gone through the Engineering, Procurement and Construction (EPC) stage is the Mmamabula Export Energy project.
When complete, the project, undertaken by CIC Energy, will sell electricity to South Africa’s Eskom (75%) and Botswana Power Corporation (BPC).

“This will bring diversification in the long run,” she pointed out. “Diamonds have been central to the growth. The private sector still depends on government spending.”


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