Botswana’s trade balance has worsened for ten straight months, brought down by lower diamond sales which are the economic mainstay, according to the latest data from Statistics Botswana’s international merchandise trade report for June.
Total imports – which are goods and services brought in the country – declined by 3.5 percent to P8.1 billion, down from May’s figure of P8.4 billion. On the other side of trade, exports – goods and services sold outside the country – fell by 21.7 percent to P5 billion in June, decreasing from P6.4 billion in May.
With imports valued greater than export sales, Botswana registered a P3.1 billion trade deficit for June, continuing the monthly deficits that started in September 2023. The latest trade imbalance means the trade deficit was P6.7 billion in the second quarter of 2024, much higher than the P4.9 deficit in the first quarter of the year.
Much of the trade balance is due to the declining rough diamond sales, which have historically accounted for 90 percent of Botswana’s exports and 30 percent of the country’s revenues. The worsening trade deficits expose Botswana’s dependence on diamond trade and the vulnerabilities that come with it.
In 2023, the trade deficit was nearly P10 billion, a reversal of the P2.6 billion trade surplus in 2022 that gave the country a brief reprieve from sustained periods of widening trade deficits. Botswana recorded a yearly trade deficit of P10.8 billion in 2021, a significant improvement from 2020’s P25.4 billion trade deficit – the largest trade imbalance on record. The historic deficit extended the P14.2 billion shortfall recorded in 2019, the third highest since 2012’s trade shortfall of P16.3 billion.
As diamond revenues dwindle, the country faces a cash crunch. In the six months of 2024, Botswana’s total diamond exports amounted to P26 billion, down by 31 percent from the P37.7 billion worth of diamonds exported in the six months of 2023.
Botswana’s rough diamonds are sourced from Debswana and Lucara, and sold via various channels. Debswana, a 50/50 percent joint venture between the Botswana government and De Beers, mines rough diamonds in Jwaneng, Orapa and Letlhakane. About 75 percent of the production is sold to De Beers and the remaining 25 percent is sold to the state owned Okavango Diamond Company.
Debswana’s rough diamond sales in the six months of 2024 totalled P17.6 billion, a huge decrease of 47 percent from P33.4 billion reported in the first half year of 2023.
Earlier this month, the country’s Finance minister, Peggy Serame, had cut down the ambitious 2024/2025 fiscal year budget she presented in February. Initially, she presented a P102.28 billion budget against forecasted revenues of P93.58 billion, which would have resulted in a budget shortage of P8.7 billion.
However, with lower revenues experienced throughout the year, the Finance ministry says they will make substantial budget cuts and apply austerity measures.
Amid declining diamond sales, Botswana’s economy declined by 5.3 percent in the first quarter of the year, declining from economic growth of 5.5 percent in the same quarter in 2023. The slowdown in economic output was also lower than the overall 2.7 percent growth in 2023.
Furthermore, Botswana’s unemployment rate increased to 27.6 percent in the first three months of 2024, up from 2023’s annual rate of 25.9 percent, which was also higher than the 25.4 percent in 2022 and the 26 percent unemployment rate recorded in 2021.
