A new report published by Ernst and Young (EY) highlights that as at May 2016, total exports came down to P36.76 billion, registering a decline of P26.69 billion from P63.45 billion in 2015. The report titled Botswana Trade report August 2016 details that the figure of P36.76 billion makes 57.9 percent of the total over the full year 2015 and 80.1 percent more than exports over 2012, depicting a comparison with the previous year and over five years. The current total exports figure is projected to increase to P88.2 billion by the end of year, which will be about 40 percent higher than over 2015.
Botswana’s unique economic makeup of a single commodity, diamond mineral to be specific, that takes up a significant share of the total exports is clearly demonstrated in the report which cites that diamond exports at P32.2 billion, were 87.6 percent of total exports, 61.1 percent of diamond exports over 2015. Diamond exports are expected to go up by 47 percent by the end of the year. This considerable share, though having historically proven beneficial to the country in terms of revenue, represents on the other hand a failure of the economy to establish other viable revenue streams to reduce the current uncertainty of a single major income stream.
“Caution: Botswana is a very efficient producer of minerals, but final export totals depend on international markets,” warns the report, which in part explains the label conferred on the economic structure of volatility based on its lucid dependency on external factors. At 87.6 percent share of total exports diamonds left a share of 12.4 percent to total non-diamond exports at P4.5 billion and the remaining share of 6.5 percent of non-mineral exports at P2.4 billion. The presentation of these figures reveal a glaring gap which as the present scenario dictates non-diamond export commodities and non-mineral exports will struggle to fill, particularly under the new government funding pressures of the economy. Hackneyed as the narrative on the diversification of the economy is, present statistics renew the urgency with which efforts have to be propelled.
The report raises a pertinent issue which Botswana will need sooner rather than later to assess and respond appropriately to. “Significant is the amount of rough diamonds being imported from other producer-countries for aggregation and re-export.” The figures cite that as at May 2016 Botswana had imported 51.2 percent against its own production of rough exports, less than what it imported however over the full year 2015 at 94.4 percent. Over a five year trend from 2012, the 2015 amount reflected an increase of 69.3 percent. The major source countries according to the report include South Africa (31%), Namibia (28%), Canada (24%). Others were: Belgium, Israel, Russia, India, UAE, USA, Hong Kong, UK. The salient detail to these statistics is that “the cost of the imported rough is an average 41% of total diamond export revenues,” which given the recorded declining value of rough diamond sales over 2015 seems to suggest that the revenue derived by Botswana is far less than what may be perceived. The latest value of rough diamond sales, obtained from Global Sightholder Sales and Auction Sales, for De Beers’ eighth cycle recorded a decline from the previous cycle. The eighth cycle, as cited by Anglo American, amounted to $485million, compared with the $639million value of the seventh sales cycle of 2016. Given the current reality, based on the average cost of imported rough relative to the total diamond export revenues it could be deduced that as mining becomes expensive in Botswana, which translates to far less production than is the norm, the economy will find itself with a conundrum of deriving a revenue closer to what it grew accustomed from the past 50 years.
Regarding the value of rough diamond sales, De Beers CEO, Bruce Cleaver is quoted saying, “Demand for De Beers’ rough diamonds in Cycle 8 continued to reflect the improved midstream trading environment compared with 2015. Our rough diamond sales were slightly ahead of expectation during the Cycle, given the normal seasonal demand patterns, the shorter than usual period between Sights 7 and 8, and the forthcoming holidays in some of the major diamond cutting centres.”