The healthy half year (2011) De Beers’ performance could come as a big relief to government if sustained through the year in terms of revenue that would be derived from Debswana Diamond Company at the close of the year.
Debswana is a 50-50 joint venture between Botswana government and De Beers.
In an interview with The Telegraph following the release of the results, Minister of Finance and Development Planning, Kenneth Matambo, said “whatever the results of De Beers are, they will affect Debswana and, in turn, affect the revenue situation of government”.
The minister, who at the time of the interview had not yet seen the results, was, however, quick to point out that “if they are positive, it is good. It will help us balance the budget”.
He, however, cautioned that government would still need to be prudent in managing its expenditure in order to achieve a balanced budget in the coming financial year (2012/13).
The minister was buttressing government view that it needed to balance its budget by 2012/13.
Independent economist and former Bank of Botswana deputy governor, Dr Keith Jefferis, said although the recovery in the global diamond market is strong, Debswana’s production levels have not yet reached pre-recession levels.
“Overall earnings from diamonds are reasonably healthy and this will help government achieve its budget deficit reduction target. In particular, it will help government achieve a balanced budget next year, which otherwise would have been very difficult,” said Jefferis.
In his second quarter Bifm economic review, Jefferis noted that GDP growth in the first quarter of 4.9 percent concealed different growth rates in the different sectors of the economy.
“In particular, the slowdown largely reflects a sharp reduction in the growth of the mining sector, which only expanded by 0.6 percent in the year to March. This is somewhat surprising, given that there has been much discussion of recovery in mining in particular, increased production of diamonds,” observed Jefferis.