BRIAN BENZAStaff Writer
Diamond exports plunged by close to 90 percent in the four months between August and November 2008 as the global recession hit demand for luxury goods, figures availed by the Central Statistics Office (CSO) reveal.
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According to the CSO, diamond exports which amounted to P3.3 billion in August, fell to P2.3 billion in November and to P821 million in October before plummeting to a mere P371 million in November as a result of falling demand and weakening prices.
Global demand for rough diamonds, which are the mainstay of the economy, is expected to drop by some 60 percent this year and the government has already estimated that revenues will be cut by over 50 percent.The latest figures call for serious belt-tightening measures.
In the 2009/10 budget, the government announced that it will pump P10 billion into the economy for developmental projects in a bid to boost economic activity, a decision which has been labelled ambitious by some analysts in view of the global economic crisis. The irony is that Debswana was struggling to meet demand for diamonds barely six months ago. Factors militating against Botswana include the fact that the country is a net importer of goods, particularly fuel and food, is economically dependent on mineral exports, especially diamonds, and its growth prospects are largely built around investment in minerals.According to the latest trade figures from the CSO, a 55-percent plunge in diamond exports in November led to a P2 billion-trade deficit in the same month.
November 2008 registered a trade deficit of P2,001.7 million, being the fifth month to register a deficit during the first eleven months of last year. Deficits were also recorded in April, May, July and October with values of P113.4 million, P905.7 million and P393.3 million and P1, 525.5 million respectively. "Total exports were valued at P1,081.4 million during November 2008, giving a decline of 39.2 percent (P697.6 million) from P1,779.0 million recorded during the previous month (October 2008)," said the CSO report. The November 2008 total exports declined by 53.2 percent (P1, 229.8 million) as compared to the value of P2, 311.2 million recorded during November 2007. On the other hand, November 2008 total imports were valued at P3, 083.1 million, having decreased by 6.7 percent (P 221.4 million) from the October 2008 value of P3, 304.5 million. "Comparison of total imports value for November 2008 to the value recorded during the same month in 2007 shows an increase of 6.1 percent (P177.3 million), from P2,905.8 million recorded during November 2007 to P3, 083.1 million recorded during November 2008." The P2 billon deficit is certainly going to eat into Botswana's foreign exchange reserves, which were reported by the government to be standing at over P72 billion - the equivalent of 30 months' import cover.
While imports have consistently been around P3 billion, exports have drastically plunged from P4.2 billion in August to P1 billion in November, a development that will exert a significant amount of pressure on the forex reserves.According to the figures, the value of diamond exports has been consistently declining since September 2008, resulting in an increase in percentage contributions made by other major exports.As the contribution of diamonds fell from 46 percent to 34 percent between October and November and copper and nickel from 31 percent to 26 percent, textiles grew from 10 percent to 17 percent while machinery and equipment rose from 2.4 percent to 9.9 percent.
However, looking on the bright side, analysts say long-term fundamentals of the industry continue to hold considerable promise inspite of the current turmoil. "The diamond industry is now in a stabilising phase where stocks, prices and supply and demand have to find a new equilibrium," renowned Israeli diamond industry expert and journalist, Chaim Even-Zohar said in a recent article. "This may take 12-14 months. In that period, demand for rough diamonds will plunge by some 60 percent. This is inevitable. However, miners like DiamonEx - if they survive - are not losing revenues; they are merely delaying income to better times.
"Unfortunately, in this restructuring and stabilising process, 'pain' will not be shared equally. Botswana will be hurting more than many other players - but we believe that demand for rough diamond will again grow in the second/third quarter of 2010. In an industry used to concepts like 'forever', this isn't too far ahead."
AdvertisementAdvertise Here
According to the CSO, diamond exports which amounted to P3.3 billion in August, fell to P2.3 billion in November and to P821 million in October before plummeting to a mere P371 million in November as a result of falling demand and weakening prices.
Global demand for rough diamonds, which are the mainstay of the economy, is expected to drop by some 60 percent this year and the government has already estimated that revenues will be cut by over 50 percent.The latest figures call for serious belt-tightening measures.
In the 2009/10 budget, the government announced that it will pump P10 billion into the economy for developmental projects in a bid to boost economic activity, a decision which has been labelled ambitious by some analysts in view of the global economic crisis. The irony is that Debswana was struggling to meet demand for diamonds barely six months ago. Factors militating against Botswana include the fact that the country is a net importer of goods, particularly fuel and food, is economically dependent on mineral exports, especially diamonds, and its growth prospects are largely built around investment in minerals.According to the latest trade figures from the CSO, a 55-percent plunge in diamond exports in November led to a P2 billion-trade deficit in the same month.
November 2008 registered a trade deficit of P2,001.7 million, being the fifth month to register a deficit during the first eleven months of last year. Deficits were also recorded in April, May, July and October with values of P113.4 million, P905.7 million and P393.3 million and P1, 525.5 million respectively. "Total exports were valued at P1,081.4 million during November 2008, giving a decline of 39.2 percent (P697.6 million) from P1,779.0 million recorded during the previous month (October 2008)," said the CSO report. The November 2008 total exports declined by 53.2 percent (P1, 229.8 million) as compared to the value of P2, 311.2 million recorded during November 2007. On the other hand, November 2008 total imports were valued at P3, 083.1 million, having decreased by 6.7 percent (P 221.4 million) from the October 2008 value of P3, 304.5 million. "Comparison of total imports value for November 2008 to the value recorded during the same month in 2007 shows an increase of 6.1 percent (P177.3 million), from P2,905.8 million recorded during November 2007 to P3, 083.1 million recorded during November 2008." The P2 billon deficit is certainly going to eat into Botswana's foreign exchange reserves, which were reported by the government to be standing at over P72 billion - the equivalent of 30 months' import cover.
While imports have consistently been around P3 billion, exports have drastically plunged from P4.2 billion in August to P1 billion in November, a development that will exert a significant amount of pressure on the forex reserves.According to the figures, the value of diamond exports has been consistently declining since September 2008, resulting in an increase in percentage contributions made by other major exports.As the contribution of diamonds fell from 46 percent to 34 percent between October and November and copper and nickel from 31 percent to 26 percent, textiles grew from 10 percent to 17 percent while machinery and equipment rose from 2.4 percent to 9.9 percent.
However, looking on the bright side, analysts say long-term fundamentals of the industry continue to hold considerable promise inspite of the current turmoil. "The diamond industry is now in a stabilising phase where stocks, prices and supply and demand have to find a new equilibrium," renowned Israeli diamond industry expert and journalist, Chaim Even-Zohar said in a recent article. "This may take 12-14 months. In that period, demand for rough diamonds will plunge by some 60 percent. This is inevitable. However, miners like DiamonEx - if they survive - are not losing revenues; they are merely delaying income to better times.
"Unfortunately, in this restructuring and stabilising process, 'pain' will not be shared equally. Botswana will be hurting more than many other players - but we believe that demand for rough diamond will again grow in the second/third quarter of 2010. In an industry used to concepts like 'forever', this isn't too far ahead."
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