066_G19_InFocus_Botawana

Global

In Focus Botswana Botswana digs deep The world’s second largest producer of diamonds, Botswana is now looking at developing its vast coal reserves to diversify the economy and provide more employment for its relatively small population Neil Ford Botswana has a well-deserved reputation for being one of the most stable countries in Africa, both politically and economically. A combination of substantial diamond revenues and a small population of just two million would count for little if it were not for sound governance. Intelligent mining sector reforms and the emergence of a strong banking industry offer the prospect of economic diversifi cation, but it is another strand of the mining industry that is likely to take the economy on to the next level. Diamonds exports account for 40 per cent of GDP and 72 per cent of export earnings, making Botswana the world’s second biggest diamond producer by volume after Russia, so the country could be seen in a similar light to other African states that rely on the export of a single commodity. However, the government ensures that it takes a large slice of diamond revenues. It jointly owns the world’s biggest diamond producer, Debswana, with South Africa’s De Beers and also holds a 15 per cent stake in De Beers itself. However, diamond exports have not increased in recent years as quickly as had been hoped. The opening of the Ghaghoo Mine was delayed, while maintenance work at other mines curtailed production, although the new Karowe Mine has come on stream as expected. In addition, global prices were about three per cent higher in 2013 than in 2012, resulting in a 17 per cent year-on-year increase in diamond revenues in 2013. Unlike in some other parts of Africa, the government’s efforts to encourage a diamond processing sector have paid off. A total of 27 polishing and cutting companies now operate in the country and the polishing sector bought $770 million worth of diamonds last year. De Beers moved its Diamond Trading Company’s (DTC) aggregation, quality-assurance and sight-preparation operations from London to Gaborone last November. But economic diversifi cation is vital if the country is to reduce its vulnerability to fl uctuations in diamond prices. The global fi nancial crisis saw prices crash, which in turn resulted in a budget defi cit of 15 per cent of GDP for Botswana in 2009-10. However, the government now operates a fi scal surplus, with the economy growing by 4.2 per cent in 2012 and then 5.4 per cent in 2013. This turnaround in fortunes has been achieved largely by a recovery in demand for diamonds, but government efforts to rein in spending have also helped. The total government wage bill, for example, was cut by ten per cent between 2010 and 2012. Diversifi cation is also crucial in order to create employment. In relation to its contribution to GDP, diamond mining employs relatively few people. The government has had great success with its poverty reduction schemes and the proportion of the population living below the poverty line fell from 30.6 per cent in Ghaghoo diamond mine four 66 l www.global -br ief ing.org th quar ter 2014 global © Gem Diamonds


Global
To see the actual publication please follow the link above