Budget on track for surprise diamond-backed surplus
Mbongeni Mguni | Monday January 16, 2023 06:00
The last time the budget recorded a first half surplus was in 2014-15 with P859 million, according to BoB records available online.
Finance Ministry technocrats have not yet revised their expectations of a P7.7 billion deficit for the current fiscal year, although Minister Peggy Serame is expected to give an update on the numbers when she delivers the budget next month.
However, the half year surplus as well as expectations of better than projected revenues from the Southern African Customs Union (SACU) point to a surplus for the 2022-23 financial year, which will be the country’s first since 2016-17. Final figures for the last fiscal year produced a marginal P100 million deficit, the smallest after years of multi-billion Pula deficits that eroded government savings and caused the imposition of higher taxes as well as greater domestic borrowing.
Fiscal authorities expect that besides higher earnings from SACU, mineral revenues, which helped the last fiscal year, will again be the “saviour” this financial year.
“Positive prospects remain, on the back of stronger than anticipated mineral receipts, due to higher demand for diamonds," the Finance Ministry said in a note distributed this week.
Diamond exports last year surged after sanctions imposed on Russia for its invasion of Ukraine. Botswana is the second largest producer of rough diamonds after Russia.
Debswana sales in 2021 were P38.1bn and in the year to November last year soared to P54.9bn, helped by the recovery of the global economy from COVID-19 and a shift to ethically sourced rough diamonds by consumers in markets such as the United States.
According to the Ministry, over the fiscal half year, which covers the period between April and September 2022, mineral revenues reached P17.2 billion over the period, up 66% over the corresponding period in the last financial year due to improved diamond exports.
Besides diamonds, the budget was helped by resurgent base metal exports, which reached P2.8 billion between January and September last year, more than 133 percent higher than the full year level achieved in 2021.
The driving force behind the higher exports has been Khoemacau Copper Mining, whose Kalahari Copperbelt operation produced its first concentrate in 2021. Khoemacau is currently ramping up to full production capacity of between 60,000 and 65,000 tonnes of concentrate, while an expansion is planned to double that production. Built at a cost of $412 million (P5 billion), Khoemacau is currently the country’s sole producer of the base metal, as efforts are ongoing to resuscitate the BCL Mines and the Mowana operation, now known as Kopano Copper Mine.
The latest budget forecasts will be a boon to technocrats, who have been battling to steer the fiscus back to stability, following running deficits dating back to 2016-17.
According to Finance Ministry figures, the fiscus suffered cumulative deficits of P47 billion under National Development Plan 11, which ran from 2017 and is due to end on March 31, this year. This is despite the envisaged broadly balanced budget over plan period.