Diamond rebound powers first trade surplus in 11mths
Mbongeni Mguni | Friday April 2, 2021 16:13
The economy has suffered rolling trade deficits since February 2020, which describes a situation where the country is consistently importing more goods than it is exporting. Economists have warned that when deficits persist, they weaken a country’s foreign reserves and its currency.
Figures released by Statistics Botswana last Friday indicate that total exports in January 2021 amounted to P8.5 billion, with diamond exports measuring P8 billion. Exports in December 2020 were P5.9 billion with diamond exports measuring P5.5 billion.
By comparison, imports amounted to P7.1 billion in January 2021 from P7.8 billion in December 2020, resulting in a surplus of P1.4 billion.
The trade balance in 2020 was a deficit of P26 billion, compared to a P14 billion shortfall in 2019, as the country’s major exports slumped on the back of the coronavirus (COVID-19) disruptions in terms of markets and prices. The impact was reflected on the country’s foreign reserves, as the Bank of Botswana was forced to make more funds available for short-term foreign currency requirements.
The trade surplus underlines statements made by Mineral Resources, Green Technology and Energy Security Minister, Lefoko Moagi who told Parliament recently that the government was noting a recovery in the diamond sector after the COVID-19 related slump in 2020.
“Despite the difficulty, the industry has seen positive consumer demand for diamond jewellery since the beginning of the holiday season, supporting the continuation of demand for polished diamonds from the midstream sector,” Moagi said.
“This, in turn, supported a steady demand for rough diamonds in the last quarter of 2020.”
The slump in local diamond mining was underlined by Debswana, which sold 17.1 million carats during the year compared to 22 million in 2019. Lucara, meanwhile realised sales of $107 million over the same period compared to $330 million in 2019, while state diamond trader, the Okavango Diamond Company sold $207 million worth of rough diamonds in 2020 compared to $440 million in 2019.
Players in the industry are cautiously optimistic about 2021, however, with Lucara’s Karowe Mine expected to reach revenues of between $180 million and $210 million. De Beers, a 50-50 equity partner in Debswana with the government, has also noted stronger demand for rough diamonds this year, with both its first and second auctions of the year recording higher earnings than the comparable auctions in 2020.
De Beers, which conducts its global auctions in Gaborone 10 times a year, has thus far recorded revenues of $1.2 billion at the two auctions conducted thus far this year, compared to $913 million over the same period last year.