Diamond drop demands �new normal'

Mmegi Editor | Wednesday February 10, 2016 12:46

The latest figures bring into stark reality, the comments made by Finance Minister, Kenneth Matambo, in his budget speech about the need for austerity and discipline in public finance management.

According to Matambo, the slowdown in diamond export income in 2015 was among major contributors to the 15 percent drop in government mineral revenues to P18.2 billion. The lower diamond production was also key in the economic growth forecast for 2015 being slashed from 2.6 percent to one percent.

History has taught Botswana that diamond mining is a highly fickle activity, whose success is based on factors out of the reach of local policy makers. A successful year in diamond mining depends on demand throughout the diamond value chain, from cutting and polishing, to jewellery stores.

It depends on conditions and prospects in economies far removed from Botswana, on macro and micro-economic indicators in places many Batswana have only heard of.

And yet for all this precariousness, the economy is still largely dependent on both the revenues from diamond mining and the economic activity spurred by production of the precious stones.

If 2009 was a tap on the shoulder for authorities pursuing the economic diversification agenda, 2016 is a scream in the ear.

Some success has been had in diversifying the local economy away from a near total dependence on diamond mining, as can be seen in the growing contribution of tourism, financial services, construction and others to local growth, government revenues and employment.

However, the country’s exports and thus, its source of foreign currency earnings, are dominated by diamond mining to the extent that non-mining exports are nearly negligible every year.

For a country that relies heavily on imports, our dependence on diamond sales for our foreign currency needs remains an economic weakness that will one day result in the wholesale drawdown of our foreign savings.

Cabinet’s Doing Business sub-committee should take its cue from the diamond drop and redouble its efforts to boost the country’s investment climate, its overall competitiveness and its ability to attract Foreign Direct Investment.

Our firms have to be competitive and efficient to compete with their peers in the global village. Botswana needs high quality infrastructure, particularly in ICT and the productivity challenges perennially identified by the World Bank and others need to be ironed out.

Botswana is regularly ranked the number one address in the world for mining investment and this same commitment needs to be applied to the non-mining sector, for the stability of the economy.