Third quarter trade deficit eases

MBONGENI MGUNI
Staff Writer | Thursday December 9, 2010 00:00

Latest figures from the Central Statistics Office (CSO) indicate that the third quarter deficit was substantially lower than the P1.63 billion and P1.54 billion recorded in the first and second quarters respectively.

The third quarter's lower trade imbalance is a far cry from the record quarterly deficits of up to P4 billion seen since October 2008.

The running deficits - broken only once through a June 2010 surplus - were mainly caused by the mining industry's contraction following the collapse of international mineral prices and market demand during the recession.

The adverse conditions forced production cutbacks, retrenchments and rationalisations as well as suspensions and shutdowns across mining and other industries, impacting on trade volumes.

According to the CSO data, third quarter figures were largely helped by a marginal deficit of P75.8 million recorded in July 2010, a month in which exports nearly matched imports.

Diamond exports powered the improved trade figures during the quarter, with sales pegged at P2.23 billion, P1.24 billion and P1.76 billion for July, August and September respectively. The contribution of diamonds to overall exports has ranged between 58.2 percent and the 68.4 percent recorded in September.

The improved third quarter figures are in line with the expectations of industry experts of rising diamond sales ahead of the festive season as manufacturers stock up to process and retail for Christmas and New Year. With China opening up as new avenue for sales, the Chinese New Year on February 3, 2011 is also a target for manufacturers and retailers, helping sales of rough stones in the third quarter.

Besides diamonds, copper and nickel, beef as well as the resurgent textile sector all contributed to more positive trade figures for the third quarter. The European Union continues to be Botswana's biggest trading partner, being the destination for 59 percent or P4.7 billion of products from the country for the quarter.

The majority of these exports were to the United Kingdom, being rough diamonds sent to the aggregation centre at the Diamond Trading Company, while Belgium and Finland were other major destinations. Non-EU states such as Norway and Switzerland were equally strong markets.

Over the quarter, imports hovered around the P3 billion mark per month, the general average across preceding months. For 2010, imports are marginally higher quarter-by-quarter compared to 2009, with experts attributing this to the government's sustained development spending and the warming consumer market.

'Government's P12.18 development budget, coupled with the improved fiscus owing to higher than projected 2009 revenues, have propped up the economy, improving demand as indicated by the higher import figures,' says an executive with a local commercial bank.

'Quarter-by-quarter, machinery and electrical equipment are among the highest import items, signifying the impact of this sustained development budget.

'Higher household and business borrowings, on the other hand, are also indicative of growing consumer and industry demand, resulting in higher imports. Therefore, we see food, beverages and tobacco, as a category, accounting for 11.8 percent of total imports for September.'

Generally, the country's biggest import items are machinery and electrical equipment, fuel, food, beverages and tobacco as well as chemicals and rubber products.