Botswana’s trade deficit widened to P1.7 billion in August 2015 from P486.4 million recorded in July this year due to low volumes of diamond exports.
Trade data released by Statistics Botswana this week shows that while imports remained relatively flat, the deficit was driven by a significant 34% decline in exports from P4.6 billion to P3.03 billion.
An analysis of the data shows that the decline in exports was triggered by lower diamond exports (both polished and rough), which plunged 35% to P2.4 billion over the two months.
On an annual basis, the country’s trade balance slipped from a surplus of P1.82 billion in August 2014 to the current deficit with diamond exports still anchoring the decline.
Botswana exported diamonds worth P7.1 billion in August last year, 200% more than the value of diamonds exported in August this year.
While the reduction in diamond production to match market demand is largely responsible for the drop in exports, polished diamonds have also significantly fallen as local manufacturers have severely cut output.
“As a result of rough diamonds from the aggregation process not being exported on a monthly basis, fluctuations in the value of total exports are observed. Values are high during the months when rough diamonds from the aggregation process are exported and are low when there is no significant exportation from the aggregation process,” said Statistics Botswana. Due to lower diamond demand De Beers, which brings diamonds from all of its mines in the world to Botswana for aggregation before they are re-exported, has trimmed 2015 production from a target 33 million carats to 29 million carats.
Debswana has been equally affected with the 2015 output now expected at 20 million carats from the original target of 23 million carats.
Local cutting and polishing firms on the other hand have also severely cut output this year as they complain of higher rough process as well as tight liquidity in the market.