Botswana faces colossal trade deficit amid weak diamond trading
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Latest released statistics shows Botswana choking at a trade deficit of more than P3 billion. And this current drift is contributed mostly by the dwindling diamond exports, a red flag for the diamond dependent economy.
The latest released International Merchandise Trade Statistics which covers the last quarter of 2019 until now for Statistics Botswana and released in December, shows signs of an economy with a niggling trade deficit. The last time Statistics Botswana compiled information on trade during October 2019, Botswana registered a trade deficit of P3, 425.1 million. During October 2019, Botswana’s total imports were valued P5, 587.0 million, resulting in an increase of 3.8percent compared to the revised September 2019 value of P 5, 383.4 million.
According to Statistics Botswana total exports for the period under review were valued at P2, 161.9 million, registering a decrease of 49.3 percent from the previously revised period which had a value of P4, 260.2 million. During the current period according to the national statistics body Botswana exported Diamond accounting 79.2 percent of total exports. Machinery & Transport Equipment and Meat & Meat Products followed with 5.7 percent and 3.9 percent respectively.
According to Statistics Botswana, India and United Arab Emirates were the major destinations for Botswana exports, having received 28.8 percent and 18.7 percent respectively, of total exports during October 2019. Statistics Botswana says Belgium and South Africa received 14.7 percent and 12.2 percent respectively. The fall of 49.3 percent of exports was mainly attributed to the 54.2 percent (P2, 026.6 million) decline in Diamonds exports during the current month compared to the value recorded for the previous month.
The diamond was not the only culprit to this country’s low export rate, it is lined up with Salt & Soda Ash which dropped by P25 .3 million or 41.6 percent from the previous quarter which is Q3. Salt & Soda Ash had dropped from P60.9 million during September 2019 to P35.6 million during the period under review. In the latest international merchandise trade statistics, Botswana exports P623.2 million worth of diamonds to India which is a leading buyer of Botswana stones.
United Arab Emirates bought diamonds worth P403.5 million while Belgium, Botswana’s biggest EU partner imported rough diamonds worth P317.5 million. The world’s biggest economy USA even trails Israel as it bought P47.2 million of diamond while Israel paid Botswana P178 million for its precious stones. Currently riddled by political protests Hong Kong remains in the top five of Botswana’s top diamond buyers as it imported diamonds worth P83 million.
Botswana’s neighbor and one of Africa’s leading economy is not a big fan of Botswana diamonds as it only bought P10 million worth of the stones in the period under review. South Africa mostly buys machinery and electrical equipment from Botswana which was worth at P104.7 million in the period under review. Most of Botswana’s exports, mostly diamonds, in the just ended quarter of 2019 were transported by air and they were worth P1, 8 billion or 82.6 percent of the entire export bill. Road transport accounted for 16.5 percent (P356.0 million) of total exports during the month under review.
Botswana dogged by trade deficit as it is currently an import dependent economy
The trade deficit of P2 billion which was recorded by Statistics Botswana shows a continue trend of the country living at a negative trade balance. Last year the trade deficit rose from P1 billion in October to P2 billion in December. For October 2019 it was already at P3 billion and trade expects said it is going to soar to more than P4 billion in December 2019 given the bad year that was last year.
In 2017 Botswana’s trade balance has been flip flopping and fluctuating with quarters of the year and months. Botswana ended the first quarter of year 2017 with a trade deficit and continued to the next quarter with a trade balance running at a negative before recovering in the third quarter albeit flip flopping between getting trade surplus and trade deficit.
The story of bad trade balance did not end three years ago, it even continue to 2018, with some months having trade surplus while some experiencing. This trend was inherited by Botswana trade dynamics towards last year where the country only experienced trade surplus only in January and June. In other months Botswana was grappling with a huge trade deficit. Statistics Botswana is yet to release the November and December trade statistics.
According to Statistics Botswana, a trade balance refers to the total value of goods exported minus the total value of goods imported by a given economy in a given period of time. A positive trade balance (trade surplus) indicates that a country is exporting more in value terms than it is importing. A negative trade balance (trade deficit) indicates that the country is importing more than it is exporting.
High import bill
The Botswana imports which were more than exports, causing a huge trade deficit in the year under review amounted to P5.6 billion. This resulted in an increase of 3.8 percent when compared to the previously revised period of 2019 where they were valued at P 5, 383.4 million.
According to Statistics Botswana, Diamonds contributed the most to the total imports, at 24.8 percent (P1, 385.5 million) followed by Food, Beverages & Tobacco and Machinery & Electrical Equipment at 14.6 percent (P813.1 million) and 12.9 percent (P722.2 million) respectively. Fuel contributed 12.4 percent (P693.3 million) while Chemicals & Rubber Products contributed 10.2 percent (P569.2 million) to total imports during the period under review.
Most of the imports from SACU came from South Africa followed by Namibia, accounting for 65.4 percent and 10.5 percent respectively, according to Statistics Botswana. South has a contribution of 65.4 percent (P3, 7 billion) of total imports during the month under review. Botswana is known to be dependent on its southern neighbor for Food, Beverages & Tobacco and Fuel and in the period under review these commodities were the top most imported goods from South Africa, with contributions of 20.8 percent (P759.6 million) and 16.1 percent (P588.1 million) respectively.
A lot of Botswana’s import bill shows that most of the commodities were also sourced from Asia and these main commodities imported from the region were Diamonds and Machinery & Electrical Equipment with contributions of 28.9 percent (P157.5 million) and 17.7 percent (P96.4 million) respectively. According to Statistics Botswana Asia also sold Chemicals & Rubber Products and Vehicles & Transport Equipment made contributions of 14.9 percent (P81.1 million) and 13.9 percent (P75.6 million) respectively. India and China were the main sources of imports from Asia, having supplied 3.1 percent (P175.7 million) and 2.4 percent (P132.2 million) respectively, of total imports during the season under review.
Also seen on Botswana’s import bill is the European Union (EU) which supplied imports valued at P372.5 million, accounting for 6.7 percent of total imports during October 2019. In the region Belgium and the United Kingdom were the main sources of imports from the EU, having contributed 3.0 percent (P165.4 million) and 1.3 percent (P70.6 million) in that order, to total imports during the month under review.
During October 2019, Canada supplied 4.5 percent (P250.5 million) of total imports to Botswana. Most of the imports from Canada were unsorted Diamonds at 98.9 percent (P247.7 million) of total imports from that country, according to Statistics Botswana. Statistician General, Burton Mguni recently said as a result, international merchandise trade statistics remains one of the major contributing indicators of the performance of a country’s economy and its competitiveness on the world market. He said the report is a compilation of the country’s national accounts and balance of payments percent and 12.2 percent respectively.
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FaR property assets value clock P1.47 billion
FaR Property Company (FPC) Limited, a property investment company listed on the Botswana Stock Exchange, has recently announced its exceptional financial results for the year 2023. The company’s property asset value has risen to P1.47 billion, up from P1.42 billion in the previous year.
FPC has a diverse portfolio of properties, including retail, commercial, industrial, and residential properties in Botswana, South Africa, and Zambia. The company owns a total of 186 properties, generating rental revenues from various sectors. In 2023, the company recorded rental revenues of P11 million from residential properties, P62 million from industrial properties, and P89 million from commercial properties. Overall, the company’s total revenues increased by 9% to P153 million, while profit before tax increased by 22% to P136 million, and operating profit increased by 11% to P139 million.
One notable achievement for FPC is the low vacancy rate across its properties, which stands at only 6%. This is particularly impressive considering the challenging trading environment. The company attributes this success to effective lease management and the leasing of previously vacant properties in South Africa. FPC’s management expressed satisfaction with the results, highlighting the resilience of the company in the face of ongoing macroeconomic challenges.
The increase in profit before tax can be attributed to both an increase in income and effective control of operating expenses. FPC managed to achieve these results with fewer employees, demonstrating the company’s efficiency. The headline earnings per linked unit also saw an improvement, reaching 26.92 thebe, higher than the previous year.
Looking ahead, FPC remains confident in its competitiveness and growth prospects. The company possesses a substantial land bank, which it plans to develop strategically as opportunities arise. FPC aims for managed growth, focusing on consumer-driven developments and ensuring the presence of supportive tenants. By maintaining this approach, the company believes it can sustainably grow its property portfolio and remain competitive in the market.
In terms of the macroeconomic environment, FPC noted that inflation rates are decreasing towards the 3% to 6% range approved by the Bank of Botswana. This is positive news for the company, as it hopes for further decreases in interest rates. However, the fluctuating fuel prices, influenced by global events such as the war in Ukraine and oil output reductions by Russia and other Middle Eastern countries, continue to impact businesses, including some of FPC’s tenants.
FPC’s property portfolio includes notable assets such as a shopping mall in Francistown with Choppies Hyper as the anchor tenant, Borogo Mall located on the A33 main road near the Kazungula ferry crossing, and various industrial and commercial properties in Gaborone leased to Choppies, Senn Foods, and Clover Botswana. The company also owns a shopping mall in Mafikeng and Rustenburg in South Africa.
The majority of FPC’s properties, 85%, are located in Botswana, followed by 12% in South Africa and 3% in Zambia. With its strong financial performance, competitive position, and strategic land bank, FPC is well-positioned for continued growth and success in the property market.
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BPC Signs PPA with Sekaname Energy
The Botswana Power Corporation (BPC) has taken a significant step towards diversifying its energy mix by signing a power purchase agreement with Sekaname Energy for the production of power from coal bed methane in Mmashoro village. This agreement marks a major milestone for the energy sector in Botswana as the country transitions from a coal-fired power generation system to a new energy mix comprising coal, gas, solar, and wind.
The CEO of BPC, David Kgoboko, explained that the Power Purchase Agreement is for a 6MW coal bed methane proof of concept project to be developed around Mmashoro village. This project aligns with BPC’s strategic initiatives to increase the proportion of low-carbon power generation sources and renewable energy in the energy mix. The use of coal bed methane for power generation is an exciting development as it provides a hybrid solution with non-dispatchable sources of generation like solar PV. Without flexible base-load generation, the deployment of non-dispatchable solar PV generation would be limited.
Kgoboko emphasized that BPC is committed to enabling the development of a gas supply industry in Botswana. Sekaname Energy, along with other players in the coal bed methane exploration business, is a key and strategic partner for BPC. The successful development of a gas supply industry will enable the realization of a secure and sustainable energy mix for the country.
The Minister of Minerals & Energy, Lefoko Moagi, expressed his support for the initiative by the private sector to develop a gas industry in Botswana. The country has abundant coal reserves, and the government fully supports the commercial extraction of coal bed methane gas for power generation. The government guarantees that BPC will purchase the generated electricity at reasonable tariffs, providing cash flow to the developers and enabling them to raise equity and debt funding for gas extraction development.
Moagi highlighted the benefits of developing a gas supply industry, including diversified primary energy sources, economic diversification, import substitution, and employment creation. He commended Sekaname Energy for undertaking a pilot project to prove the commercial viability of extracting coal bed methane for power generation. If successful, this initiative would unlock the potential of a gas production industry in Botswana.
Sekaname Energy CEO, Peter Mmusi, emphasized the multiple uses of natural gas and its potential to uplift Botswana’s economy. In addition to power generation, natural gas can be used for gas-to-liquids, compressed natural gas, and fertilizer production. Mmusi revealed that Sekaname has already invested $57 million in exploration and infrastructure throughout its resource area. The company plans to spend another $10-15 million for the initial 6MW project and aims to invest over $500 million in the future for a 90MW power plant. Sekaname’s goal is to assist BPC in becoming a net exporter of power within the region and to contribute to Botswana’s transition to cleaner energy production.
In conclusion, the power purchase agreement between BPC and Sekaname Energy for the production of power from coal bed methane in Mmashoro village is a significant step towards diversifying Botswana’s energy mix. This project aligns with BPC’s strategic initiatives to increase the proportion of low-carbon power generation sources and renewable energy. The government’s support for the development of a gas supply industry and the commercial extraction of coal bed methane will bring numerous benefits to the country, including economic diversification, import substitution, and employment creation. With the potential to become a net exporter of power and a cleaner energy producer, Botswana is poised to make significant strides in its energy sector.
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UDC deadlock: Boko, Ndaba, Reatile meet
It is not clear as to when, but before taking a festive break in few weeks’ time UDC leaders would have convened to address the ongoing deadlock surrounding constituency allocation in the negotiations for the 2024 elections. The leaders, Duma Boko of the UDC, Mephato Reggie Reatile of the BPF, and Ndaba Gaolathe of the AP, are expected to meet and discuss critical matters and engage in dialogue regarding the contested constituencies.
The negotiations hit a stalemate when it came to allocating constituencies, prompting the need for the leaders to intervene. Representatives from the UDC, AP, and BPF were tasked with negotiating the allocation, with Dr. Patrick Molotsi and Dr. Philip Bulawa representing the UDC, and Dr. Phenyo Butale and Wynter Mmolotsi representing the AP.
The leaders’ meeting is crucial in resolving the contentious issue of constituency allocation, which has caused tension among UDC members and potential candidates for the 2024 elections. After reaching an agreement, the leaders will engage with the members of each constituency to gauge their opinions and ensure that the decisions made are favored by the rank and file. This approach aims to avoid unnecessary costs and conflicts during the general elections.
One of the main points of contention is the allocation of Molepolole South, which the BNF is adamant about obtaining. In the 2019 elections, the UDC was the runner-up in Molepolole South, securing the second position in seven out of eight wards. Other contested constituencies include Metsimotlhabe, Kgatleng East and West, Mmadinare, Francistown East, Shashe West, Boteti East, and Lerala Maunatlala.
The criteria used for constituency allocation have also become a point of dispute among the UDC member parties. The issue of incumbency is particularly contentious, as the criterion for constituency allocation suggests that current holders of UDC’s council and parliamentary seats should be given priority for re-election without undergoing primary elections. Disadvantaged parties argue that this approach limits democratic competition and hinders the emergence of potentially more capable candidates.
Another disputed criterion is the allocation based on the strength and popularity of a party in specific areas. Parties argue that this is a subjective criterion that leads to disputes and favoritism, as clear metrics for strength and visibility cannot be defined. The BNF, in particular, questions the demands of the new entrants, the BPF and AP, as they lack a traceable track record to support their high expectations.
The unity and cohesion of the UDC are at stake, with the BPF and AP expressing dissatisfaction and considering withdrawing from the negotiations. Therefore, it is crucial for the leaders to expedite their meeting and find a resolution to these disputes.
In the midst of these negotiations, the BNF has already secured 15 constituencies within the UDC coalition. While the negotiations are still ongoing, BNF Chairman Dr. Molotsi revealed that they have traditionally held these constituencies and are expecting to add more to their tally. The constituencies include Gantsi North, Gantsi South, Kgalagadi North, Kgalagadi South, Good Hope – Mmathethe, Kanye North, Kanye South, Lobatse, Molepolole North, Gaborone South, Gaborone North, Gaborone Bonnignton North, Takatokwane, Letlhakeng, and Tlokweng.
The resolution of the contested constituencies will test the ability of the UDC to present a united front in the 2024 National Elections will depend on the decisions made by the three leaders. It is essential for them to demonstrate maturity and astuteness in resolving the constituency allocation deadlock and ensuring the cohesion of the UDC.