After President Mokgweetsi Masisi’s trip to new darling China he jetted off to the US for a United Nations assembly, ironically these trips happened during an unprecedented era of a trade war between two of the world’s economically powerful nation, China and USA.
Masisi with his infant administration appears not much concerned about the trade war, however observers says it is visible that the Botswana president is currently a man carefully treading on eggshells lest this country finds itself caught in a brutal trade war crossfire.
Biggest economy USA exports most of Botswana diamonds. According to latest findings by World Top Exports, its total diamond imports are worth US$23.2 billion (20 percent of total diamond imports) and this country gets a larger chunk out of this. China, the second economic superpower, spends US$7.9 billion on diamonds being the one of the top importers of Botswana diamonds.
The diamond-dependant Botswana economy depends on both China and US’s money, meaning a trade war between the two should scare this country. According to reports diamonds, gems or precious metals takes 91.5 percent of Botswana exports which amounts to US$4.5 billion.
The US and China are having an economic conflict resulting from extreme protectionism as they are engaged in a tit-for-tat for tariffs in each other’s goods and this has been going on for months. US President Donald Trump started the war as he lambasted China for “unfair” trading practices including theft of US companies’ intellectual property.
Trump launched a trade war with China in a bid to create more US manufacturing jobs. In a see-saw affair of tariff war the “America First” president imposed US$ 200 billion on Chinese goods and China in return retaliated with a much milder response of US$60 billion. After US tariffs on China, the large Asian nation responded saying it “deeply regrets” the White House’s decision, adding that “China has no choice but to take counter-measures”.
But is Botswana affected by trade war, and how?
When delivering a keynote address at last month’s budget Pitso, Minister of Finance and Economic Development Kenneth Matambo said it was a time “when there are trade related uncertainties, particularly between China and the US which has resulted in externality to our domestic economy. The domestic economy can be affected negatively particularly the mining sector.”
The question of trade war effect on Botswana followed Minister of Investment, Trade and Industry Bogolo Kenewendo in a recent interview with Bloomberg. Kenewendo told the business media outlet that Botswana’s linkage with China and USA does not make it susceptible to the negative impacts of trade war.
“At the moment there is no direct impact but we are concerned…we are keeping our eye on it because it could have drastic impacts on our economy because we are a diamond based economy and our biggest markets are China and the US,” said Kenewendo.
Economists predict that the trade war between China and the US shows no obvious signs of ending and there are fears that this will drag down global economic growth this year and in 2019. The World Bank which has been trying to mitigate the China versus US trade bout warned that this may also bring the global economic recession à la the 2008 financial crises.
During the recent UN General Assembly US president Trump said, “the United States has just announced tariffs on another $200 billion in Chinese-made goods.” The “America First” president was not apologetic as “we reject the ideology of globalism and accept the ideology of patriotism.”
Trade experts have warned that there is not going to be a winner at the end of the trade war but the global economy will have a slump in growth. Analysts believe “when elephants fight, it is the grass that suffers” as it is the case for developing countries like Botswana will suffer when the global economy collapses. Also, economists argue that border tariffs are typically counterproductive because the higher costs are passed on to consumers, even domestic consumers like the case of US farmers who uses China as an ideal import hub.
Bakang Ntshingane, a Motswana political scientist based in South Korea whose focus is in international trade and economic diplomacy, is worried about the already fragile global economy which is likely to collapse to its knees. In his trade advice to Botswana, Ntshingane believes Botswana should be practical in dealing with both superpowers; China and US.
“We should learn from them. We should learn whatever we can from them, like China in terms of industrialization and special economic zones, unabated by the trade. China’s increased focus and attention on Africa means there will be more opportunities for development partnerships. We should be ready and prepared to exploit those opportunities and seek fair trade arrangements.
Trade remains one of the most critical tools for economic growth. We have to invest more time and effort in building infrastructure and building export competitive industries. Let us also shift our attention to intra-regional trade,” said Ntshingane.
This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.
“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.
Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.
A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.
Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.
A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.
Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.
In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.
The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.
In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.
Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.
The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”
In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.
Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.
The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.