Latest figures from the country’s Statistics agency affirm diamonds trade as the mainstay of the economy as they continue to dominate the exports and imports.
The International Merchandise Trade Statistics (IMTS) for May has revealed that diamonds still dominate the goods coming and leaving the country.
The report released by Statistics Botswana noted that May 2015 total imports were valued at P6, 485.5 million, showing an increase of 16.4 percent (P912.5 million) from the April 2015 value of P5, 573.0 million. As compared to May 2014, the May 2015 import figure shows a decrease of P573.2 million, which is 8.1 percent decrease from P7, 058.7 million recorded during the same month of the previous year.
Equally, during the same period, total exports were valued at P7, 103.0 million, an increase of 88.6 percent (P3, 337.6 million) from the April 2015 value of P3, 765.4 million. May 2015 total exports show a rise of P1, 092.5 million (18.2 percent) from the May 2014 value of P6, 010.6 million.
According to the monthly digest, the composition of imports by principal commodities for May 2015 shows that diamonds contributed the most to total imports (P6, 485.5 million), having contributed 40.3 percent (P2, 615.6 million), and followed by Fuel with 11.3 percent (P731.1 million) and Machinery & Electrical Equipment with 11.1 percent (P717.3 million).
May 2015 total exports were valued at P7, 103.0 million, with 85.3 percent (P6, 061.7 million) attributed to exports of Diamonds. These diamonds consist of diamonds from Diamond polishing companies as well as those from the aggregation process.
Copper Nickel, Machinery & Electrical Equipment and Meat & Meat Products contributed 5.5 percent (P392.3million), 3.1 percent (P219.8 million) and 1.6 percent (P110.4 million) respectively, to total exports during the month.
Botswana‘s main trading partners are South Africa, Namibia, European Union, United Kingdom, Asia, China, Japan, Israel and Belgium.
The digest indicates that Botswana’s imports were largely from South Africa accounting for 60.9 percent (P3, 951.6 million) followed by Namibia contributing 19.1 percent (P1, 240.2 million). Canada and the United States of America (USA) supplied 9.4 percent (P611.8 million) and 1.0 percent (P63.5 million) respectively, of total imports during the month.
Other sources of imports for the period under review were Asia which supplied imports valued at P317.5 million, representing 4.9 percent of total imports. Israel contributed 1.1 percent (P68.6 million), while China and India each contributed 1.0 percent to total imports during May 2015, at values of P64.0 million and P61.7 million respectively.
The European Union (EU) supplied imports valued at P216.5 million, representing 3.3 percent of total imports during May 2015. Belgium contributed 1.7 percent (P110.9 million) to total imports recorded during the same period.
Total exports for May 2015 were valued at P7, 103.0 million, with 37.1 percent (P2, 637.8 million) destined to Asia. India received most of the exports destined to Asia at the value of P1, 081.5 million, representing 15.2 percent of total exports.
United Arab Emirates (UAE), Israel and Hong Kong followed with contributions of 8.2 percent (P583.1 million), 8.0 percent (P569.2 million) and 2.2 percent (P156.6 million) respectively, during the month under review.
Exports destined to the EU were valued at P1, 629.4 million, representing 22.9 percent of total exports during the period under review. Belgium received most exports destined to EU, having received 20.9 percent (P1, 482.5 million) of total exports during May 2015. South Africa and Namibia received 11.3 percent (P799.4 million) and 10.1 percent (P715.4 million) respectively, of total exports during the month under review.
Exports to Canada were valued at P453.4 million, representing 6.4 percent of total exports (P7, 103.0 million) during May 2015. Norway, Switzerland and the United States of America (USA) received 4.2 percent (P298.1 million), 3.6 percent (P257.7 million) and 3.0 percent (P210.3 million) respectively, of total exports during the same period.
Botswana recorded a trade surplus of P617.5 million.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”