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Covid-19 wipes out P4.3 billion worth of export earnings in April

Muted global demand of rough diamonds in April resulted in a massive decline in Botswana’s total export by value; this is according to Statistics Botswana’s International merchandises trade figures for the month of April.

Trade for the month was characterized by widespread declines across exports and imports of commodities coincided with disruptions in international trade by the outbreak of the Covid-19 pandemic which resulted in the country declaring a lockdown from 2nd April to 20th May 2020.

During this period, the Botswana Government took a decision to close most of its borders; those that were open were to allow for the flow of mainly essential goods. Botswana imported mostly essential goods in April 2020.

The leading commodity groups were imports of Food, Beverages & Tobacco, Chemicals & Rubber Products and Fuel at 38.2 percent, 19.8 percent and 15.4 percent respectively. South Africa was the major source of Botswana’s imports with a contribution of 73.6 percent to the country’s total imports.

China and India followed with contributions of 3.9 percent and 3.5 percent respectively. With regard to regional groupings, SACU was the major source of imports with a contribution of 77.8 percent.

Asia and the EU followed with contributions of 10.5 percent and 3.1 percent, respectively. Canada contributed 2.4 percent worth of imports to Botswana’s total imports during the same month.
Botswana’s overall exports amounted to P142.8 million, representing a massive fall of 96.8 percent (P4, 339.2 million) when compared to the revised March 2020 value of P4, 482.1 million. On the other hand, imports stood at P1, 355.1 million, showing a decrease of 78.8 percent (P5, 038.2 million). Subsequently, the country recorded a negative trade balance of P1, 212.2 million.

Botswana’s exports were mostly absorbed by SACU with a market stake of 77.4 percent, with South Africa receiving 73.7 percent of total exports during the month under review. Zambia accounted for 7.3 percent of the export market share. The most exported commodities from Botswana were Gold, Salt & Soda Ash and Meat & Meat Products at 35.6 percent, 28.8 percent and 7.3 percent respectively.

The P142.8 million export value was led by Gold at 35.6 percent (P50.9 million). Salt & Soda Ash followed with a share of 28.8 percent (P41.2 million). Copper & Nickel contributed 2.5 percent (P3.6 million) to total exports during the period under review.

During April 2020, Botswana received total imports amounting to P1, 355.1 million. The country mostly imported essential goods. Food, Beverages & Tobacco contributed the most to total imports at 38.2 percent (P517.2 million), followed by Chemicals & Rubber Products with 19.8 percent (P268.7 million).

The Chemicals & Rubber Products group includes pharmaceutical products. Fuel made a contribution of 15.4 percent (P208.4 million). Botswana uses air and road as its main modes of transport. Air transport accounted for 64.1 percent of exports while Road transport accounted for 82.3 percent of imports when considering the values of goods exported and imported.

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Business

Closed border trade conundrum; Masisi’s pragmatic headache

4th August 2020

A graphical picture or statistical publication shows that since 2018, Botswana’s trade balance has been on the lows if not fluctuating on the negatives-a bad economic health. This was shown in the latest International Merchandise Trade Statistics (IMTS), statistics which is one of the major contributing indicators of the performance of Botswana’s economy and its competitiveness in the world market.

This trade balance graphical picture is figuratively akin to that of a Covid-19 patient on life support; struggling to breathe while lying down on a sickbed gasping to salvage the last oxygen left on offer.

Botswana’s affair in foreign trade statistics -which is all about an account of all transactions of merchandise between this country’s domestic residents and the rest of the world- is on feeble health or life support status. The account measures the value and quantity of goods which add or subtract from the stock of material resources of a country, by entering (imports) or leaving (exports) its economic territory.

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Business

Enters SEZA the Game Changer

4th August 2020

By introducing special regulatory, administrative and fiscal regimes, the Special Economic Zones Authority (SEZA) intends to improve the ease of doing business and re-position Botswana as a premier investment destination of choice, thereby ushering in a new era of robust economic growth.

This was revealed by SEZA Chief Executive Officer (CEO) Lonely Mogara, who further explained that the special regulatory, administrative and fiscal regimes will be implemented at the Authority’s eight SEZs in Pandamatenga, Francistown, Selibe Phikwe, Palapye, Tuli Block, Gaborone and Lobatse.

“These special regimes will ease doing business by addressing constraints that may hinder investment in the country like work permits, residence permits, building permits, Environmental Impact Assessment (EIA) permits, and tax incentives through a dedicated One Stop Service Centre (OSSC),” said Mogara.

SEZA was established through an Act of Parliament and mandated to establish, develop, manage and regulate a portfolio of SEZs. The Authority would then attract world class investors to set up mega factories and businesses in these SEZs, thereby growing and diversifying the Botswana economy through increased Foreign Direct Investment (FDI) and export revenue.

Mogara explained that SEZA intends to develop SEZs that are integrated into the domestic, regional and international markets; facilitate clusters development; and create backward and forward linkages anchored by targeted investors. The Authority will also rollout the red carpet for SEZ investors through its robust One Stop Service Centre (OSSC).

“In order to tap into existing resources and avoid duplication, we have initiated discussions with strategic organisations that will be appointed Zone Management Companies. Some of the potential Zone Management Companies that we have identified are Local Enterprise Authority (LEA), Fairgrounds Holdings, Botswana Innovation Hub (BIH), Selibe Phikwe Economic Diversification Unit (SPEDU) and Botswana Agricultural Marketing Board (BAMB),” said Mogara.

Going forward, SEZA will explore partnerships with these stakeholders to leverage on their strengths and optimise the country’s resources. To this end, said Mogara, SEZA has already signed agreements with BIH and Business Botswana; while negotiations with BAMB and LEA are in advanced stages.

In 2005, the Business Economic Advisory Council (BEAC) recommended the implementation of Free Zones to spur economic growth and diversification, create jobs and eradicate poverty post depletion of minerals. Free Zones were identified as suitable vehicles for introducing viable, new economic activities by providing attractive incentives for highly specific, strictly circumscribed investment ventures. Government later adopted the SEZ Policy of 2011, established the SEZA in 2016 and approved the SEZ Regulations and Incentives in 2018 and 2019 respectively.

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Business

De Beers Q2 production down 54 %, sales drop 95 %

4th August 2020
Diamonds

Rough diamond production for global mining giant, De Beers Group declined by 54% to 3.5 million carats in the second quarter of 2021. This is primarily due to the Covid-19 lockdowns across the mining producer countries.

A production report released by Anglo American, De Beers parent company recently , reveals that Debswana, Botswana’s De Beers operation spearheaded the decline, registering 68 % drop in production for the second quarter of the year 2020.

Debswana is jointly owned by both Botswana Government & De Beers Group on equal shareholding. Botswana government has 15 % direct shareholding on De Beers Group, with the remaining 85 % owned by mining conglomerate Anglo American.

Debswana, which is De Beers‘s flagship rough diamond producer has only managed to deliver to 1.8 million carats in quarter 2, principally due to a nationwide lockdown from 2 April to 18 May in Botswana. In addition De Beers says the 68 % production drop is also attributable to curtailed output in both plant and human resource as a result of Covid-19 measures implemented to safeguard the workforce. Operations restarted from mid-May, with production targeted at levels to meet the lower demand.

Since COVID-19 pandemic engulfed the world beginning of the year, demand in polished diamonds significantly dropped as a result of closure of jewelry and retail outlets in the United States.
This then disrupted the entire value chain from downstream backwards, leaving midstream businesses with full and dense inventories subsequently shrinking demand for rough goods from upstream producer entities.

In Namibia where De Beers operate a model similar to that in Botswana, production decreased significantly at NamDeb, the inland mining outfit jointly owned by Namibian Government and De Beers Group on 50-50 shareholding.

However the decrease was offset by Debmarine, a unique mining operation where De Beers recovers diamonds on the Namibian coast of Atlantic Ocean. In 2016 De Beers invested P5 billion on a new vessel of unprecedented sophistication for Debmarine to take coastal diamond mining to another level.

For the quarter under review, the magic was delivered by Mafuta crawler vessel which was under maintenance in Q2 2019. Overall production in Namibia increased by 7% to 0.4 million carats.
In South African where De Beers operates Venetia Mine in Limpopo province, production decreased by 3% to 0.6 million carats primarily due to Covid-19 measures. The production shutdown was partly offset by higher grades from the open pit material prior to transition to the underground.

Production in Canada decreased by 27% to 0.8 million carats, primarily due to Victor reaching the end of its life in Q2 2019. At Gahcho Kué, production decreased by 11% to 0.8 million carats due to Covid-19 measures.

SALES

During Q2, the demand for rough diamonds was significantly impacted by a combination of Covid-19 restrictions impacting consumer demand and access to Southern Africa, as well as severely limited midstream cutting and polishing capacity due to lockdowns, particularly in India.

Rough diamond sales totalled 0.3 million carats (0.2 million carats on a consolidated basis) compared with 9.0 million carats (8.3 million carats on a consolidated basis) in Q2 2019. The third Sight of 2020 was cancelled due to Covid-19-related travel restrictions and, in response to the unprecedented industry conditions, De Beers also offered sightholders the option to defer up to 100% of their allocations at the fourth and fifth Sights.

Rough diamond consolidated sales in Q2 2020 decreased to $56 million, signaling a catastrophic decline from $1.3 billion raked in second quarter 2019. The sharp decline was driven by lower volumes and prices.

The H1 2020 average realized rough diamond price decreased by 21% to $119/carat (H1 2019: $151/carat), driven by a higher proportion of lower value rough diamonds sold and an 8% reduction in the average rough price index.

De Beers has however maintained their production guidance at 25-27 million carats (100% basis), subject to continuous review based on the disruptions related to Covid-19 as well as the timing and scale of the recovery in demand. The guidance was in the first quarter revised from the initial 32-34 million carats forecasted beginning of the year, slashed by 20 % to the current guidance in response to declining demand.

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