• Diamond exports to decline further
• Copper/Nickel exports also under pressure
• Diversification of exports may ease strain
The value of Botswana’s total exports fell 62 percent year-on-year shedding P3.7 billion in value, driven mostly by subdued demand and decline in commodity prices. The national accounts office said this week that November 2015 exports were valued at P2.3 billion, after having shrunk significantly from the P6 billion value seen during the previous corresponding period. This translates to government losing P3.7 billion as per the expected average export revenue. The November 2015 export figure also saw a 51 percent tumble from the October 2015 value.
The November 2015 export figure also saw a 51 percent tumble from the October 2015 value.
Stastistitian Geneneral Annah Majelantle, Statistitian said that as a result of rough diamonds from the aggregation process not being exported on a monthly basis, fluctuations in the value of total exports were observed.
“Values are high during the months when rough diamonds from the aggregation process are exported and are low when there is insignificant exportation from the aggregation process,” she said.
Last year, demand for rough diamonds was at its lowest, with de Beers cutting production by over 32 percent. Okavango Diamond Company (ODC), a sight holding firm, also skipped some of its sights last year, reducing the value of diamond sales in the process. Head Researcher at Motswedi Securities, Garry Juma said that exports would continue to be under pressure because of a cool in China and limited demand in the USA.
The market watcher said that on month-to-month comparison, figures showed that diamond exports in the months of 2014 were higher than those in the months of 2015, signalling declining sales.
In 2012 total diamond exports generated P36 billion but further climbed to P55 billion and P65 billion in 2013 and 2014 respectively, which was an average of 60 percent to the total exports. However, in 2015, 11 months to November, P40 billion was recorded as diamond exports. Although the December 2015 figures are yet to be released, the exports will still show a huge decrease from the 2014 exports.
Not only is Botswana experiencing a decline in diamond exports, but other base metals as well which contribute largely to the export revenue.
While November 2015 total exports were valued at P2.3 billion, 62.3 percent of that value was diamonds alone.
However, Juma said that the sad thing is that not only is Botswana experiencing a decline in diamond exports, but other base metals as well which contribute largely to the export revenue. Copper/Nickel is the second largest contributor to exports. During the period under review, the commodity was accountable for 12.1 percent (P280 million) of the total export value, but the value has been falling significantly during 2015.
For example, 2015 second quarter (q2) saw P1.2 billion being recorded as copper/nickel exports, but the figure fell drastically to P368 million in q3, and is expected to close q4 further depressed.
Juma points to the low demand at the number one consumer, China, which is driving prices down as well. China has been buying a lot of copper for its industries but has since cooled off. China consumes half of the world copper production, which is around 22 million tonnes.
Further, Juma points out that copper mines have been shutting down in Botswana owing to the slump in prices and the dwindling demand. In 2015 alone, Discovery Metals Limited (DML) closed its operations at Boseto Copper Mine, while African Copper also wound down operations. Both mines owed creditors hundreds of millions of Pula owing to the unfavourable trading conditions.
Juma said the only solution was to have diversity in exports. However, despite the two commodities, Machinery & Electrical equipment is the third largest export revenue contributor at 8 percent, while the rest falls under 5 percent. Meat & Meat products, as well as Textiles used to contribute significantly to exports, but have since fallen to 3.2 percent and 1.4 percent respectively.
Botswana imports 78 percent of its products from South Africa.
The crumbling Rand also weighs down on local exporters
While Juma said that it would be best to have more companies exporting various goods to diversify export revenue, many may be discouraged by the depreciation of the Rand, since South Africa is Botswana’s major trading partner.
Figures show that while Botswana imports 78 percent of its products from South Africa, it also exports 22 percent from Africa’s second largest economy by value, the same value equivalent to that of Asia.
Juma said that with the Rand now equivalent to P0.71, it means that businesses which export to South Africa will start making less money which will further discourage them from exporting.
“It will make the companies less competitive,” he said. On the other hand, he said SA will benefit more because while Botswana exports to the value of P500 million to SA, it rather imports to the value of P4 billion, which will see SA gaining more value out of the Pula