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Botswana’s Diamond-Export Slump Weighs on Economic Growth

Feb 7, 2016 10:11 AM   By Rapaport News
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RAPAPORT... A slump in global demand for diamonds hit Botswana’s economic growth as exports of rough diamonds fell 39 percent to $2.41 billion in 2015, according to provisional data published by the Bank of Botswana.

“The continued slowdown of growth in the global economy, particularly in the major markets for our diamonds, has had profound impact on the domestic economy,” Kenneth Matambo, Botswana’s minister of finance and development planning, said in his budget speech for 2016 on February 1.

Matambo added that weakness in the diamond industry forced the Bank of Botswana to revise its 2015 economic growth estimate to 1 percent from 2.6 percent. That compares with economic growth of 3.2 percent in 2014. Supply challenges in the water and electricity sector weighed on growth, but the main catalyst behind the slowdown was mining, which dropped 14 percent in 2015 because of a cut in diamond production, he said.

Matambo projected that Botswana’s budget deficit will widen to 3.8 percent of gross domestic product (GDP) in the fiscal year that ends on March 31, largely a result of the slump in diamond output and prices.

Botswana is the world’s second largest diamond producer, according to Kimberley Process data, having been replaced from the top spot by Russia in 2014.

De Beers last week reported diamond production at its Debswana unit, a joint venture with the Botswana government, dived 16 percent to 20.37 million carats in the calendar year 2015. Debswana accounts for a vast majority of Botswana’s diamond production, with about 85 percent of its output sold by De Beers and the remaining by the state-run Okavango Diamond Company.

Rapaport estimates De Beers rough diamond sales plunged 44 percent to $3.7 billion in 2015 as demand nosedived in the second half. The slowdown influenced Okavango to cancel its final two sales of the year.

Botswana’s rough exports consequently plummeted 88 percent year on year to $114.1 million in the fourth quarter, its lowest level in a decade, according to the Bank of Botswana.
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Tags: Botswana, De Beers, diamonds, Okavango, Rapaport News
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