Govt, De Beers urged to speed up deal
Government has been urged to remove bottlenecks anticipated to weigh down prospects of the economy. Econsult analyst, Sethunya Kegakgametse in the company’s first quarter economic review, said uncertainties lingering over the economy will inject lower growth and a deterioration in the trade balance anticipated, as diamond exports slow down.
“These uncertainties need to be removed if there is to be sufficient private sector investment, including foreign direct investment (FDI), to underpin competitiveness, export-led growth, and job creation,” said Kegakgametse. She said the uncertainties include delays in concluding negotiations between government and De Beers on diamond marketing and mining agreements.
President Masisi is on record warning the government is prepared to cut ties with international diamond giant, De Beers if talks to renegotiate a sales agreement prove unfavorable for the country. Under the current deal, which expires in June, government is entitled to purchase up to 25 percent of the stones mined in a joint venture and Masisi's administration is pushing for a better deal.
In addition, Kegakgametse cited threats posed by vegetables import bans, in conflict with the country’s commitments under the Southern African Customs Union (SACU) Agreement and the recently-signed African Continental Free Trade Area (AfCFTA) agreement.
Econsult’s forecast comes on the backdrop of a stable economic performance in 2022. Even though most sectors experienced lower growth rates than in 2021, mining regained its position as the largest sector of the economy in 2022 after several years of declining, since 2017.
“The mining sector was boosted by higher diamond output, increased prices, the new Khoemacau copper mine reaching full capacity production, as well as increased coal output.” The 2022 stable economic activities saw a decrease in annual GDP growth to 5.8 percent fell below projections of 6.7 percent by Ministry of Finance and 6.4 percent by IMF.
“Annual GDP growth in 2022 slowed, reflecting in broader terms the normalisation of growth following the COVID-19 pandemic,” said Kegakgametse. Despite the high diamond output last year, the international market for rough diamonds experienced a rough start to 2023, with De Beers’ Global Sightholder Sales (DBGSS) recording lower sales in the first three sales cycles of the year, compared to the previous year, total sales in the first three cycles of 2023 were 20.6 percent lower than the same in 2022.
“This reflects subdued global demand for diamonds and diamond jewellery from two biggest markets, China and USA. However, this was largely expected, given that Botswana diamond exports rose significantly by 20.4 percent in 2022, benefiting from sanctions on Russia’s diamond exports,” said Kegakgametse.