Econsult Botswana said it is forecasting a contraction in the contributions of both diamond mining and diamond sales to GDP in 2020, which will hence impact negatively on growth. This comes on the back of the coronavirus which is starting to have an impact on sectors like mining and tourism. In a Special Review for 2020, the research house warned that even before the outbreak of COVID-19 the country was already experiencing the effect of the global growth slowdown.
The consulting organisation pointed out that diamonds account for the majority of the country’s exports, provide the largest single source of government revenues, and make a significant contribution to GDP.
“2019 was a difficult year for the global diamond industry, with weak sales. Nevertheless, there were signs of stabilisation and recovery in December 2019 and January 2020. However, the February sales round by De Beers Global Sightholder Sales (DBGSS) in Gaborone had much smaller sales than the first 2020 sight in January, as the impact of reduced Chinese demand kicked in,” it said.
“Future sales rounds over the next few months will be further impacted by the global slowdown, as reduced demand for diamond jewellery feeds back to purchases of rough diamonds by the cutting and polishing industry and jewellery manufacturers. In addition, travel restrictions currently in place mean that the usual buyers (sightholders) will not be able to travel to Gaborone for the regular DBGSS sights, which may reduce sales further.”
Econsult said that reduced diamond sales and exports will have an impact on Botswana government revenues. It added that diamond mining companies such as Debswana may maintain production levels for some time, but only to the extent that they have the capacity to stockpile unsold diamonds, which means that the impact on mining (and GDP) may be less than the impact on sales.
“The capacity for Debswana and De Beers to stockpile unsold diamonds – incurring production costs but not receiving income – is constrained, after having already undertaken some stockpiling in 2019.”
“We forecast a contraction in the contributions of both diamond mining and diamond sales to GDP in 2020, which will hence impact negatively on growth.”
Econsult also said the second sector of the economy that is likely to be badly affected by COVID-19 is the tourism and hospitality sector. It observed that this cuts across a range of economic activities, including hotels, lodges, safari camps, tour operators, bars and restaurants, transportation, travel agents and airports.
“Already, the tourism and hospitality sector is feeling the impact of COVID-19, as a visit to any hotel or airport will attest. Botswana is particularly vulnerable given that the bulk of tourism earnings come from high-value international tourists visiting the safari areas and game parks of northern Botswana, in the Chobe and Okavango,” the review noted.
“Such traffic has ground to a halt, with cancellations in the coming months approaching 100% in some cases. This reflects the position in the international aviation industry, where major airlines are cancelling almost all flights. There are domestic factors impacting on the sector as well, with government and firms cancelling conferences, workshops, retreats etc until further notice.”