Rough diamonds from Debswana mines (Pic By De Beers)
Botswana has been warned there are possibilities of the death of the export sector as the contribution of mining to GDP has shrunk over the years with the economy now dominated by the services industry.
Managing Director of Econsult Botswana, Dr Keith Jefferissaid at a two-day conference in Gaborone exports have not been diversified enough, which has become the biggest dilemma for the country known for being the home best diamond mines.
“Mining has shrunk and we have the economy dominated by services industry. Mining no longer drives growth,” he said at the conference under theme “Are Diamonds there forever? – Prospects of a Sustainable Development Model for Botswana.
“Exports have not become more diversified and that has become the biggest problem,” he said. The services sector, which includes industries like tourism, accounts to 45% of the GDP.
“We make lot of services without exporting services,” the former Bank of Botswana Deputy Governor observed. “As the economy moves to services that is where we have structural problems. The challenge facing Botswana is that exports will die”.
As the mining industry shrunk at the back of global recession with falling demand, minerals are also no longer Botswana’s largest sources of fiscal revenues and they have been replaced by revenues from Southern African Customs Union (SACU).
Botswana is currently exporting less diamonds, which can be explained partly to the relocation of De Beers’ beneficiation activities to the country. “The big change has been polished diamonds. Now (the country is) exporting polished diamonds than rough diamonds”.
Jefferis said the challenge is to change the basis of the economy as the country has been relying on ‘windfall income’. “These days are over,” he warned. “Exporting services is absolutely crucial for the future of the economy”.
Services currently stands at 6% of the country’s total exports and Dr Grace Tabengwa, a Senior Research Fellow at the Botswana Institute of Development Policy Analysis (BIDPA) warned “we are not making any progress” in export diversification.