Diamond exports down 50% by Q3
Mbongeni Mguni | Wednesday December 18, 2024 09:50
Figures released by the Bank of Botswana recently indicate that between January and October, Debswana sold P22.7 billion in rough diamonds, compared to P45.2 billion over the corresponding period in 2023.
Debswana is the country’s primary producer of diamonds, accounting for more than 95% of annual output. Under the current agreement between its shareholders, De Beers and government, Debswana sells 75% of its annual output to the diamond giant and the balance to the state-owned diamond trader, Okavango Diamond Company.
According to the central bank figures, Debswana sales have averaged P2.3 billion in the months to October this year, compared to P4.5 billion over the same period last year.
De Beers and other producers are hoping their festive season marketing efforts clear the oversupply in natural diamond jewellery that has been plaguing the market. This would help recovery further up the pipeline, to the midstream of cutting and polishing firms, as well as the upstream of producers such as Debswana.
Debswana is also restraining its production this year, the major factor behind government’s recent forecast that the economy would contract by 1.7 percent this year. From an initial target of as much as 32 million carats at the beginning of the year, De Beers revised its maximum output this year to 29 million carats, then lowered it in July to 26 million carats. Debswana produces about two-thirds of De Beers’ annual output and the production cuts are in an effort to clear the oversupply and reduce stockpiles.
Vice President and Finance Minister Ndaba Gaolathe confirmed that there were emerging signs of recovery at the retail end of the diamond market.
“There has been a slight improvement in retail sales in the US market at the start of the critical holiday season,” he told legislators last week. “However, the level of inventory in the pipeline is still on the high side and the expectation is that the economic pressures in the diamond market will largely continue through the first half of 2025. “Nevertheless, much depends on how fast the accumulated inventories can be reduced, to allow normal production to resume.”
The new administration is keenly watching for a diamond recovery, which would provide fiscal breathing room for the economic agenda the Umbrella for Democratic Change promised ahead of the recent general elections.
In Parliament last week, Gaolathe announced a range of planned cost-cutting measures, which followed projections that the budget deficit for the current financial year could more than double initial projections to P18.6 billion.
The plans include moving towards a balanced budget “in the shortest possible time” by limiting spending to projected revenues, as well as reigniting the country’s long-stalled Public Private Partnership policy.
“We realise that asking you, the people of Botswana, to trust us, is a big ask, and we know trust is the kind of thing that is earned, but all the same, we will need your trust and patience to navigate the sometimes painful and uncomfortable path that now lies ahead of us,” Gaolathe said.