Botswana’s economy is slowing as diamond sales dip, says IMF
Diamonds are the country’s main source of income but weak demand, as well as ongoing drought conditions, are containing growth
The International Monetary Fund (IMF) warned on Wednesday that Botswana’s economy is facing headwinds as diamond sales dip and a severe drought ravages Southern Africa.
Botswana’s economy, which grew 4.5% in 2018, is expected to slow to about 3.5% in 2019. Growth is forecast to recover to 4.2% in 2020 as the diamond sector looks set to stabilise and copper production begins, said the IMF.
Botswana is one of the world’s largest diamond producers and the gems are its main source of income, accounting for more than three-quarters of the country’s exports.
“After a relatively good performance in 2018, the economy is facing headwinds in 2019 related to weaknesses in the diamond market, a severe drought, and slower growth in neighbouring countries,” said Papa N’Diaye, who led an IMF team on a two-week trip to Botswana capital Gaborone.
President Mokgweetsi Masisi acknowledged the difficulties the diamond industry is facing this year in his state of the nation address earlier in November, saying global sales of the gems have fallen by over a fifth so far in 2019.
“Over the first seven months of 2019, an array of interrelated developments across the entire value chain have exerted pressure on Botswana’s diamond production and sales,” said Masisi.
He put the blame for the slowdown on retailers having overstocked, thus reducing demand this year.
Southern African countries are grappling with one of the worst droughts in decades after months of erratic rainfall and record-high temperatures. The Botswanan government has had to step in to the struggling livestock sector by offering farmers a 35% subsidy on feed to save their cattle from starvation in the most drought-hit areas, such as the northern Kgalagadi and Okavango regions.
For the past five decades, Botswana has been one of the world’s fastest growing economies. Business activity has expanded by about 5% a year over the past decade, the World Bank said in 2018.