Botswana looking to move away from dependence on diamonds

A recent article in the Africa Review reports that Botswana is desperate to end overreliance on mining following threats of diminishing diamond reserves.

Minister of Minerals, Energy and Water Resources, Ponatshego Kedikilwe, said the country was “heavily dependent on a single and finite commodity – diamonds”.

Mining, dominantly diamonds, accounted for about 41% of government’s revenue and 32.3% of GDP last year and Mr Kedikilwe believes economic diversification is the way out. “We do recognise that economic diversification is a long term process and in our case, the immediate concern is how to lessen the country’s heavy dependence on diamonds,” Kedikilwe said at the just-ended Botswana Resource Sector Conference.

He said the country was presently monitoring another looming double-dip recession and had to stay prepared for it. “Economic diversification and sustainable growth cannot succeed unless an overall enabling framework has been put in place first. Priority areas for my ministry are coal and diamonds,” he added.

According to Kedikilwe, coal provides a viable diversification option because of its various utilisation options including exporting it, electricity generation for domestic consumption and export and cement manufacturing. Already, the Botswana government is in the process of establishing a Coal Development Unit (CDU) to facilitate development of the entire coal value chain from mining, coal washing, power generation, transportation, storage at ports to shipping.

“The mandate of the CDU is to facilitate monetisation of Botswana coal by developing and implementing an accelerated coal monetisation strategic plan, coordination of the optimisation of the coal value chain, directing the planning of the coal and coal related rail development, undertake coal facilitatory projects and will be the contact point between government and the private sector,” he said.

Apart from resources, Botswana’s beef sector received a boost last week after the European Union lifted the ban slapped on the country’s beef products last year, allowing the country to resume exporting beef to the EU market.

The EU banned Botswana after observing deficiencies in official controls, abattoir operations and certification procedures. It sent inspectors to assess the country’s animal disease control systems last year and recommended that the southern African country should put in place clear documented procedures and relevant official controls to guarantee that only eligible animals are slaughtered for export to the EU. Botswana was also asked to ensure that all its listed export abattoirs fulfil the EU requirements and that records of treatment with veterinary medicinal are kept on farms.

The Botswana Meat Commission says it has now complied with EU’s veterinary and quarantine procedures. “Government, through the veterinary services, as the competent authority, has put sufficient official controls in place to guarantee production of beef destined for the lucrative EU market,” read a press release this week.

We believe it is paramount for Botswana to use the proceeds from its diamonds to develop other sectors of the economy. This will help reduce the negative impact on its economy whenever the global economy takes a hit. As much as we laud the move into harnessing its coal reserves, we believe the government should also pursue diversification beyond the resource space.

Imara is an investment banking and asset management group renowned for its knowledge of African markets.