The dollar value of Debswana’s diamond sales is expected to gradually return to the level achieved in the financial year 2007/08 by 2012/13, says O.K. Matambo, Botswana’s Minister of Finance and Development Planning, in his 2010 Budget Speech, entitled “Transforming our Economy After the Crisis”, which was delivered to the National Assembly on 8th February 2010.
Following are extracts from the speech:
“The theme I have chosen for the 2010/11 Budget Speech is “Transforming our Economy after the Crisis: 2010 and Beyond”. This theme recognises that, due to the recent global financial and economic crisis, Botswana experienced an unprecedented loss of national income. Global demand plunged, particularly for luxury goods such as diamonds, and so did Government revenue that we use to finance development initiatives.”
“This theme challenges us to find strategies to resume rapid economic growth, while broadening the sources of growth beyond the mineral sector. It makes it imperative that we identify new opportunities for economic growth and find additional sources of Government revenue. To succeed we must foster strategic and highly productive investments in both people and infrastructure, and streamline our policies to enhance private sector participation. We should avoid embarking on new investment initiatives that are not productive, with no future outlook beyond the diamonds era. Instead, this diversification strategy requires us to be particularly rigorous in our evaluation of public sector programmes and projects and prioritise only those that strategically position Botswana to become competitive in the regional and world economy.”
“While output is no longer declining, real GDP for the third quarter of 2009 was still less than that of the third quarter of 2008, because quarterly mineral output in real terms was still well below the levels achieved over the last 5 years. The partial recovery of the mineral sector in the second and third quarters of 2009 reflects developments in the world economy and the consequent positive impact of these on the mining sector, particularly the diamond industry. However, due to uncertainties in the global economic prospects, it is expected that output for this industry will remain below the long-term trend potential for another year or two,” continues Matambo.
“Looking beyond the actual GDP recorded in the third quarter of 2009 calendar year, we are projecting a gradual recovery of the world diamond market. The dollar value of Debswana’s diamond sales is expected to gradually return to the level achieved in the financial year 2007/08 by 2012/13. In the meantime, the rest of the economy will continue with modest real growth, in part because we have avoided a sharp reduction of Government’s spending. We, therefore, project overall real GDP growth for 2009/10 financial year to be about zero, and then about 5 percent in 2010/11.”
As a result of a decline in diamond sales due to the global crisis, production at all the Debswana operations was suspended up to mid-April 2009. Consequently, diamond revenue forecasts for 2009/10 also declined to P6.9 billion compared to actual revenue of P10.8 billion for 2008/09. As at the end of September 2009, Debswana employed 5,809 people at its four mines, a reduction of more than 1,380 compared to December 2008, mainly because of deferment and cancellations of noncore projects. Though the future still remains unpredictable, there seems to have been positive improvements on the global demand for diamonds since April 2009. Such improvements will however, not be enough to take us back to the contribution made to GDP and economic growth, by the diamond sector, during the past 5 to 10 years. Full recovery of diamond market is expected only in 2012/13. It also means in transforming the economy, we have to find alternative sources of economic growth besides diamonds,” continues Matambo.
With regard to diamond beneficiation, all the 16 licensed diamond cutting factories are now operating. However, between November 2008 and August 2009, there was a reduction of 26 percent in employment (from 3,226 to nearly 3,000), of the beneficiation industry, due to the global economic crisis.
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