While rough diamonds still account for 74 percent of Botswana’s total exports, and mining is still an important component, the country’s economy is increasingly a services-driven one, with the real growth coming from financial business services, hotels and restaurants and tourism, Keith Jefferis, the former Deputy Governor of the Bank of Botswana and currently the Managing Director of Econsult Botswana, told the Botswana Resource Sector Conference on Monday.
Botswana also exports copper, nickel, gold, soda ash and beef, but the volumes are significantly lower and cannot compensate for a drop in diamond exports — something the country confronts as its major mines go into decline.
“Even if we produce 25-million carats a year forever, the growth rate is zero, and at best we’ll plateau, and the diamond industry will not contribute to economic growth on that basis,” Jefferis said.
Another indicator that Botswana was no longer a mining-driven economy lay in the fact that foreign direct investment into the country, which had hovered between 6 and 7 percent in the early years of this millennium, had now plunged to below 2 percent.
Jefferis also noted that diamond mining and sales had been volatile, though the sector had shown a recovery over 2016-17 after a poor 2014-15. He said that over the past quarter of a century, Botswana’s economy had not diversified significantly from being mining-dependent. Diamonds accounted for 66 percent of exports in 2016 and had contributed roughly 30 percent to the country’s gross domestic product (GDP) over the past two years.
Jefferis noted that since 1990, Botswana’s growth has been slowing to around an average real GDP growth of 4 percent a year and, with the population growth at around 2 percent a year, it would take 35 years to double the current per capita income of $7,000.
He added that about 20,000 people were entering the labour market each year, but only 2,000 jobs a year were being created, with capital-intensive mining doing little on the jobs front.
The country would need large infrastructure investments in railways and ports among others and power generation or purchase would be a priority.
https://www.gemkonnect.com/news/diamonds-still-dominate-services-now-drive-botswana-growth