Diversification remains Botswana’s biggest challenge.
According to Pieter du Preez, NKC senior economist, the over-reliance on the diamond industry renders the country highly vulnerable to any downturn in global economic conditions given the “luxury good” nature of diamonds.
“Botswana has a shortage of skilled labour coupled with relatively high unit labour costs, which complicates the country’s diversification efforts,” he said. While efforts to diversify are ongoing – with the tourism industry a particular focus point - manufacturing in Botswana has fared relatively poorly in the last couple of years.
“More specifically, the manufacturing sector’s contribution to GDP fell from just over 6.4% in 2011 and 2012 to just below 6% last year,” said Du Preez. “The fall in contribution is mainly due to the manufacturing sector only growing by 0.5% in 2014, before rebounding in 2015 and recording growth of 3.3%. The latter was during a period when the economy overall contracted as a result of depressed commodity prices. In the last two years the manufacturing sector struggled again and recorded growth of 1.6% and 1.9% in 2016 and 2017, respectively. The diversification drive by the government has yet to see any tangible results in this sector.”
He said De Beers had moved its sorting and sales operations from London to Gaborone in 2013, where almost 20 manufacturing units operated, in an effort to boost manufacturing in Botswana.
“This will certainly help economic growth; however, this is linked to the diamond sector and falls outside local authorities’ diversification plans. Government will ideally want to boost the manufacturing sector outside the diamond sector as well.”
At the same time, said Du Preez, it remained difficult to gauge the current status of the economic stimulus programme (ESP). “The main objective of the ESP is to facilitate economic diversification, which still has not yielded tangible results. Although mining’s contribution to GDP has fallen, diamonds still account for the vast majority of all exports and are of pivotal importance for foreign exchange accumulation.”
