The Botswana Institute of Chartered Accountants (BICA) has become the latest organisation to attempt to remedy Botswana’s over-reliance on the exportation of diamonds.
With over 70% of the country’s Gross National Product (GNP) attributed to diamond sales, economic diversification has always been top of government’s priority as diamonds are a non-renewable resource that cannot infinitely sustain the economy.
In addition, Botswana’s beef exportation constantly experiences a myriad of trade prohibitions, primarily imposed by the European Union due to a lack of discernable production standards.
This leaves diamonds and tourism as the foremost methods of acquiring foreign exchange and consequently, the primary drivers of the economy.
Speaking at the 2016 BICA dinner dance, prominent businessman, lawyer and politician – David Magang illustrated the need to deviate from diamond dependence.
“Over-dependency on one major economic activity has the disadvantage that in the event of a tumble of commodity prices, the shock to the economy overall will be telling. Right now, diamond prices have fallen by 40% in the last 3 years. The result has been the closure of several mines in Botswana.”
He also touched on aspects of how finite Botswana’s current reserves are thus making this a current problem and not one we can afford to sweep under the rug.
“Diamonds are not forever. What is important is that we have of late been told that diamond production in this country will continue until 2050. It is actually possible, the optimists will say, that we may be able to mine our diamonds from Orapa and Jwaneng until the end of this century.”
“We may be lucky and discover other areas where there is adequate ore of diamonds. But even if this is the case, diamonds will not generate the same return as we have been traditionally accustomed to because the deeper you go to try and dig out the ore, the more costs you incur and consequently you have to reconcile yourself with lower returns.”
Not only are we facing the possibility of diminishing diamond reserves, recent times have seen countries with no diamonds begin to vigorously produce artificial diamonds that possess nearly all the aesthetic appeal of the real ones but at a far reduced price.
“Synthetic diamonds have also become so real that you can’t differentiate them from diamonds and the only way to identify them is through the use of sophisticated machines. This is one of the biggest threats to diamonds in this country as [synthetic diamonds] are selling annually to the sum of $9 billion and continue to grow.”
“One of the things we can do to mitigate the problem that we have in terms of unemployment in this country is that the mining itself of diamonds does not provide employment. What provides employment is the processing of minerals. That is where the value is.”
“One of the most neglected potential agents of economic growth in Botswana is IT. It is mind boggling that Botswana has not started cashing in on IT when other countries have gotten upon the band wagon.”