The balance of payments was in overall deficit in 2015 as exports of rough diamonds slowed sharply in during the year, this is according to Bank of Botswana Annual Report released this week. The central bank says a deficit of P57 million in 2015 compared to a surplus of P11.4 billion in 2014 was mainly caused by the deterioration in the trade balance, as exports of rough diamonds slowed in 2015. Regarding the current account surplus, BoB says it is currently estimated at P11.3 billion in 2015 compared to a revised P22.2 billion during the year before. The lower surplus is said to be primarily a result of merchandise trade deficit, arising mainly from the decline in mineral exports that was only partly offset by rising inflows from SACU and net service receipts. It is said that trends in merchandise trade continues to be driven by the aggregation and sales functions of De Beers that relocated to Gaborone in 2012, thus establishing a substantial re-export trade for rough export diamonds in the country. “This also benefited local diamond cutting and polishing business while the decline of the United Kingdom as a major export destination was matched by the growing importance of trade with other global diamond processing centres such as Belgium, India and Israel.
According to BoB, despite some growth in exports of beef, vehicles and other goods, total exports fell by 16.9 percent with the result that the merchandise trade deficit was P8.3 billion in 2015, compared to a surplus of P4.7 billion the year before. Diamond exports in 2015 fell by 19.4 percent to P52.7 billion with the decline in exports further aggravated by lower sales of copper and nickel which decreased by 15.4 percent to P3.7 billion. Gold exports declined by 21.6 percent to P283 million. The central bank estimates imports for 2015 at P71.8 billion, reflecting an increase of 0.1 percent from the revised P71.7 billion in 2014. The bank report highlights that the local economy has perfomed well by most economic and developmental criteria since the country gained independence half a century ago. With an annual growth of 6.4 percent in real terms between 1981 and 2014, resulting in a near seven fold expansion of the economy. The bank however raises concerns over unemployment figures which it says put a stain on this otherwise impressive track record. Bob warns that the increase in younger, better-educated generations has the potential to become demographic dividend and on current trends, threatens to be a demographic time bomb if chronic youth unemployment is not addressed.
It is said that going forward, providing enough jobs will become a challenge in the context of modest rates of economic growth compared to the past. According to the bank, the result of high unemployment figures – officially estimated at 20 percent, is because of various and complex sources. “Slow progress in diversifying Botswana’s economy potentially limits the availability of job opportunities and this can be aggravated by lower rates of growth,” BoB reports, noting further that persistent unemployment at such high levels that compare unfavorably with most comparator countries suggests that structural factors are also involved. “Notably, skills gaps can result in low productivity, with a negative impact on business viability or even failure to take up available opportunities. Related to skills are also issues of motivation and readiness for employment or self-employment.”