Ratings Agency S&P Affirms Negative Outlook For Botswana

(IDEX Online) – The ratings agency Standard & Poors said Botswana is "constrained by its narrow economic base which relies heavily on the diamond sector and is vulnerable to external shocks, despite efforts to diversify".

“Botswana is one of the world's largest rough diamond producers, and the diamond mining industry remains its main economic locomotive. The diamond sector contributes just under one-third of Botswana's GDP, over one-third of its fiscal receipts, and more than two-thirds of exports. Debswana, a 50-50 joint venture between De Beers and the Botswana government is the main producer of diamonds in Botswana. Nevertheless, the economy remains exposed to a weak performance in the diamond sector, which could hurt economic growth prospects and potential fiscal adjustment. Under our current assumptions, we expect Botswana's economy may be able to maintain economic growth rate of three per cent in real terms in 2017, similar to 2016.

“Botswana's estimated fiscal deficit in fiscal year 2016 (ended March 31, 2017) is narrower than our assumptions six months ago. But the deficit has been helped by what we view as one-off higher diamond sales experienced in 2016 (as Debswana sold inventory), rather than by a significant firming of diamond prices and/or production on a longer-term basis. Debswana production levels have declined by at least 10 per cent from close to 23 million carats in 2014 to average 20 million over the past three years. At the same time, Debswana's average diamond prices have declined by 15 per cent from $178 per carat in 2015 to $152 per carat in 2016."