Botswana recorded a second trade surplus for the month of February, indicating that the country was not importing more that it was selling outside the country.
This is according to fresh data from Statistics Botswana, which shows that, in the month under discussion, the landlocked country exported goods worth P6, 7 billion to various destinations.
The trade merchandise statistics which was signed off by Statistician General, Annah Majelantle, shows that exports ballooned by 6, 1 percent month-on-month. “This increase is mainly due to a rise of 7, 2 percent (P424, 2 million) in diamond exports,” said the statement released this week.
Experts, including the Finance and Economic Development minister, Kenneth Matambo have forecast a recovery in the diamond sector after a slump in the past few years. This was largely due to weak economic growth in major diamond markets such as the United States, Europe and China.
US is poised for a robust growth this year same as China which is expected to leapfrog by 6, 5 percent in 2017, according to Fortune magazine. Diamonds are the single biggest export revenue earner for the mining economy which has seen its efforts to diversify falter for various reasons.
Meanwhile, it remains to be seen if diamond exports will continue on an upward trend following South African government refusal to grant De Beers (SA) an exemption to export diamonds to Botswana for aggregation purposes. De Beers has since taken minerals minister Mosebenzi Zwane to court over the decision, which is likely to fuel tension between the two neibouring countries.
After a deal with De Beers six years ago, all diamonds from De Beers mines are aggregated in Botswana, and then exported to their various destinations, which has worked well for Botswana.
Meanwhile, statistics also shows that for the month of February, vehicle and transport equipment also picked the country’s exports. “Vehicle and transport equipment group contains mainly re-exports,” added the statement.
For the period under review, the group recorded a 100 percent increase to close February at P21, 5 million. Some of Botswana exports include beef and soda ash.
As far as imports are concerned, the country imported goods and services worth P4, 2 billion in February 2017. Fuel contributed the highest in terms of value. To power its activities, Botswana imported fuel amounting to P215, 4 million.
Machinery and electrical equipment also had a notable contribution to imports.
According to Statistics Botswana, the country recorded a trade balance of P2, 5 billion, keeping the country in a healthy balance sheet.
Debswana Mining Company’s Managing Director, Balisi Bonyongo says although the diamond market seems to have stabilised, this does not call for any celebration yet. It emerged from the company’s stakeholder engagement this week Tuesday that the world’s biggest diamond producer by value has realised a business improvement of 40 percent, a three-points increase from last year’s figure.
The improvement was largely driven by higher revenue from strong rough diamond demand, favourable exchange rates and improved cost and operational efficiencies. The first three cycles of the year 2017 started on a promising note with the cycles reaching US$729m, US$553m and US$580m respectively. Carats produced remained in line with 2015 production at 20.5 million carats, because of the company’s strategy to produce to demand by maximising production at its core assets and scaling down at its lower value.
However, Bonyongo cautioned that nonetheless, volatility remains. “A volatile situation is complex and anything can happen. We have to be aware of the global dynamic macro-economics when making decisions. 2017 will be a stable year and will probably remain so going ahead. 2015 stocks were all sold last year and destocking started taking place by sizeable numbers and the rough diamond demand is expected to normalise in 2017,” said Bonyongo.
The global growth will depend on macroeconomic factors including; the policies of the new Trump administration in the US; the strengthening of the US dollar impacting consumer demand, economic performance in China as well as the effects of the Indian demonetisation. US is however expected to remain the main driver of the global growth through 2017.
With the anticipation of continued sales and price volatility, Bonyongo emphasised that Debswana shall maintain its operational flexibility, drive costs and operational efficiencies and improve planning and forecasting.
The company’s response to these external shocks is guided by its commitment to safety matters; employee engagement and morale and driving cost and operational efficiencies hence doing more with less; preserving jobs in readiness for an upturn; investing in projects to sustain the future of Debswana; investing in communities within which Debswana operate to leave a legacy of prosperity and sustainability; investing in health and wellness and; investing in citizen economic empowerment.
Addressing the shareholders’ Annual General Meeting this week in London, Sir John Parker, Chairman of Anglo American plc indicated that looking to 2017… on the demand side, the fortunes of the mining industry will inevitably continue to be influenced by developments in China, where the authorities have recently reduced the country’s growth target for 2017 to 6.5 percent as the country seeks to balance its economy through a mixture of stimulus and managed slowdown.
Turning to Anglo American’s performance last year, which Debswana is a member through De Beers; Parker emphasised the importance of safety. Although the Anglo group had a most encouraging 24 percent reduction in recordable injury rates compared with 2015, the number of people who lost their lives at its operations increased from six to 11.
This contrasted sharply with the declining trend of the past few years. “It was all the more surprising, given the increased focus on safety across the Group, including our emphasis on critical controls in high safety-risk areas. As a Board, we regard each loss of life with great sadness, and it is particularly distressing that several of these fatal incidents were preventable, given that they resulted from front-line operational practice being out of alignment with our safety policies,” he said.
While there was a clear imperative to reduce net debt during 2016, the underlying asset strategy holds true. Going forward, Parker says the Group’s commitment remains to a portfolio focused on the highest quality assets where they can deliver attractive margins and returns in the context of the right corporate and capital structure.
Shumba Energy, the forthcoming energy developer is upbeat that the international coal market will bounce back, led by biggest consumers such as China and East Asia. The company is currently at various stages of developing its coal assets in Botswana, both for the domestic and export markets. At the beginning of the year, prices were going under $55 per tonne briefly, but the picture has since changed.
This is with the benchmark Australian export price coming within touching distance of USD 70 per tonne and they are now making reduced losses around +USD 15 to USD 20 per tonne after further cost reductions, cancelling expansion plans and capital projects. Writing in the latest company annual report, Shumba Chairman, Alan Clegg, Shumba indicated the market is still heading for a significant deficit within 3 to 5 years which will force prices upward to potentially unseen levels and highs.
On a related matter concerning the cola market, heavy rainfalls have hit Indonesian supplies also and with the Chinese Government shutting down mines at home on safety and environmental concerns these are all boosters for the price with some analysts predicting prices back at levels of USD 90 per tonne by 2018. As for Botswana’s Shumba, sentiments remain the same with those of the analysts and still believe the markets are correcting. Market analysis places South East Asia for significant growth with strong correction by end of 2017 and into 2018 based on the known energy demand which on latest 2016 estimates require an additional 40Mt to 45Mt of coal supply per annum.
“As I highlighted last year the Southern African power pool continues to hold a major net deficit of over 30GWe that is still growing as older power plants are closed down and/or need replacement. This urgency to cover this deficit and make industry in the SADC region competitive and sustainable has been highlighted in the reporting period with much inter-governmental activity on cross border power supply arrangements and agreements which, are all in Shumba’s favour.” He further indicates that, some 3750Mw has been approved and called for by the South African government under these arrangements and recent parliamentary presentations by Botswana’s Minister of Energy again highlighted the urgency for these quotas to be filled by independent power producers.
Shumba continues to focus on tactical execution for early cash flow. “In line with this, low cost coal production for local supply to the spot market and established energy producers directly through offtake agreements, like Botswana Power Company at Morupule, is a point of focus. And further our IPP projects are also in the short term another priority, particularly at Mabesekwa.” Potentially in the future Shumba may yet export onto world spot markets into the sweet spot of the upturn medium term, giving significantly higher than normal returns.