Commodity bubble hits Botswana Botswana's US$14-billion economy contracted by 1.7% in 2015, weighed down by persistent power and water cuts that disrupted factory production.
It will struggle to achieve 3% growth in 2016.
Mining has been the driving force of Botswana's economy, helping the GDP grow at an average of 7% a year for most of the 1990s. But price volatility, fuelled by the cooling of the Chinese economy, and the growing haemorrhage of mining revenues to corrupt officials and businessmen have weakened the sector.
Diamond sales, which contribute a third of the country's GDP, have lost their sparkle, declining by up to 30% in market value over two years, according to S&P report published in December 2015.
Last year, Debswana, a 50/50 venture between Botswana government and De Beers, closed its Damtshaa diamond mine, adding woes to an industry that has shed up to 30 000 jobs according to the Business Weekly and Review newspaper.
At least six mines and “sightholders”, companies that turn rough stones into finished gemstones before selling them directly to jewellers such as Forevermark and Tiffany & Co, have gone out of business since 2011.
They include operations that closed in 2011 and 2016, and leaving 600 workers without jobs. Australian copper junior miner Discovery Metals Limited filed for bankruptcy last year, leaving 450 workers near the Okavango Delta out in the cold, while African Copper closed its operations at Mowana and Thakadu in central Botswana.
On August 31 last year the state-owned BCL – Botswana's biggest copper and nickel mine – collapsed into bankruptcy after enduring three decades of losses, throwing 5 000 miners out of work and dealing a heavy blow to the Francistown/Selibe-Phikwe regional economy.
BCL was holed by a combination of ills; a global slump in commodity prices; clumsy, incompetent management; and political inertia. With losses of P1.2-billion 2015 alone, it had P7-billion in debts and liabilities.
The company's woes had a knock-on effect: BCL subsidiary Tati Nickel – in which Russian mining giant Norilsk Nickel has a stake – also closed, while the Morupule colliery, a major supplier to the nickel mines, faced major downscaling.
With untapped reserves exceeding 200 billion tons, the country could become the world's largest coal exporter to economies such as China. Yet red tape has stalled the construction of a 1 500km railway link to Walvis Bay, which exporters would require.
Moatlhodi Sebabole, economic researcher at First National Bank of Botswana, believes that job losses have accelerated financial pressures on ordinary households, which has in turn had a trickle-down effect on the economy.
“Loss of jobs has resulted in pressure on the property market,” said Sebabole. But the real challenges may well be political. The Botswana Democratic Party's popularity has been on the decline, hitting a new low of 47% in the 2014 election.
Khama will be succeeded by an altogether duller figure, current BDP chair Mokgweetsi Masisi.
He faces the UDC, an increasingly energetic opposition bloc, under lawyer and human rights activist Duma Boko.
If Boko defeats Masisi at the polls in in 2019, he will take the helm of a ship of state that seems to be drifting towards for the rocks.
DAILY MAVERICK
It will struggle to achieve 3% growth in 2016.
Mining has been the driving force of Botswana's economy, helping the GDP grow at an average of 7% a year for most of the 1990s. But price volatility, fuelled by the cooling of the Chinese economy, and the growing haemorrhage of mining revenues to corrupt officials and businessmen have weakened the sector.
Diamond sales, which contribute a third of the country's GDP, have lost their sparkle, declining by up to 30% in market value over two years, according to S&P report published in December 2015.
Last year, Debswana, a 50/50 venture between Botswana government and De Beers, closed its Damtshaa diamond mine, adding woes to an industry that has shed up to 30 000 jobs according to the Business Weekly and Review newspaper.
At least six mines and “sightholders”, companies that turn rough stones into finished gemstones before selling them directly to jewellers such as Forevermark and Tiffany & Co, have gone out of business since 2011.
They include operations that closed in 2011 and 2016, and leaving 600 workers without jobs. Australian copper junior miner Discovery Metals Limited filed for bankruptcy last year, leaving 450 workers near the Okavango Delta out in the cold, while African Copper closed its operations at Mowana and Thakadu in central Botswana.
On August 31 last year the state-owned BCL – Botswana's biggest copper and nickel mine – collapsed into bankruptcy after enduring three decades of losses, throwing 5 000 miners out of work and dealing a heavy blow to the Francistown/Selibe-Phikwe regional economy.
BCL was holed by a combination of ills; a global slump in commodity prices; clumsy, incompetent management; and political inertia. With losses of P1.2-billion 2015 alone, it had P7-billion in debts and liabilities.
The company's woes had a knock-on effect: BCL subsidiary Tati Nickel – in which Russian mining giant Norilsk Nickel has a stake – also closed, while the Morupule colliery, a major supplier to the nickel mines, faced major downscaling.
With untapped reserves exceeding 200 billion tons, the country could become the world's largest coal exporter to economies such as China. Yet red tape has stalled the construction of a 1 500km railway link to Walvis Bay, which exporters would require.
Moatlhodi Sebabole, economic researcher at First National Bank of Botswana, believes that job losses have accelerated financial pressures on ordinary households, which has in turn had a trickle-down effect on the economy.
“Loss of jobs has resulted in pressure on the property market,” said Sebabole. But the real challenges may well be political. The Botswana Democratic Party's popularity has been on the decline, hitting a new low of 47% in the 2014 election.
Khama will be succeeded by an altogether duller figure, current BDP chair Mokgweetsi Masisi.
He faces the UDC, an increasingly energetic opposition bloc, under lawyer and human rights activist Duma Boko.
If Boko defeats Masisi at the polls in in 2019, he will take the helm of a ship of state that seems to be drifting towards for the rocks.
DAILY MAVERICK