Botswana Expects a 50% Decline in 2009 Diamond Revenues

Botswana’s diamond production declined to 32.6 million carats in 2008 compared to 33.8 million carats in 2007, shrinking 3.5 percent. Sales, however, fell 17 percent to an estimated at 28.9 million carats, according to Minister of Finance and Development Planning Baledzi Gaolathe.

During the annual budget speech to the National Assembly on Monday, Gaolathe warned that the fall in diamond sales are the main risk to the Botswana economy.

According to Gaolathe, the country’s diamond sales started to fall significantly in November 2008, leading to the 17 percent year-over-year decline in volume.

“The diamond market performed exceptionally well during the first three quarters of 2008 which saw prices increasing by about 20 percent. However, the ensuing global financial crisis led to a sharp decline in commodity prices during the last quarter of 2008,” Gaolathe told the Assembly.

Despite the downturn, revenues from diamonds and other minerals rose about 13 percent to 1.44 billion pula ($181.3 million), thanks mostly to a 9 percent increase in diamond prices. Botswana benefits economically from diamonds through mineral taxes, royalty payments and dividends.

Gaolathe expects diamond prices to decline 15 percent and production to contract by 35 percent in 2009, leading to a 50 percent decline in diamond revenues.