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S&P Lowers Botswana’s Outlook as Diamond Slump Hits Growth
May 1, 2016 10:39 AM
By Rapaport News
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RAPAPORT... Standard & Poor’s (S&P) cut its outlook for Botswana
to negative on concern a slump in the diamond industry could be structural
rather than cyclical.
The country is highly exposed to the performance of the diamond
sector as it represents just under a third of Botswana's gross domestic
product, about a third of its fiscal receipts and more than two thirds of
exports, according to an S&P report.
“The weaker global external environment stemming from
China's slowdown and declining pricing power of key diamond marketers is
resulting in weaker performance of diamond demand and sales,” the report said.
Debswana, a 50:50 joint venture between De Beers and the
Botswana government, cut production following declining diamond prices in the
second half of 2015. This reduced the nation’s economic activity overall, with
fiscal receipts falling “in tandem,” the ratings group said. Other factors such
as water and power shortages and the impact of a drought on agricultural
production also dented growth.
S&P’s decision to revise the outlook from stable comes
as data released by the Bank of Botswana showed the nation’s rough diamond
exports slumped 17 percent year on year to $817.6 million in the first quarter
of 2016.
The downward trend was not steep enough to prompt S&P to
budge on its ‘A-/A-2’ credit rating, but the company warned it could lower its
score if diamond-sector production and prices remain depressed and the nation’s
fiscal position deteriorates. A further fall in precious-stones exports could
also lead to a cut in the rating, the company added.
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Tags:
Botswana. rough diamonds, credit ratings, mining, Rapaport News, Rough markets, S&P, Standard & Poors
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