Botswana Should Hope The Coronavirus Pandemic Won't Be A Hard Lesson On The Need For Economic Diversification

Last week, the World Health Organization (WHO) officially declared the Covid-19 virus—or Coronavirus as it is colloquially known—a pandemic. After this announcement, several countries—including Botswana—were quick to react by either suggesting or imposing travel restrictions on both inbound and outbound travels and encouraging social distancing and self quarantining amongst citizens in order to contain the spread of the disease.

Since the virus started to spread from its epicenter in the Chinese city of Wuhan then subsequently more or less the rest of the world, it had been quite clear that its effects on aspects of life, from social to economical, will be felt by the whole world for the foreseeable future with fears of a global recession even floating about. For Botswana, the situation is looking even direr because the pandemic is directly affecting its foremost sectors—diamond industry and tourism.

With regard to the diamond industry which contributes a whopping one-quarter to the country's GDP, about 85% of export earnings and about a third of government revenues, the impact of the virus on the industry's major markets which are China, America, and Europe has led to a significant slump in the demand for the precious stones which consequently saw a slump in their prices over the last few weeks.

As for the tourism industry, with most countries from which most of the country's tourists flock in from having imposed travel restrictions and closing their borders, it is pretty much obvious that tourist destinations are bound to see major decreases in the number of tourists, a situation which will severely hurt Botswana's 7 billion pula per annum tourism industry which accounts for about 11.5% of the country's GDP.

Together, Botswana's diamond mining and tourism industries constitute about 36% of the country's GDP and the fact that they are directly affected by this virus presents a serious and worrying problem for its economy. 

Despite talks of economic diversification having been at the top of the ruling party's agenda for every pre-election campaign since the need for economic diversification was identified, to this point, the country is yet to device any effective diversification drives. 

With the Coronavirus set to slow down if not put to a complete halt the country's two most reliable industries, does the country have a backup plan? At the moment, unfortunately, it does not look so. There is already talk of the government planning to put on ice some development projects which were slated for this financial year as a way to cushion the impact of the pandemic on the country's economy because it has become quite obvious that the economy does not have the potential to tackle the situation head-on.

This will obviously hurt the country's development plans which include an annual economic growth of 6% from the current 4.4% in order to achieve high income status by the year 2036. With current situation, it looks like the country will struggle to keep its economic growth perched at 4.4% let alone increase growth by 2.6% to the desired 6%.

At the moment it is not clear when this pandemic will subside. Some estimates suggest the upheaval might last until at least August and should these estimates turn out to be true or understated, Botswana is bound to face difficulties in keeping the wheels of its relatively small economy from falling off. 

Economic diversification has long been overdue in Botswana and the country's government has over the years either procrastinated it or completely failed in implementing it and with this scourge holding its breadbasket industries by the throat, we can only hope that the pandemic will be gentle in teaching the country a lesson about the need for diversification.