Mining in deep contraction

No positive signs of sector recovery yet

Mining output drops by 27% in 2020 Q4

Diamond production fell hugely by 28%

BAKANG TIRO

editors@thepatriot.co.bw

Key data released by Statistics Botswana (SB) suggests a record economic contraction in the local mining sector with mining production having declined by 27.1% in the fourth quarter of 2020.

Statistician General Dr Burton Mguni said the index of mining production stood at 64.0 during the fourth quarter of 2020, showing a negative year-on-year growth of 27.1% from 87.8% in Q4 2019.

The quarter-on-quarter analysis also indicates a significant decline of 11.7 % from the index of 72.5 during the third quarter of 2020 to 64.0.

According to Statistics Botswana, the immense contraction in mining sector growth was mainly attributable to the production of diamonds, which contributed negative 23.7 percentage point.

“Soda Ash and Salt (each contributing 0.1 of a percentage point) contributed positively to the change in the mining production. However, their contributions were insignificant to offset the negative contribution made by diamonds. The annualised total Index of Mining Production has been decreasing at an average rate of 3.8 percent during the last 10 years,” Statistics Botswana said.

The total Index of Mining Production shrank by 28.1 %in 2020, the biggest annual decline noted since 2009. To that end, the decrease reflected the sharp declines in mining production registered during the course of the year as a result of Covid-19 pandemic movement controls that took effect in the country.

Economist Dr Mosimane Rammika said the key contributing sectors to the Gross Domestic Product (GDP) being mining and tourism have been subdued since the outbreak of Covid-19 pandemic locally.

He said deep contraction in the key mining sector put the already strained economy under pressure.

Rammika said the country’s economy was in a technical hard recession as it had experienced two successive quarters of negative growth since Covid-19 outbreak, on a quarter-on-quarter basis.

Diamond production waned by 28% during the fourth quarter of 2020 compared to 2019 fourth quarter.

“Similarly, quarter-on-quarter analysis shows that production registered a decline of 12.7%during the fourth quarter of 2020 compared to the preceding quarter. The decrease was as a result of planned strategy to align production with weaker trading conditions linked to Covid-19 protocols,” added SB.

Gold production on the other hand increased by 4.1 % during the fourth quarter of 2020 as compared to previous year, with rise as a result of higher than expected gold recoveries from the ore.

Both Soda Ash and Salt production increased by 12.2% and 13.4% respectively during Q4 2020.

The quarter-on-quarter analysis shows that Soda Ash production increased by 95.5% during the period under review, with the significant increase attributable to the effectiveness of the plant following a refurbishment which occurred in the third quarter of 2020.

“Coal production decreased by 6.1 percent during the fourth quarter of 2020 compared to the corresponding quarter of 2019. Similarly, the quarter-on-quarter comparison shows that coal production decreased by 21.0 percent compared to the preceding quarter. The decrease can be attributed to the low demand of the product,” said Statistics Botswana on mineral output.

Meanwhile, the global diamond mining company De Beers Group says it expects recovery in 2021.

Executive Vice president Diamond Trading at De Beers, Paul Rowley recently said the company expects to produce between 32 and 35 million carats in the year boasted by good market outlook.

The Group in 2020 produced 25.1 million carats, representing an 18% decrease from the 30.8 million carats recorded in 2019 with decline attributed to weaker diamond demand amid Covid-19.

“2020 was unprecedented year for the diamond industry globally and we also suffered from the effects of Covid-19. Containment measures such as the lockdowns impacted negatively on our business operations. There has been significant challenges for rough diamond industry,” he said.