Botswana (MRB Oct 01 2001): Concern for economy after terror attacks hit diamonds and tourism.

The two key sectors on which Botswana's economy depends face massive downturns after the terror attacks in the US. Diamonds and tourism are both likely to be severely hit. A predicted growth rate of 10% for the year 2000 - 2001 will now come in substantially lower.

Botswana relies on diamond revenues for 80 percent of its export revenues, a direct 35 percent of its gross domestic product (GDP) and 60 percent of government revenues. The US accounts for 50 percent of world diamond jewellery sales and consumers are not spending.

The US accounts for 50% of world diamond jewellery sales. The tourist industry reports 'hundreds' of cancellations by Americans. The diamond industry contributes 40% by value of all sales by De Beers' Diamond Trading Company. This equates to 35% of the world's diamonds. Diamonds contribute some 70% of foreign exchange earnings, 50% of government revenue and 30% of GDP. The country's foreign reserves would last for over two and a half years in the absence of export earnings.

De Beers has been advising caution and recognised the need to be flexible in a bid to restore consumer confidence.

Diamond production in Botswana is dominated by Debswana, a joint venture company owned by De Beers Investments (50%) and the government of Botswana (50%).

Tourism currently accounts for approximately four percent of Botswana's GDP, but has been identified by the government as the means to diversify the economy away from diamond revenues. A cutback of up to 60 percent in tourist traffic is now being anticipated as the tourist industry reports 'hundreds' of cancellations by Americans.

Tourism in Botswana took a year to get back to normal after the Gulf War, say tour operators, and they expect a similar downturn now. Companies like Gametrackers, part of the Orient-Express group, have the financial reserves to survive, but the situation was more serious for smaller, family-based operators, who had already been affected by the troubles in Zimbabwe, say industry analysts.