Business Diamond exports rebound in October

Rough and polished diamond exports rebounded strongly in October, up to 78 percent to P2.16 billion from September, preliminary Bank of Botswana statistics indicate.

The latest figures suggest a resurge in demand for diamonds after a transitory reduction in the market's appetite for the precious stones, which resulted in a flattening out of prices in the third quarter. Prior to the third quarter slowdown, rough diamond prices had risen by about 35 percent since January before prices reached saturation point on market dynamics.

Analysts attributed the rebound in diamond exports seen in October to restocking and building up of inventories by cutting and polishing firms ahead of the festive season.

Traditionally, rough diamond demand peaks in the quarter before the Christmas, New Year and Chinese New Year period as manufacturers and jewellery chains stock up for holiday spending. In addition, the Pula's recent fall against the US dollar in September and October is expected to have increased the allure of precious stones to the market.Between September and October, the Pula depreciated by 8.3 percent against the US dollar for a total of 9.8 percent fall in the first 10 months of the year. According to Bank of Botswana data, October figures bring diamond exports for the first 10 months of the year to P27.8 billion, a historic performance, given that the previous record for exports over 12 months was P21.7 billion achieved last year.

In US dollar terms - the currency of international diamond trade - the October exports equal US$288 million( P2.1 trillion), up 73 percent month-on-month. For the year in US dollar terms, the exports to October equal US$4.16 billion (P30.8 billion). The record diamond earnings are music to government's ears in a year in which it is targeting a balanced budget in 2012/13.

Although government was planning to finance the P6.2 billion deficit that is projected for 2011/12 from domestic borrowing, the treasury has gained elbow room from higher diamond revenues and lower-than-forecast spending by some ministries. At the current pace - and given the stronger fourth quarter rough diamond demand linked to the festive season - analysts believe annual exports could reach P34 billion.

The historic figures recorded thus far this year have been made more momentous by the fact that they have been achieved from production of fewer stones.

Debswana, the country's main diamond producer, is targeting 25 million carats this year, down from pre-recession years when the company easily pumped out more than 30 million carats annually.