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Botswana and the impending trade war cross fire

Publishing Date : 15 October, 2018

Author : TSAONE SEGAETSHO

After President Mokgweetsi Masisi’s trip to new darling China he jetted off to the US for a United Nations assembly, ironically these trips happened during an unprecedented era of a trade war between two of the world’s economically powerful nation, China and USA.


Masisi with his infant administration appears not much concerned about the trade war, however observers says it is visible that the Botswana president is currently a man carefully treading on eggshells lest this country finds itself caught in a brutal trade war crossfire.


Biggest economy USA exports most of Botswana diamonds. According to latest findings by World Top Exports, its total diamond imports are worth US$23.2 billion (20 percent of total diamond imports) and this country gets a larger chunk out of this. China, the second economic superpower, spends US$7.9 billion on diamonds being the one of the top importers of Botswana diamonds.


The diamond-dependant Botswana economy depends on both China and US’s money, meaning a trade war between the two should scare this country. According to reports diamonds, gems or precious metals takes 91.5 percent of Botswana exports which amounts to US$4.5 billion.


The US and China are having an economic conflict resulting from extreme protectionism as they are engaged in a tit-for-tat for tariffs in each other’s goods and this has been going on for months. US President Donald Trump started the war as he lambasted China for “unfair” trading practices including theft of US companies’ intellectual property.


Trump launched a trade war with China in a bid to create more US manufacturing jobs.  In a see-saw affair of tariff war the “America First” president imposed US$ 200 billion on Chinese goods and China in return retaliated with a much milder response of US$60 billion.  After US tariffs on China, the large Asian nation responded saying it “deeply regrets” the White House’s decision, adding that “China has no choice but to take counter-measures”.

But is Botswana affected by trade war, and how?


When delivering a keynote address at last month’s budget Pitso, Minister of Finance and Economic Development Kenneth Matambo said it was a time “when there are trade related uncertainties, particularly between China and the US which has resulted in externality to our domestic economy. The domestic economy can be affected negatively particularly the mining sector.”


The question of trade war effect on Botswana followed Minister of Investment, Trade and Industry Bogolo Kenewendo in a recent interview with Bloomberg. Kenewendo told the business media outlet that Botswana’s linkage with China and USA does not make it susceptible to the negative impacts of trade war.


“At the moment there is no direct impact but we are concerned…we are keeping our eye on it because it could have drastic impacts on our economy because we are a diamond based economy and our biggest markets are China and the US,” said Kenewendo.


Economists predict that the trade war between China and the US shows no obvious signs of ending and there are fears that this will drag down global economic growth this year and in 2019.  The World Bank which has been trying to mitigate the China versus US trade bout warned that this may also bring the global economic recession à la the 2008 financial crises.


During the recent UN General Assembly US president Trump said, “the United States has just announced tariffs on another $200 billion in Chinese-made goods.” The “America First” president was not apologetic as “we reject the ideology of globalism and accept the ideology of patriotism.”


Trade experts have warned that there is not going to be a winner at the end of the trade war but the global economy will have a slump in growth. Analysts believe “when elephants fight, it is the grass that suffers” as it is the case for developing countries like Botswana will suffer when the global economy collapses. Also, economists argue that border tariffs are typically counterproductive because the higher costs are passed on to consumers, even domestic consumers like the case of US farmers who uses China as an ideal import hub.  


Bakang Ntshingane, a Motswana political scientist based in South Korea whose focus is in international trade and economic diplomacy, is worried about the already fragile global economy which is likely to collapse to its knees. In his trade advice to Botswana, Ntshingane believes Botswana should be practical in dealing with both superpowers; China and US.


“We should learn from them. We should learn whatever we can from them, like China in terms of industrialization and special economic zones, unabated by the trade. China’s increased focus and attention on Africa means there will be more opportunities for development partnerships. We should be ready and prepared to exploit those opportunities and seek fair trade arrangements.


Trade remains one of the most critical tools for economic growth. We have to invest more time and effort in building infrastructure and building export competitive industries. Let us also shift our attention to intra-regional trade,” said Ntshingane.

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