The Effects Of The2008-2009Financial Crisis On Diamond Export Case Study Of Botswana

The global economic crisis of2008/2009had severe negative consequences on the economy of Botswana. However as for the economy of Botswana; the crisis was fully felt in the2008Q4. As if that was not bad enough the economy continued on a free fall motion to hit rock bottom GDP growth rate of14,491.3million pula (statistics Botswana). The sluggish growth is attributed to the decline in demand for diamonds export to the major trade partners in the international markets.The broke out of the crisis meant that the major trade partners reduced their import demands for diamonds. The local economy is heavily dependent on mineral more especially diamond export such that should there be any change in the diamond trade, the impact of such a result will immediately be felt and at times seen literally unfolding by the GDP growth rate as it was the case with the financial crisis in question.The objective of this paper was to examine the effects of the2008/9financial crisis on the diamond exports, a case study of Botswana and how the decline of diamonds trade has hurt the GDP growth of the Botswana economy. Our paper has been divided into5chapters to illustrate and support our statement. In the first chapter, we briefly introduce our statement problem that we are going to discuss. Chapter2is literature review of different scholarly research and reports of other researchers on the same topic. Their conclusions and recommendations have been crucial to argue our statement and also to find possible answers from their shortfalls. While in chapter3, we are going to discuss and describe the data and methodology we are going to use. We clearly state the kind of data and source of data that we preferred to use and the reason as to why we preferred to use such data instead of the other. While the methodology we will address the how question of using the data at our disposal. Meanwhile chapter4and5will present the analysis of data and discusses policy recommendations and draw a conclusion respectively.For the purpose of this paper, we have adopted the case study analysis of Botswana economic growth, data collection and comparison of the local economic growth. We will use secondary data collected of the relevant stakeholders provided by the Central Statistics Office of Botswana. The data will be presented in quarterly ratio for a period of ten years starting2002to2012.The data we obtained strongly suggests that the financial crisis had a severe impact on the diamond exports mainly due to the decline in demand from the major trade partners. The trade partners, who are also the original place of the financial crisis, were forced to reduce importation of luxury goods to avert the impact of the crisis at least until the situation normalizes.It is concluded that the diamond trade which has been the major driver of Botswana’s economy for decade, could no longer sustain the economy due to the financial crisis. The decline spelt doom to the economic growth and experienced a sharp decline as a result. The fact that the economy is adversely dependent on the extraction sector is not sustainable as the economy suffered a severe consequence during the financial crisis. The effects did not spare the government who is the major employer which eventually spilled over to the private sector and other non government organizations.Based on our findings, it is crucial for the government to reduce its dependence on a single commodity as it has been proved not to be viable. Economic diversification could be the permanent solution to this anomaly so that it can sustain itself in future when the minerals have long gone.