Botswana’s President Mokgweetsi Masisi recently unveiled a 2,492-carat diamond found in August at the Karowe mine, a gemstone anticipated to fetch over $40 million. This diamond, regarded as the second-largest ever discovered and the largest in a century, was showcased on August 22. Masisi’s display of the gem underscores the critical role diamonds play in Botswana’s economy, where gemstone sales represent roughly 80% of exports, a third of tax revenues,
Despite the celebratory display, Botswana faces a daunting economic reality. The global diamond market is experiencing a steep decline, with prices plummeting around 30% since 2022 due to the rise of synthetic diamonds. These lab-created stones, which are over ten times cheaper than natural diamonds, are impacting market prices. Duncan Money, a mining industry historian, notes that synthetic diamonds are continually reducing market values and gaining popularity, particularly in the U.S., where they now top one in
China dominates the synthetic diamond market, producing over 90% of the world’s cultured jewelry. This shift has prompted major players like Anglo American to consider selling their stakes in diamond companies. Notably, Anglo American is seeking to divest its 85% share in De Beers, the world’s leading diamond producer, with the remaining 15% held by Debswana, a joint venture between De Beers and the Botswanan government. This partnership is crucial for De Beers, which relies on Botswana for 70% of its diamond output.
In response to the downturn, Debswana’s uncut diamond sales dropped by 49.2% in the first half of the year. This decline has pressured Gaborone to seek alternative revenue sources. President Masisi successfully renegotiated the sales agreement with De Beers, increasing Botswana’s share of uncut diamond production from 10% to 25%, with a future goal of 50%.
Economists predict Botswana’s growth will decelerate to 1.1% in 2024, down from 2.7% in 2023, primarily due to the weakening diamond sector. Emmanuel Kwapong from Standard Chartered Bank emphasizes the need for economic diversification and reforms to bolster competitiveness in non-diamond industries.
Despite Botswana’s notable economic management compared to other mining-dependent nations, its reserves of alternative minerals such as copper, nickel, and manganese are insufficient to offset the revenue losses from diamonds. To mitigate future economic risks, Botswana established the Pula Fund in 1993 to invest surplus diamond revenues, managing a portfolio valued at $4.1 billion today.
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