Across Botswana, the lines of patients outside government clinics are lengthening, construction companies dependent on state jobs are laying off workers, and university students are threatening to boycott lectures after not receiving the allowance increases they were promised. This economic slowdown marks a sharp reversal from a few years ago when Botswana’s diamond wealth allowed it to invest heavily in healthcare and education, making it a model of prosperity in southern Africa.
The discovery of diamonds in 1967 transformed Botswana from a rural backwater into the richest nation per capita on the sub-Saharan African mainland. However, six decades later, the diamond market is in crisis, with lab-grown gems significantly undercutting demand for natural diamonds, particularly in the United States, the largest market for these gems.
Lab-Grown Gems: A Market Disruptor
The rise of lab-grown diamonds is reshaping the global diamond market. These synthetic stones, which can be produced in weeks or months, accounted for almost half of engagement ring purchases in the U.S. last year, compared to just 5% in 2019, according to jewellery insurer BriteCo. The ability to produce these gems quickly and at a lower cost is causing natural diamond prices to plummet.
Mining historian Duncan Money notes that this disruption is the most significant since the discovery of abundant alluvial diamonds on Namibia’s beaches in the early 20th century. The impact on Botswana is profound, as diamond exports constitute 80% of its exports and a third of government revenue.
“For decades, we have leaned and relied heavily on diamonds. While they served us well, we know painfully today that this model has reached its limits,” President Duma Boko said in an August speech. “This is no longer an economic challenge alone; it is a national social existential threat.”
Economic Repercussions and Government Response
The downturn in diamond revenue has forced Anglo American to consider selling De Beers, the world’s largest diamond company, which operates in Botswana. President Boko’s administration, which took power in October, is scrambling to address the economic crisis. In July, the government enlisted Malaysia’s PEMANDU Associates to advise on accelerating economic diversification. On August 21, Boko announced a $12 billion investment plan from Al Mansour Holdings, though details remain scarce.
The government has declared a public health emergency, frozen recruitment, and is facing shortages of medical supplies. Botswana Doctors Union president Kefilwe Selema describes the situation as dire, with patients like Galeemiswe Mosheti, a diabetes sufferer, waiting up to eight hours for medication.
“We’re spending long periods in the queue and our jobs suffer,” said Mosheti, a taxi driver who loses income while waiting for treatment.
Construction and Employment Challenges
The construction sector, heavily reliant on government contracts, is also suffering. Tshotlego Kagiso, chairman of the Tshipidi Badiri Builders Association, reports widespread layoffs among its members. “Most of our members have had to retrench workers,” he said, adding that thousands of jobs have been lost as companies suspend operations due to reduced government spending.
The economic statistics are stark. The International Monetary Fund forecasts Botswana’s fiscal deficit to reach 11% of GDP by 2025, the largest since the 2009 global financial crisis. Government debt is projected to double, reaching 43% of GDP. The finance ministry has revised growth forecasts, predicting a contraction in the economy.
“Botswana is experiencing a significant decline in revenue inflows resulting in massive liquidity challenges that threaten financial stability and sustainability of government business operations,” Finance Ministry Permanent Secretary Tshokologo Kganetsano told a parliamentary committee in June.
Looking Forward: Diversification and Challenges
Botswana’s efforts to diversify its economy have been ongoing since its first president, Seretse Khama, established the Botswana Development Corp in 1970. However, progress has been limited. Tourism, the second-largest contributor to GDP after diamonds, accounts for just 12% of the economy. Efforts to develop copper mines and exploit coal deposits have faced funding challenges.
With over two-fifths of the population under 24 unemployed, President Boko acknowledges the urgent need for job creation. His plans for investment in renewable energy, technology, and agriculture face financial constraints.
“We must now focus on job creation,” Boko stated, outlining his vision for economic reform.
As Botswana grapples with its diamond dependency, the nation stands at a crossroads. The need for economic diversification has never been more critical, and the coming years will test the government’s ability to navigate these challenges and secure a sustainable future for its citizens.
