Botswana’s economy, heavily reliant on diamonds, is confronting mounting challenges as a global surplus, depressed prices, and escalating competition from lab-grown alternatives undermine demand and fiscal outlooks. The government has cautioned that the burgeoning diamond inventory may exert considerable pressure on economic growth, public revenues, and overall macroeconomic stability in the foreseeable future. The Ministry of Finance’s 2026/27 Budget Strategy Paper reveals that Botswana’s diamond stockpile reached approximately 12 million carats by the end of December, nearly double the government’s preferred cap of 6.5 million carats.
This elevated inventory level mirrors dampened global demand and indicates that production is likely to remain largely stagnant in the near term until the excess supply is sufficiently reduced. Only then can production escalate without exacerbating the current surplus. As the world’s second-largest diamond producer after Russia, Botswana derives roughly one-third of its GDP from diamonds.
This heavy dependence exposes the country to pronounced vulnerabilities from global market fluctuations. The ongoing downturn has been propelled by weakened consumer spending in the United States and China, the two largest diamond markets worldwide, where retailers have scaled back orders in response to shifting consumer preferences and the increasing allure of more affordable lab-grown stones. Research from industry authorities such as Bain & Company and the World Diamond Council highlights that lab-grown diamonds have rapidly captured market share, particularly among younger buyers prioritizing affordability and sustainability.
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Bain’s analysis estimates that lab-grown diamonds now represent a substantial and growing segment of engagement ring sales in key markets, exerting structural downward pressure on natural diamond prices rather than merely causing a temporary cyclical decline. Compounding Botswana’s challenges are rising trade barriers. The finance ministry has identified a 15% tariff in the United States and increased duties in significant markets including India as critical risks that could prolong price weakness and compress profit margins throughout the value chain.
Current projections estimate rough diamond prices averaging $99.3 per carat, a sharp decline from $128.8 recorded in 2024. Any further price deterioration would likely reduce mineral revenues below already conservative forecasts. Mineral revenue is expected to total just 10.3 billion pula in 2025/26, substantially below the long-term average of 25.3 billion pula.
The ministry warns this shortfall may persist over the medium to long term, with the possibility that revenues may never fully rebound to historical levels. Echoing this concern, the International Monetary Fund (IMF) has cautioned that resource-dependent economies face enduring impacts from commodity-specific shocks, especially those driven by technological substitution, if economic diversification is delayed. The broader economic outlook for Botswana is precarious.
The economy is projected to contract by nearly 1% in 2025 following a 3% decline the previous year. Dwindling foreign exchange reserves and diminishing government savings further restrict fiscal space, limiting the authorities’ capacity to stimulate growth or stabilize the exchange rate. Diamonds transformed Botswana from one of the world’s poorest countries in the 1960s into an upper-middle-income economy.
Today, this extended downturn underscores the critical urgency of economic diversification, value addition, and strategic repositioning within the global diamond industry. As global mining titan Anglo American moves to divest from De Beers, Botswana’s efforts to secure a stronger stake in the company reflect both the inherent risks and the high stakes involved in safeguarding the nation’s economic future beyond the diamond era.
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