- Keith Jefferis cites diamond market slump, warns against overestimation
- Says growing dominance of lab-grown diamonds is cutting into Botswana’s marketshare
TLOTLO KEBINAKGABO
Botswana’s projected mineral revenue for the 2025/26 fiscal year may have been significantly overestimated, raising concerns about a larger-than-expected budget deficit.
According to the highly-regarded economist who runs Econsult, Dr Keith Jefferis, the government’s forecast that suggests that mineral revenues will nearly double in comparison to the current fiscal year is questionable.
Speaking at the recent FNB Budget Speech Review, Jefferis pointed out that Botswana’s primary diamond partner, De Beers, has projected a reduction in output, casting doubt on the government’s optimistic revenue expectations.
Since mid-2023
“I am worried that the deficit will be even larger because mineral revenues are being overestimated,” he said.
Jefferis highlighted the ongoing downturn in the global diamond market, noting that it has been in a slump since mid-2023, significantly longer than previous “V-shaped” recessions that typically saw quicker recoveries.
He argued that one of the key factors behind the market’s prolonged struggles is the growing dominance of lab-grown diamonds, which are increasingly cutting into Botswana’s share of the market.
Further, he pointed to the collapse of China’s diamond sector. “China is the second-largest diamond market, but it is described as dead,” said Jefferis.
De Beers impairment
The future of De Beers, Botswana’s long-time diamond mining and sales partner, is another source of concern. Jefferis noted that De Beers’ parent company, Anglo American, is preparing to release its 2024 financial results, which are expected to include a significant impairment update on De Beers’ value.
“It is in deep trouble right now,” he warned. “Anglo is about to release the 2024 financial results, and they said they are going to release an impairment update for the value of De Beers. I think we are going to see them write down the value of De Beers a lot. They said they are going to get rid of De Beers as they do not want it any more.”
Jefferis added that the uncertainty surrounding De Beers’ future is creating further instability in the diamond market, complicating Botswana’s economic outlook.
“The bleeding has not stopped”
Beyond mineral revenue projections, Jefferis also criticised the government’s approach to spending. He said there seems to be a reluctance to reduce commitments inherited from the previous administration while new commitments are continuously being added.
“The bleeding has not stopped,” he noted, arguing that without significant cuts, the government risks deepening the fiscal deficit.
With mineral revenues potentially overstated and spending commitments piling up, Jefferis warned that Botswana could face a larger budget shortfall than anticipated.