The diamond market, once a bastion of stability and wealth, is undergoing a seismic shift as lab-grown diamonds gain market share. This trend is more than likely to continue and will, if nothing is done to relieve the nation’s mono-culture economy, in all likelihood shove Botswana to the doldrums
DOUGLAS RASBASH
Special to The Botswana Gazette
Reliance on diamonds has been the cornerstone of Botswana’s economic success for decades. However, the very foundation of this success is under unprecedented threat. The diamond market, once a bastion of stability and wealth, is undergoing a seismic shift as lab-grown diamonds gain market share.
Despite a staggering 30 percent decline in diamond sales in 2024, leading to a 5.6 percent contraction in GDP and recession, senior government officials are clinging to a precarious optimism, forecasting a GDP rebound of 4 percent in 2025.
“The domestic economy is anticipated to rebound in 2025 to a growth of 3-4 percent, reflecting a combination of base effects, the global recovery in the major diamond export markets, and continued growth in the non-mining sector,” said Walter Matekane, Botswana’s director of macroeconomic policy at the Budget Pitso in Gaborone last week.
The government expects this recovery to narrow the budget deficit to 3.6 percent of GDP in the 2025/26 fiscal year, from the 6.75 percent forecast for 2024/25. It is entirely understandable that those who live in the house that diamonds have built cannot envisage a world without diamond income. However, this reliance on hope as a strategy is not just risky; it is reckless.
A waste of money
The government’s optimism is built on a dubious assumption: that the global diamond market will magically recover, restoring revenues to previous highs. Yet the evidence points to a structural, not cyclical, change. According to the UK Guardian of 18 January, natural diamonds are a waste of money.
The global lab-grown diamond market size was valued at USD 22.79 billion in 2023. The market is projected to grow from USD 25.89 billion in 2024 to USD 74.45 billion by 2032, exhibiting a CAGR of 14.11% during the forecast period. In 2018, the LGD market share was 8 percent, which grew to 20 percent five years later. The classical 25 percent market tipping point will be reached in 2026.
Lab-grown diamonds are here to stay, disrupting natural diamond markets with their lower prices, environmental appeal and growing acceptance among consumers word wide. Pretending that this is a temporary blip is akin to ignoring a gathering storm and hoping the winds will pass. Botswana cannot afford to pin its future on wishful thinking.
History is rife with examples of economies that failed to adapt to structural change, often with devastating consequences. The once-thriving coal towns of Appalachia in the United States are a cautionary tale of what happens when industries collapse and governments fail to diversify.
Botswana, despite its commendable history of sound governance, is at risk of joining this ignoble list if it continues to rely so heavily on a single commodity.
Instead of banking on a miraculous recovery, Botswana must adopt a strategy grounded in reality: plan for the worst-case scenario. This means bracing for the possibility that natural diamonds will continue to decline in both value and demand. It means recognising that the global diamond market is unlikely to return to its glory days. It means being proactive, not reactive.
Frustratingly slow
Botswana must accelerate economic diversification. While the government has long acknowledged the need to broaden the economic base, progress has been frustratingly slow. Agriculture, tourism, renewable energy and technology offer viable if not conventional avenues for growth and should be prioritised. But readers are also referred to an item in this issue on 10 novel ways to diversify.
Botswana’s leaders must summon the courage to face the harsh realities of a changing world. Betting the nation’s future on a diamond market revival is a gamble with stakes too high to justify.
Matekane has optimistically predicted a 4 percent rebound but the evidence is suggesting otherwise: hope is not a strategy; preparedness is. The question is not whether Botswana can adapt but whether it will.