By Dr Douglas Rasbash – Special Correspondent
Economics is unforgiving. It does not care about national narratives, history, pride or political messaging. It cares about numbers. And when those numbers are applied honestly to Botswana’s dependence on diamonds, the verdict is mathematically unavoidable: the country is underinvesting in diversification at precisely the moment it should be accelerating it, while simultaneously deepening its exposure to the very commodity whose decline could remove nearly half of national income.
A Neat Answer — And a Wrong One
The starting point for this discussion appears deceptively simple. What is Botswana’s non-diamond per capita income? Diamonds contribute roughly 25–30% of GDP. With per capita income estimated at around US$7,000, a straightforward subtraction suggests that non-diamond per capita income stands at about US$4,900. Neat, clean—and wrong.
Diamonds do not merely occupy a slice of GDP. They propagate throughout the economic system via wages, procurement, taxation, consumption and services. Remove diamonds and the economy does not lose 30% of output; it loses the direct contribution plus the indirect and induced activity that depends on it.
The Multiplier Effect
Across mineral-based economies, output multipliers typically range between 1.3 and 1.6. Botswana is no exception. Applying these multipliers produces sobering results. A low-case scenario implies a GDP loss of roughly 33%. A central estimate approaches 42%. A high-case scenario reaches almost 50%. A realistic median assessment is that losing diamonds tomorrow would remove approximately 40% of Botswana’s GDP.
That would collapse per capita income from around US$7,000 to roughly US$4,000. This is not a marginal adjustment. It is a national reset.
External Shock
The shock would not stop at domestic output. Diamonds account for between 80% and 90% of export earnings. Their removal would push the trade deficit from roughly 15% of GDP toward 35%. Foreign reserves, currently estimated at around P50 billion, would be drawn down rapidly. Within two years, a third could be depleted. To defend the pula, interest rates would rise. As reserves thinned, depreciation of 20–30% would follow, driving inflation into the 12–18% range.
Fiscal Arithmetic
Diamonds contribute roughly 30% of government revenue. Remove this revenue stream and the budget deficit would surge toward 55% of GDP. Maintaining essential services would require borrowing between P15 billion and P20 billion annually. Debt could rise toward 40–50% of GDP within a few years.
Social Consequences
Unemployment could rise toward 40%. Education sponsorships would be cut. Health budgets would be reduced. Social protection would shrink. Skilled emigration would accelerate.
Destiny in a Spreadsheet
Every pula invested in diamond dependence is a pula not invested in economic survival. Economics does not negotiate. Arithmetic does not lie.