A Nation that Lives by the Diamond...

Botswana's failure to sell a single carat at its emergency tender last week underscores a dramatic change of fortunes for Africa's diamond capital.

It is a nation that has been transformed diamonds. They were discovered in 1967, less than six months after Britain granted independence to what was then known as the Bechuanaland Protectorate.

At the time it was among the poorest countries in the world, almost entirely dependent on subsistence framing. There were 12km of roads and just 22 university graduates out of a sparse 575,000 population.

Illiteracy and malnutrition were widespread. And almost half the adult male population worked abroad because there were so few job opportunities. 

Diamond revenue changed everything. It funded the construction of paved roads, electricity grids, water supply systems, sanitation and modernized urban infrastructure.

It paid for schools and universities, hospitals, social welfare, and a steady improvement in living conditions. 

Botswana flourished and became an upper-middle-income country. In 2022, rough diamond sales hit a record high of $4.7bn, according to Kimberley Process figures. 

Botswana was the world's biggest producer (by value) that year, with a 29 per cent market share (Russia was 22 per cent).

A once-impoverished nation became a global diamond powerhouse. But today it finds itself with too many eggs in a single basket, staring into an abyss.

It has been hit by a perfect storm of weak demand for natural diamonds (especially in China), the rising popularity of lab growns, and, as of August, the devastating impact of US reciprocal tariffs.

In June, Debswana (the joint venture between Botswana and De Beers) announced three-month production pauses at Jwaneng Cut 9 and Orapa, its primary mines, after overall sales halved in 2024.

In August the government declared a public health emergency and warned of dire shortages in essential medicines as a result of the slump in diamond sales.

It has devalued its currency twice in recent months, its S&P rating has been downgraded and it has agreed a $1bn support package with the African Development Bank (AfDB).

In addition, its budget deficit has widened to 9 per cent of GDP, the highest since the pandemic, its foreign reserves have almost been wiped out and unemployment is soaring.

Botswana has long recognized the need to diversify beyond diamonds. The renewed 10-year sales and mining agreement with De Beers includes a $75m Diamonds for Development Fund, which is designed to boost tourism, agriculture, manufacturing, technology, financial services and beyond.

And the country is actively seeking investment from elsewhere. It signed a $12bn deal with Qatar's Al Mansour Holdings in August and is currently negotiating an $11.3bn deal with Oman's sovereign wealth fund.

It has also signed a memorandum of understanding with Japan's Toyota Tsusho Corporation to collaborate in green energy, mining, agriculture, and water development.

And it is more than keen to secure a majority ownership of De Beers, in which it currently holds a 15 per cent stake.

But if it can't sell diamonds, it can't sell diamonds.

A tender by Okavango, the state-owned diamond marketing company, typically raises $60m, sometimes as much as $90m.

But last week it failed to raise a penny. The ad hoc, emergency tender of 1m carats, didn't sell a single stone. Which tells you something about the state of the market.

Have a fabulous weekend.