“I see roads, I see hospitals, I see children going to school…” No, Mokgweetsi Masisi is not reading the future in a crystal ball, but through the 2,492 carat diamond discovered in August at the Karowe mine in central Botswana. The Head of State, who presented this precious stone to the press on 22 August, is well aware of the profit that his country of 2.7 million inhabitants will make from the sale of this jewel, estimated at more than 40 million dollars (more than 36 million euros). The half-kilo stone would be the second largest diamond ever found, according to several experts, and the largest in a century.
History has proved Botswana’s president right. Since independence in 1966, diamond sales have funded many roads, hospitals and schools in this country the size of France. Botswana is Africa’s largest producer and the world’s second, after Russia. Gems are vital to its economy. Sales account for around 80% of its exports, a third of its tax revenues and a quarter of its GDP, according to the International Monetary Fund (IMF).
Two months before the presidential elections, for which he is a candidate, Mokgweetsi Masisi triumphed during the presentation of this new national jewel. In front of the television cameras crowded into his office in the House of Representatives, he attentively inspects this rare object, translucent and the size of a tennis ball. He puts on jeweler’s glasses, makes faces, exclaims ” Wow ! “ before his ministers gathered for the occasion. The marketing operation is well organized.
Synthetic stones
Because if the president becomes the VRP of this precious stone for a day, it is because he is aware that the current collapse of the diamond industry threatens Botswana’s economy. The diamond market is in free fall worldwide (prices have fallen by around 30% since 2022) following the arrival of synthetic stones. “Lab-grown diamonds have outperformed market prices and continue to become cheaper”says mining industry historian Duncan Money.
These new stones, the result of a technological laboratory process, are more than ten times cheaper than authentic diamonds from traditional mining. An industry whose raw material is sometimes difficult to trace and is sometimes described as “blood diamonds”. Today, one in two engagement rings sold in the United States is topped with a synthetic diamond. China is at the forefront in this segment: Beijing produces more than 90% of the world’s cultural jewellery.
The crisis is such that the mining giant Anglo American wants to sell the shares it holds in De Beers (85%), the world’s leading diamond producer. The remaining 15% is held by Debswana, a joint venture between the company and the state of Botswana. The southern African country is vital for De Beers: the diamond trader produces 70% of its diamonds there. In short, “De Beers and the government of Botswana are bound by mutual dependence”Duncan Money sums up.
Copper, nickel and manganese.
Debswana’s rough diamond sales fell by 49.2% in the first half of the year. The negative market outlook has forced Gaborone to react in order to obtain more revenue from its resources. In 2023, at the cost of a long stand-off, Mokgweetsi Masisi forced De Beers to renegotiate the sales agreement. According to the initial agreement, which dates back to 2011, the company was to receive 90% of rough diamond production. Currently, Gaborone’s share is 25% and will eventually rise to 50%.
Although classified as an upper-middle-income country (along with Brazil, South Africa and China), Botswana could face significant economic turbulence. “We expect growth to slow to 1.1% in 2024, from 2.7% in 2023, largely due to deteriorating prospects in the diamond sector.”says Emmanuel Kwapong, an economist at Standard Chartered Bank. “More emphasis needs to be placed on diversification”The analyst continues, recommending “Pro-business reforms to enhance Botswana’s competitiveness in non-diamond sectors”.
However, if, as Duncan Money reminds us, “Botswana’s economic performance has been remarkable in recent decades, particularly when compared to other countries with extractive-dependent economies”Its reserves of rare metals, copper, nickel and manganese remain “in quantities insufficient to offset the loss of revenue generated by precious stones”To prepare for the post-diamond era, Botswana set up the Pula Fund (named after the national currency) in 1993 to invest surplus gemstone sales. It now manages a portfolio of $4.1 billion in assets.
