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Botswana’s economy, long powered by its world-renowned diamond industry, is facing mounting pressure as Debswana Diamond Company the country’s biggest diamond producer significantly reduces output in response to waning global demand. The move comes as part of a broader strategy to cushion the financial blow from weakening sales and shifting market dynamics.
Debswana, a 50-50 joint venture between the Government of Botswana and De Beers Group, has announced a 27% reduction in diamond production for 2024, yielding just 17.93 million carats compared to previous years. Revenues took an even sharper hit, falling by 46% year-on-year. The outlook remains grim, with further production cuts planned for 2025 – down to an estimated 15 million carats – in a bid to cut operational costs and adapt to market conditions.
This strategic scale-back includes the suspension of key operations at the Jwaneng Cut 9 project and Orapa mine, as well as earlier shutdowns at the Letlhakane tailings plant and the Jwaneng Modular Plant. These cost-cutting measures are expected to reduce expenses related to fuel, electricity, and raw materials, while avoiding involuntary layoffs by offering voluntary separation packages.
The downturn in the diamond sector is already reverberating across Botswana’s economy. Diamonds account for around 75% of the country’s foreign exchange earnings and nearly 30% of government revenue. The International Monetary Fund (IMF) reported a 3% contraction in Botswana’s economy for 2024, with a further 0.4% shrinkage projected for 2025. The government is now grappling with a widening budget deficit and liquidity challenges, which have delayed payments to contractors and raised concerns over fiscal sustainability.
Globally, the diamond industry is undergoing a shift. Rising inflation, economic uncertainty, and the growing popularity of lab-grown diamonds – which are significantly cheaper and increasingly accepted by consumers – are all contributing to a slowdown in natural diamond demand. According to Botswana’s central bank, Debswana’s rough diamond sales plummeted by 49.2% in the first half of 2024, dropping to $1.29 billion from $2.54 billion in the same period in 2023.
To protect its long-term economic interests, Botswana signed a new 10-year diamond sales agreement with De Beers. Under this deal, the government’s share of Debswana diamonds will rise from 25% to 30% in the first five years, reaching 50% by the end of the contract. This shift aims to give the country more control over its diamond revenues and ensure greater value retention from its natural resources.
Still, Botswana faces a tough road ahead. The government has intensified efforts to diversify its economy beyond diamonds, investing in agriculture, tourism, and manufacturing. However, analysts warn that these initiatives may take years to fully bear fruit.
The current crisis may serve as a wake-up call for Botswana and other resource-reliant African economies. With global markets evolving and sustainability taking center stage, the ability to adapt and reimagine resource management will be essential for long-term stability and growth.
