Urgent: Botswana Launches Wealth Fund Amid Diamond Crisis
UPDATE: Botswana is taking immediate action as the diamond industry faces a crisis from cheaper lab-grown alternatives. In a significant move, the government announced the launch of a sovereign wealth fund this week, aimed at ensuring a “resilient, sustainable, and diversified future beyond diamonds.”
This urgent development comes as Botswana, heavily reliant on diamonds for its economy—accounting for approximately 30 percent of its GDP and 80 percent of its exports—struggles to adapt to a market increasingly dominated by synthetic stones. President Duma Boko is exploring various strategies, including potential majority ownership of the industry giant De Beers and independent diamond sales, to mitigate the financial fallout.
The price of natural diamonds has plummeted sharply, dropping from a peak of $6,819 per carat in May 2022 to $4,997 by December 2024, according to the World Diamond Council. Economic pressures have intensified, prompting Botswana to seek alternative revenue streams, such as luxury wildlife tourism and solar power development. This situation escalated to a critical point in August, when the government declared a state of emergency due to dwindling foreign reserves and an overstretched health system.
“If left unaddressed, there is a real risk of the situation becoming not just an economic challenge but a social time bomb,”
Boko warned in July, emphasizing the urgent need for diversification.
Other Southern African nations like Angola, Namibia, and South Africa are also feeling the strain, but Botswana bears the brunt of the crisis. Economist Brendon Verster from Oxford Economics Africa stated, “Diversification is essentially now or never.” He noted that synthetic diamonds now represent about 20 percent of the global market value and dominate up to 50 percent of the US engagement ring segment as of 2025.
Lesotho, with diamonds contributing up to 10 percent of its $2 billion GDP, is also experiencing turmoil. This month, the Letseng mine announced it would lay off 20 percent of its workforce due to “sustained pricing pressure,” heightening fears of economic collapse, according to independent analyst Thabo Qhesi.
In a bid to revive the natural diamond market, Botswana and its neighbors, including the Democratic Republic of Congo, pledged in June to allocate 1 percent of their annual diamond revenues to marketing natural stones. De Beers emphasized the potential to engage consumers with the story of responsibly sourced diamonds.
Meanwhile, the global ratings agency S&P downgraded Botswana’s long-term credit rating to “BBB” with a negative outlook, citing the rapid growth of the lab-diamond market as a significant risk. The agency’s report highlights that synthetic diamonds are reshaping consumer preferences and threatening traditional markets, leaving Botswana in a precarious position.
As Botswana navigates this critical transition, officials like Jacob Thamage from the Ministry of Minerals advocate for coexistence between natural and lab-grown diamonds, noting that they serve different consumer markets. The local jewelry scene reflects this divide, with natural diamonds fetching prices over $50,000 while lab-grown options are available for less than $115.
The urgency of the situation cannot be overstated. With the future of Botswana’s economy hanging in the balance, the government and industry leaders are racing against time to secure new avenues for growth and ensure that the legacy of their diamond riches does not fade into history.
As developments unfold, all eyes will be on how Botswana adapts and what innovative solutions emerge to secure its economic future in the face of this unprecedented challenge.
