Botswana’s growth forecasts for fiscal 2024 have slipped. They are down to 1%, compared with 3.6% last April. This is due to lower diamond production in the country. Last February, Botswana’s Minister of Finance Peggy Serame, forecast economic growth of 4.2% for the country. A target deemed unattainable by the Central Bank, due to persistent headwinds on the world diamond market. All the more so as Botswana derives 30% to 40% of its revenues and 75% of its foreign exchange earnings from diamond sales.
According to the IMF, the budget deficit is also set to widen from 3.45% to 6%, due to lower profits from the mining sector.
“The continuing economic slowdown is mainly due to a decline in diamond production. Some fiscal easing is warranted this year given the decline in mining revenues, but implementation of the ambitious investment budget should be slowed to contain the deterioration in the deficit and prioritize the most profitable projects, said the Bretton Woods institution in a press release.
A market weakened by synthetic diamonds
Botswana is the world’s leading diamond producer by value. In 2022, this raw material generated US$4.7 billion in diamond value. These figures reinforce the country’s leadership in diamond production in Africa. The Karowe mine produces between 395,000 and 425,000 carats of diamonds every year. The country produces around twenty million diamonds a year.
Today, diamonds account for around 33% of Botswana’s Gross Domestic Product (GDP) and 75% of its foreign exchange earnings. However, the rise of synthetic diamonds is having an impact on Botswana’s economy. Growing demand for laboratory diamonds is weakening the market. The natural diamond market is currently in crisis. Demand for natural stones is falling, in favor of synthetic ones. In other words, consumer interest in synthetic stones is growing all the time. Botswana sees laboratory diamonds as a threat to its economy, which is supported by a diamond industry that accounts for around 40% of government revenue. The rush for synthetic diamonds could impact Botswana’s long-term projects. The country is planning a US$6 billion investment, in partnership with De Beers. The aim is to extend the life of Africa’s largest diamond mine, Jwaneng. The first phase of this project requires an investment of one billion US dollars.
