The myth of diamond dependence
Lewanika Timothy | Tuesday February 3, 2026 13:04
As export revenues weaken, the pula softens and economic growth stalls, diamonds are routinely identified as the faltering pillar dragging the economy toward the abyss. Yet this diagnosis confuses cyclical shocks with deeper structural failures. Commodity prices fluctuate but economic models endure. Countries with sound fiscal structures absorb shocks and adjust. Those overextended with billions in commitments, do not.
The consistent blaming of the diamond market fails to account for the unproductive use of capital in a growing recurrent expenditure that prioritises consumption over investment. It fails to point out that government size is too big and does not have the capacity to carry its capital requirements.
Recurrent expenditure has steadily crowded out productive investment. Capital that should expand future capacity is instead absorbed by wages, subsidies and bailouts. Government has grown to a size that requires continuous high revenues simply to stand still, leaving no buffer for shocks and no surplus for long-term development. In such a structure, diversification becomes a revenue patch not a solution.
Even with new exports whether copper, hemp, the fiscal pressures would remain. A public wage bill approaching P38 billion per annum, utility tariffs that recover a fraction of production costs, repeated bailouts of state-owned enterprises and rising social obligations have left little room for productive investment. The central challenge is not what Botswana produces, but the weight government has placed on the economy.
The Asian tiger economies are rarely thrown into crisis by turbulence in mainstay sectors such as oil not merely because they are diversified, but because their economic models are not fiscus dependent. There, government plays a catalytic rather than dominant role, allowing private enterprise to drive growth while the state focuses on regulation, infrastructure, and productivity. Botswana, by contrast, has constructed an economy in which government is the largest employer, spender and risk absorber, an arrangement that bloats fiscal stress when revenues weaken.
Botswana’s ailing economy can be traced to the gigantic size of government, with the trend of creating parastatals and government departments to address service shortfalls rather than allowing the private sector to create solutions.
Historically, the discovery of diamonds in 1967 marked a turning point in the country’s development trajectory. The surge in revenue strengthened the state’s financial muscle and enabled rapid expansion of public services. Policies and programmes such as the Destitute Policy, the Drought Relief Programme, the Financial Assistance Policy, and the Arable Land Development Programme were implemented to address social and economic needs. These interventions were vital at the time and played a critical role in stabilising the young nation.
To enhance service provision in urban areas, parastatals such as the Water Utilities Corporation, Botswana Power Corporation, Botswana Telecommunications Corporation, Air Botswana, and the Botswana Agricultural Marketing Board were established to complement government efforts. Over time, however, many of these entities evolved into persistent fiscal liabilities.
Their lacklustre performance and mounting financial losses exposed the limitations of state-led service delivery.
By the late 1990s, it had become evident that the public sector had grown excessively large, with government emerging as the dominant employer in the economy. This reality informed the formulation and adoption of the Privatisation Policy in 2000. The policy recognised that inefficiencies stemming from bureaucratic inertia, weak accountability and misallocation of resources were undermining service quality and fiscal sustainability.
The expansion of government departments has often resulted in low productivity and declining service standards, driven by red tape, rigid job security and weak performance incentives. Policy formulation and implementation have become slow and cumbersome, while managerial accountability has eroded.
In a 1997 Budget speech, former President and Minister of Finance and Development Planning, Festus Mogae said that privatisation would only be embraced to ensure that developmental efforts were not compromised by short-sighted measures yielding only temporary gains.
“The benefits of these measures are justified whether they are realised over the short, medium or long term. “We cannot afford to concentrate our efforts only on short-term gains. This is the reality of sustainable development,” he said.
Critics of this approach argue that privatised parastatals would still depend on government support, as commercial banks may be reluctant to finance them in a country with one of the smallest domestic markets in Southern Africa.
These concerns are not without merit. However, they reinforce rather than undermine the central point: Botswana’s economic structure remains overly dependent on government spending. Until the role of the state is recalibrated from primary economic actor to enabler of private productivity neither diversification nor privatisation will deliver lasting relief.
Ultimately, the diamond debate risks becoming a distraction. Botswana’s challenge is not resource dependence per se, but a governance and fiscal model built on the assumption of perpetual growth to finance permanent commitments. When growth slows, the system strains. When revenues dip, services deteriorate. Until this structural imbalance is addressed, the myth of diamond dependence will continue to obscure the real source of the crisis.