Last year’s performance is the worst since COVID-19 when sales dropped to P23.7 billion. However, in terms of percentage drop, the 46% fall in 2024 appears to be amongst the steepest on record.
Debswana accounts for more than 95% of the country’s diamond sales and is a major contributor to both the budget and liquidity in the financial markets. The diamond group, owned equally by government and De Beers, sells the bulk of its production to the De Beers ecosystem and 25% to the state-owned diamond trader, Okavango Diamond Company.
Preliminary Bank of Botswana figures show that monthly sales at Debswana sank to as low as P24.4 million in January last year and peaked at P4.5 billion in March.
The poor performance of natural diamonds, driven in large part by retail market disruptions, is behind forecasts that the 2024–2025 budget will carry a record P18.7 billion deficit by the time the financial year ends on March 31.
The downturn has also impacted the banking sector as Debswana is a major contributor of liquidity and foreign currency. The central bank has responded by reducing the prime reserve ratio in order to free up more cash to banks, whilst also raising the trading margin used for foreign exchange transactions to banks. The latter move, announced in January, is designed to push banks to source foreign currency amongst themselves, rather than defaulting to the BoB whose levels are strained due to the diamond downturn.
Whilst the diamond figures made for difficult reading this week, De Beers CEO, Al Cook, told Bloomberg in Cape Town, South Africa that the market for the precious stones appeared to be improving. The CEO was quoted as saying demand for diamond jewellery rose by about eight percent year on year in the United States, the world’s largest market for diamonds.
“We see growth, the regrowth of Chinese demand being a longer-term story,” Cook was quoted as saying by Bloomberg. “The good news is that India has taken over where China was.”
Government is banking on the recovery of diamonds this year to prop up the new administration’s economic plans. The recovery is also desperately required to slow down debt fundraising and restore fiscal stability, before accelerating reforms required to transform the economy.
Speaking at a media briefing in Cape Town on Monday, Minerals and Energy minister, Bogolo Kenewendo, said the finalisation of talks between government and De Beers for a new sales deal would inject confidence in the broader diamond market.
She added that the development would also allow government and other players in the industry to move towards addressing the structural challenges facing natural diamonds.
“We are hoping that the announcement of the conclusion of negotiations brings us not only to the end but the beginning of a working relationship where we can start to focus on developmental areas that are needed in this diamond industry to try and resuscitate and build market confidence. “We also need to ensure that we are not building for the past industry, but rebuilding around the structural changes that this industry is currently facing,” she said.
