In his maiden State of the Nation Address (SONA) last week speech, President Duma Boko shared his vision of implementing the decade-old song of moving the economy away from dependence on diamonds. “Botswana’s reliance on diamond revenues has been our strength, but it has also made us vulnerable,” Boko said in the televised address. “The decline in diamond revenues by over 60% in recent years is a clear signal that we can no longer afford to depend on a single commodity,” he added. Economists at economic consultancy firm, Econsult, in their second quarter review sounded alarms for Botswana’s economy as diamond sales continue to plummet.
According to the economists, the deepening downswing in the diamond market is raising questions whether the trend is short-term market turbulence or a long-term market disruption that will mark the world’s gradual move away from natural diamonds. “A critical question from a policy point of view is whether the current set of problems afflicting the diamond market is adjudged to be the result of short-term volatility or long-term structural change. “If it is short-term volatility, then accumulated financial buffers can be used to smooth and offset the broader macroeconomic impact,” said the economists led by former Deputy Governor of the Bank of Botswana, Dr Keith Jefferis. Diamonds, the economy’s single most important commodity, have been in a protracted downturn stretching back to the third quarter of last year. The diamond downturn has been the worst in at least five years, driven by underlying factors such as uncertainties in the crucial United States market, a surge in the popularity of lab-growns, and the lower-than-expected recovery in China. Another factor was the distaste for natural diamonds some consumers felt as sanctioned Russian stones continued trading in the market. The slump manifested in higher inventory levels of natural diamonds at the retail end, with the oversupply moving to the midstream and pressurising the cutting and polishing firms, mainly based in India. These firms have since asked the upstream miners such as Debswana to reduce their production and allow demand to recover elsewhere in the diamond pipeline.
