Keypoints:
- Diamond inventories nearly double official ceiling
- Weak global demand drags prices and revenues
- Government warns slowdown may persist long-term
BOTSWANA is holding nearly double its permitted diamond stockpile as weak global prices and intensifying competition from lab-grown stones continue to curb demand, raising fresh concerns about the country’s economic outlook.
The southern African nation, the world’s second-largest diamond producer after Russia, warned that the growing glut is likely to weigh on growth, government revenues and fiscal stability at a time when public finances are already under strain.
Diamonds account for about a third of Botswana’s gross domestic product and remain the backbone of state revenue. But a prolonged global downturn has left millions of unsold carats piling up, exposing the economy to slower growth, declining reserves and the risk of a structural shift away from natural stones.
According to the Finance Ministry’s 2026/27 Budget Strategy Paper published on Tuesday, Botswana held roughly 12 million carats of diamonds at the end of December — far above the government’s official ceiling of 6.5 million carats.
The ministry said the elevated inventory level is likely to constrain production in the near term.
‘This suggests that, over the short term, production is expected to remain broadly unchanged, until the level of inventories is drawn down closer to minimum allowable levels, creating room for additional production,’ the paper said.
Demand weakens in key markets
The slump has been driven largely by softer demand in the United States and China, the world’s two biggest diamond markets. Retailers in both countries have reduced orders as consumers increasingly turn to cheaper lab-grown alternatives.
Once viewed as a niche product, lab-grown diamonds have gained mainstream acceptance, particularly among younger buyers attracted by lower prices and sustainability branding. The shift has eroded demand for natural stones and placed sustained pressure on global prices.
Botswana’s finance ministry warned that trade policy risks could deepen the downturn. A 15 percent tariff imposed by the United States, alongside higher duties in other major markets such as India, threatens to prolong weak prices and further compress industry margins.
The ministry described the situation as ‘a source of concern’ for the economy.
Prices slide sharply
Government projections show rough diamonds are expected to average $99.3 per carat, down from $128.8 in 2024 — a steep decline for a sector long accustomed to price stability.
‘If prices fall below this level in the remaining months of this financial year, this could reduce mineral revenues than what is currently projected,’ the paper said.
Mineral revenues are forecast at 10.3 bn pula, or about $770 million, in the 2025/26 financial year, far below the long-term average of 25.3 bn pula.
The ministry warned the decline may not be temporary.
‘The shortfall is likely to persist over the medium to long term with a possibility of a non-recovery,’ it said.
Economic outlook deteriorates
The policy paper cautioned that the prolonged weakness in the global diamond market ‘poses a significant threat’ to Botswana’s growth prospects.
The economy is projected to contract by almost one percent in 2025, following a three-percent decline the previous year — marking one of the most difficult periods since diamonds were discovered in the 1960s.
‘Compounding this situation is the decline in foreign reserves and Government savings, which are further constraining fiscal space and exchange rate policy options,’ the ministry said.
Botswana, nearly 70 percent desert, transformed itself over decades into one of Africa’s most stable economies after diamonds lifted the country out of poverty. That model is now being tested by fundamental changes in the global gem industry.
De Beers uncertainty adds pressure
Botswana is among several African governments and regional investors seeking a stake in De Beers, the world’s leading diamond company and a cornerstone of the country’s mining sector.
Mining giant Anglo American has announced plans to divest from De Beers as the long-dominant producer grapples with falling demand, price weakness and shifting consumer preferences.
For Botswana, the challenge is no longer cyclical alone. Until global demand recovers or inventories fall significantly, the diamond-dependent economy faces a prolonged period of uncertainty — with limited alternatives ready to fill the gap.
