- Says De Beers’ split from Anglo-American may affect short-term investment in Botswana
https://businessweekly.co.bw/news/nothing-can-replace-diamonds
Botswana’s renowned natural diamond industry is facing growing competition from an unexpected source: lab-grown diamonds.
As the global market for synthetic gems expands, Botswana’s traditional mining sector is contending with the increasing popularity of these alternatives, which threatens a key pillar of the country’s economy, according to a report by Business Monitor International (BMI).
Botswana, the second-largest diamond producer by value, has long reaped the benefits of its natural diamond reserves, which account for roughly one-fifth of its GDP. However, lab-grown diamonds, which mimic the physical and chemical properties of natural stones, have gained momentum in recent years due to their ethical and environmental appeal, as well as their lower cost, BMI warns.
“Although lab-grown stones can’t yet meet global demand, they are triggering a seismic market repricing, to the detriment of Botswana’s traditional mining industry. While demand is expected to rebound in H2 2024, lab-grown diamonds will likely cap future production. Consequently, weak export growth will reduce net exports by 1.0 percentage points, down from 1.3 pp in 2023,” BMI stated.
The report adds, “Should competitive pressure from lab-grown diamonds keep the price of natural stones near current lows, we expect miners to halt production to protect profit margins. However, if private consumption and investment exceed expectations due to higher sensitivity to low inflation, we could see growth surpass our current forecast. Additionally, De Beers’ recent breakaway from Anglo-American raises questions about the diamond giant’s future ownership, which may impact short-term investment in Botswana.”
BMI highlights that falling rough diamond prices reflect structural challenges in the market. Retailers overstocked during the pandemic, assuming prices would continue to rise. However, inflation in the US and the housing market collapse in China in 2023 dampened demand, leading to a surplus and historic price lows. Meanwhile, the rising demand for lab-grown diamonds, which are cheaper and virtually indistinguishable from natural stones, has intensified competition in a previously monopolised market.
Lab-grown diamonds are produced in controlled environments using methods such as High-Pressure High Temperature (HPHT) and Chemical Vapor Deposition (CVD), creating gems that are almost identical to their natural counterparts. With this technology advancing rapidly, lab-grown diamonds have improved in quality, size, and color—factors that have significantly boosted their appeal.
Botswana’s natural diamond industry, led by Debswana—a partnership between the government of Botswana and De Beers—remains a crucial pillar of the nation’s economy. However, as lab-grown diamonds capture a larger global market share, the impact is being felt within Botswana.
Recent data indicates that lab-grown diamonds are making inroads into local markets, attracting younger, environmentally-conscious consumers and luxury brands seeking to capitalise on their ethical appeal. This shift has raised concerns about the future of Botswana’s traditional diamond mining industry.
‘Nothing can replace diamonds’ – The Business Weekly & Review
