Botswana’s institutions remain among its most important investment strengths, but disruption in the diamond industry is testing the country’s economic model. This is a central finding for Botswana in the 2026/27 edition of RMB’s Where to Invest in Africa report, which ranks the country 15th among the 31 African economies assessed.
The pressure on Botswana’s investment position is not primarily institutional. The country continues to stand out for political stability, low corruption and economic freedom. Instead, weaker demand for natural diamonds and falling diamond revenues are weighing on growth and employment.
This puts economic diversification at the centre of Botswana’s longer-term investment outlook. The question is whether the country can draw on its institutional strengths to navigate disruption in the diamond market and build a broader foundation for future growth.
“Botswana has one of the most stable democracies in Africa and a sovereign wealth fund that few African economies can match. Its fall in the rankings is not because of institutional issues. It reflects falling diamond revenues, as lab-grown stones have eroded demand for natural diamonds,” says Isaah Mhlanga, chief economist at RMB.
For decades, democratic governance and a functioning sovereign wealth fund have helped Botswana turn diamond wealth into economic stability. But the industry’s continued importance also leaves the country exposed to changes in global demand. The report identifies the rise of lab-grown diamonds as a source of disruption, weakening revenue streams and contributing to job losses and declining GDP over the past two years.
Strong institutions, concentrated exposure
Now in its third consecutive edition using the updated Where to Invest in Africa model, the report compares 31 countries on a like-for-like basis across 2024/25, 2025/26 and 2026/27.
Botswana’s position illustrates the distinction between institutional quality and economic resilience. Strong institutions can help a country withstand shocks, but they cannot eliminate the risks associated with dependence on a single major export industry. When that industry comes under pressure, the consequences can extend to government revenues, employment and economic growth.
The report’s new Resilience and Vulnerability Matrix adds another dimension to the rankings. Resilience refers to the policies, institutions and buffers that help an economy withstand shocks and recover, while vulnerability captures structural exposure, including export concentration and import dependence.
Botswana scores highly on resilience, supported by good governance and market efficiency. These foundations provide the institutional capacity to respond to economic pressure.
However, the matrix also highlights the limits of that resilience. The diamond downturn has affected social development, while trade openness, strategic import requirements and export concentration expose the economy to external shocks.
“Where two economies look equally attractive on a static ranking, the more resilient of the two is, all else equal, the superior destination. More resilient economies surrender less ground when conditions deteriorate, and recover more quickly and from a better position when they improve,” Mhlanga says.
Diversification becomes central to the investment case
Botswana’s challenge is to broaden its productive base as pressure on the diamond industry exposes the risks of economic concentration.
The report identifies constraints that complicate this effort, including connectedness, import concentration, unemployment and income inequality. These reflect the challenges facing a small, landlocked economy with a relatively narrow productive base.
Government efforts to capture more value through local diamond cutting, polishing and trading form part of the response to changes in the market. However, these activities remain tied to the diamond value chain and cannot, on their own, address the broader need to diversify production and exports.
Botswana’s institutional strengths therefore remain important not simply because they support its existing investment proposition, but because they provide a foundation for pursuing new sources of growth. Political stability, good governance, low corruption and economic freedom can support that transition, although diversification will require more than institutional quality alone.
Botswana’s next investment phase
The report does not suggest that resilience eliminates risk or guarantees investment performance. For Botswana, strong institutions offer an advantage, but they do not remove the vulnerabilities associated with dependence on diamonds.
The country enters this period with established institutional foundations, while its next investment phase will depend increasingly on how effectively it responds to changes in the diamond market and expands its economic base.
For investors, the issue is not simply Botswana’s position in a comparative ranking. It is whether the country can use its institutional strengths to reduce its exposure to a single export industry.
As the diamond market changes, diversification is becoming an increasingly important factor in the durability of Botswana’s investment case.
