Gazing into Botswana’s economic crystal ball, Moody’s sees little sparkle left in diamonds—and a long road ahead before recovery takes hold.
The global credit ratings agency, which recently downgraded the country’s long- and short-term issuer ratings from A3 to Baa1 and maintained a negative outlook, says Botswana’s best hope lies in its ambitious economic transformation programme.
The Botswana Economic Transformation Programme (BETP), championed by Vice President Ndaba Gaolathe, aims to reduce the country’s dependence on diamonds and volatile Southern African Customs Union (SACU) revenues by building a more dynamic private sector and deepening export and fiscal diversification.
Moody’s argues that successful implementation of the plan could eventually stabilise the sovereign rating.
Betting on a new growth model
According to documents before parliament, the BETP sets out a sweeping industrial agenda across six priority sectors—tourism, agriculture, manufacturing, financial services and digitalisation, energy and mining, and infrastructure—alongside three social pillars: healthcare, education, and social protection.
From more than 6,900 project proposals, 186 initiatives were selected to drive some P514 billion in cumulative investments over the next decade. Around 60 are deemed “investment-ready,” including a dairy value addition hub, a Moringa-based agriculture cluster, an expansion of Air Botswana’s cargo business, and an IV fluids manufacturing plant, according to the programme.
Authorities estimate that these projects could generate over half a million jobs and lift gross national income per capita to at least US$15,730 by 2036. Yet execution will test Botswana’s administrative machinery—long criticised for slow delivery and weak coordination across ministries.
Shinning bright like a ….
For decades, Botswana’s prosperity has glittered under the light of its diamonds. But that reliance is now a vulnerability. Diamond output plunged 43 per cent in the second quarter of 2025, according to Statistics Botswana, reflecting production cutbacks amid subdued global demand. De Beers reported a similar decline, citing maintenance shutdowns at Orapa and output curbs at Letlhakane.
Paradoxically, exports rose 3 percent in June, driven by a rush to ship high-value stones to the United States before new tariffs took effect. When speaking at the Bifm Breakfast Seminar recently, Economist Dr. Keith Jefferis said producers are prioritising top-end gems that still fetch premium prices even as lower-end stones struggle against cheaper lab-grown competitors, which now account for roughly half the bridal jewellery market by volume.
“The short-term sales bump is unlikely to last,” Jefferis warned. “Large inventories already sitting in the U.S. could dampen demand for the rest of the year.”
Structural, not cyclical
Moody’s is sceptical that a diamond rebound will rescue Botswana’s fiscal fortunes. “Cyclical improvement alone will not create upward rating pressure,” the agency said, noting that the sector’s downturn appears increasingly structural.
Absa Botswana managing director Keabetswe Pheko-Moshagane previously put it bluntly: Even if diamonds recover, Botswana won’t earn what it once did. If we used to make P10, we’ll now make about P6.
“You’ve got to look at the economy’s changes and ask—to what extent are they structural, and to what extent are they cyclical?” she said during the bank’s results presentation. Her conclusion was clear: “We can agree that many of the elements are structural.”
“The diamonds, even if they recover, they will never recover to the values and volumes we used to enjoy,” Pheko-Moshagane said.
The diamond market recovered strongly after COVID-19 between 2021 and 2022, but it has been contracting since mid-2023. Jefferis explained that the slowdown is being driven by a shift toward lab-grown diamonds—particularly in the US market, where they are about 75 percent cheaper—alongside a weak post-COVID recovery in China, a global move away from conspicuous consumption, sanctions on Russian diamonds linked to traceability concerns, and changing consumer tastes influenced by growing interest in sustainability.
“It increasingly likely that this market downturn is structural rather than cyclical with no recovery in sight,” he said.
The country’s economy has grown at an average of just 2.6 per cent over the past decade—a pace too slow to absorb youth unemployment or sustain fiscal buffers built during the diamond boom.
Diamonds traditionally account for around 80 percent of exports and 30-35 percent of Government Revenues.
Moody’s noted that the continued weakness in the diamond sector makes it difficult to replace as a key engine of economic activity and foreign exchange earnings. Jefferis has similarly argued that while no single commodity can take the place of diamonds as a revenue source, a collective mix of sectors could potentially fill the gap.
He said that Botswana must now design a new policy response that sees transformation not as a slogan but as a survival strategy. “This demands a different policy response.”
Reform fatigue
Moody’s notes that progress under Botswana’s new National Development Plan 12 has been “slow and uneven,” hindered by weak inter-ministerial coordination and resistance from vested interests. Efforts to reform state-owned enterprises, digitise government services, and diversify exports remain patchy, it said.
“Fiscal pressures further constrain the government’s capacity to invest in high-return projects,” the agency warned. A credible track record of fiscal consolidation and improved domestic credit access, it added, could help stabilise the outlook.
“A further deterioration in Botswana’s fiscal and debt metrics beyond our current expectations, a structurally weaker medium-term growth outlook, and continued delays in policies to address the country’s narrow economic, fiscal, and export base would increase the risk of another ratings downgrade,” Moodys warned. “Additional signs of vulnerability—such as an increase in the government cost of borrowings, and public debt rising more rapidly than we currently expect, or a continued decline in foreign exchange reserves —would further undermine creditworthiness and could trigger a downgrade.”
For now, the ratings firm believes Botswana’s recovery depends on how swiftly it can turn its transformation blueprint into action—and whether policymakers can finally deliver growth that outlasts the shine of diamonds.
