Natural diamond companies, such as the De Beers Group, face mounting pressure to preserve the commercial value and demand for natural diamonds. Failure to do so could see the lab-grown diamond industry erode a larger share of revenue than currently anticipated, posing significant risks to the nation’s economy.
Botswana’s reliance on traditional diamond mining makes the country particularly vulnerable. A sustained decline in demand for natural diamonds could derail economic diversification efforts, dragging down the forecasted growth rate.
Looking ahead to 2025, Batisani Mandlebe, Senior Manager of Investment and Trading at Absa Bank Botswana told this publication that the diamond market remains uncertain, with recovery relying heavily on the recovery of major diamond-consuming markets, primarily the US and China. However, he cautioned that the recovery will also depend on how quickly the oversupply in the midstream diamond market can be reduced.
“Overall, some recovery is expected with a U-shaped recovery, rather than the V-shaped one initially anticipated over the medium term,” he said.
The challenging circumstances in the diamond industry have prompted Debswana to develop a new strategy to align its production with demand. Mandlebe further noted that the anticipated rebound in 2025 will likely be driven by the diamond industry, bolstered by a global recovery in key diamond export markets and De Beers’ decision to halt the production of synthetic diamonds for its Lightbox consumer brand.
Research firm BMI cautioned: “Risks are weighed to the downside, given that stronger-than-expected competitive pressure from the lab-grown diamond industry could keep pushing natural stone prices lower”.
Structural headwinds in the global diamond market are expected to limit Botswana’s economic recovery in 2025. Competitive pressure from lab-grown diamonds is expected to intensify in 2025, threatening the profitability of Botswana’s capital-intensive traditional mining industry.
Lab-Grown Diamonds May Push Prices Down
Natural diamond prices are projected to remain low as miners reduce production to constrain supply growth and stabilise prices. However, advances in lab-grown diamond technology continue to drive down costs, making it unlikely that demand for natural diamonds will fully recover.
China, previously the world’s second-largest diamond consumer, saw diamond jewellery sales fall by as much as 50 percent in 2024. “Slowing economic growth in consumption hubs such as the United States and Mainland China will present headwinds to luxury goods demand, including diamonds,” BMI stated.
The De Beers Group, the world’s largest diamond producer by revenue, faces significant challenges. The Financial Times reported that De Beers has accumulated its largest diamond stockpile since the 2008 financial crisis, with inventory valued at approximately $2 billion for much of 2024.
“It’s been a bad year for rough diamond sales,” De Beers CEO Al Cook acknowledged.
Marketing Efforts
De Beers has turned to strong marketing for natural polished diamonds. Analysts emphasise the need for the natural diamond industry to refocus its marketing efforts to rekindle consumer desire for natural stones. Industry leaders like De Beers are expected to play a pivotal role in shaping the future of the market.
De Beers recently partnered with India’s Gem & Jewellery Export Promotion Council (GJEPC) to strengthen the natural diamond narrative in the Indian market. India, now the world’s second-largest market for diamond jewellery, is projected to grow its gem and jewellery sector from $85 billion to $130 billion by 2030.
“Through this collaboration, we aim to unlock opportunities for increased consumer demand for all types of natural diamond jewellery, including bridal and everyday wear,” said Sandrine Conseiller, CEO of De Beers Brands.
Other marketing efforts include the “Worth the Wait” campaign, targeted at younger consumers, and the “Forever Present” campaign, designed to reinforce the desirability of natural diamonds during the US holiday season.
To further support global marketing efforts, the diamond midstream industry, in collaboration with the Natural Diamond Council (NDC), has pledged to raise $65 million annually for generic diamond marketing. This initiative comes in addition to the NDC’s current $35 million budget, which is funded by De Beers and other mining companies.
BMI has warned that if natural diamond companies like De Beers fail to protect the commercial value and demand for natural diamonds, the lab-grown industry could capture more of the market’s revenue than expected, to the detriment of Botswana’s economy, which relies heavily on traditional mining.
BMI projected that such a scenario would result in growth in 2025 falling below current forecasts, as the country struggles to diversify away from mining quickly enough to mitigate the effects of a prolonged decline in diamond demand.
Non-Mining Sector To Pick Up The Slack
As industry leaders bolster marketing efforts to sustain natural diamond demand, the government’s task would be to accelerate diversification efforts to mitigate the impact of declining revenues from traditional diamond mining.
Mandlebe told The Business Weekly & Review that the non-mining sector is expected to cushion the economy somewhat from a steeper decline in 2024. He believes the non-mining sector will play a significant role in Botswana’s economic performance in 2025, reflecting the impact of government policies and programs aimed at diversifying the domestic economy.
Among the sectors forecasted to perform positively in 2025 are agriculture (due to good rains), tourism, and construction.
BMI expects real GDP growth to show a modest recovery in 2025, following a full-year contraction in 2024. The organisation forecasts that Botswana’s economy will contract by 2.8 percent in 2024, before growing by 3.8 percent in 2025, after a 4.3 percent year-on-year contraction in Q3 2024.
Private consumption is expected to contribute 1.6 percentage points to real GDP growth, up from 1.1 percentage points in 2024. Fixed investment is also projected to remain robust, driven by government efforts to diversify the economy.
However, government consumption is likely to remain constrained due to depressed mineral revenues. The Ministry of Finance has announced austerity measures, including reducing the civil service wage bill and cutting grants and subventions to curb spending and boost savings.
Budget Expectations
As the Minister of Finance Gaolathe Ndaba prepares to deliver the budget speech next month, which will be the first under the new government, Mandlebe anticipates that the government will implement measures in the 2025/2026 budget aimed at addressing the current unfavourable fiscal position. These measures are expected to focus on managing unsustainable budget deficits, improving revenue collection, reducing revenue leakage, and identifying and eliminating inefficiencies.
“Moreover, we expect the government to continue with the implementation of major infrastructure projects in areas such as water, energy, and transport, as these are necessary conditions for stimulating domestic economic growth,” Mandlebe said. “Further, we expect the government to continue its focus on efforts to stimulate revenue growth from alternative sources (non-mineral sectors).”
As the new government works on developing the NDP 12 and the 2025/26 Budget Speech, Mandlebe noted that these documents will outline the government’s areas of focus, which will, in turn, determine the funding priorities for the short to medium term.
“Our expectations are that government funding will be guided by the new government’s commitments to implementing national priorities and strategic objectives,” Mandlebe said. “Therefore, the focus will be on improving the quality of life, transforming the economy, and improving the education and healthcare systems.”
He emphasised that there will be a continued focus on prioritising sectors such as tourism, agriculture, and manufacturing, which the previous government aimed to promote for economic diversification and sustainable job creation. Modernising and transforming infrastructure will also be a key focus to enhance the country’s competitiveness and efficiency.
Inflation Projections
Despite the challenges, Botswana may find some relief in lower energy prices and moderate inflation in 2025. These factors are expected to cushion households, supporting private consumption growth.
“Lower energy prices will keep inflation moderate, which should mitigate the loss of household purchasing power,” BMI noted. Inflation is forecast to average 3.8 percent in 2025, below the 2014–2023 average of 4.6 percent and within the Bank of Botswana’s target range of 3.0–6.0 percent.
Domestic inflation has been under downward pressure in 2024, which Mandlebe attributed to a faster-than-expected deceleration in fuel prices, causing headline inflation to breach the lower bound of the Bank of Botswana’s target range.
In 2025, Mandlebe expects inflation to remain within the BoB’s objective range of 3–6 percent, around the midpoint of that range.
“It is worth noting, however, that inflation could be lower if the expected recovery in both the domestic and global economies remains sluggish and if international oil prices drop further beyond current forecasts,” Mandlebe explained.
“However, there are upside risks to this inflation forecast, such as changes in administrative prices by the government and negative external developments, including higher-than-expected international commodity prices for oil.”
In line with domestic low inflation expectations for 2025, Mandlebe predicted that the monetary policy rate would likely remain unchanged at 1.90 percent, adding that liquidity supply in the economy is one of the major determinants of interest rates.