As diamond mines decline, Botswana searches for new way to shine
Botswana's discovery of its diamond wealth in the 1960s fueled dramatic economic and social gains. Now, the country is hoping to be equally successful in adapting to a near future in which the mines run dry.
Gaborone, Botswana — On April 19, 1967, a 24-year-old South African geologist named Manfred Marx stepped out of a pit in a dusty stretch of central Botswana clutching a rock that would irreversibly alter the country’s future.
In his hand was a chunk of kimberlite — the volcanic rock that hosts diamonds — the first major clue that beneath the newly born country’s parched red soil lay glittering shards valuable enough to eventually make Botswana the leading diamond producer in the world.
In the nearly five decades since that discovery, Botswana has become an anomaly in modern African history: the rare nation that has transformed its massive wealth into equally staggering social gains, all the while avoiding the corruption and political disarray that have often torpedoed growth in the continent's mineral-rich corners.
But if diamonds built Botswana, they now pose a threat of equally existential proportions: Barring any new discoveries, geological experts say in 20 to 30 years the precious resource will basically be gone.
That pivot will be nothing short of monumental in a country that relies on diamonds for more than 80 percent of exports and more than 50 percent of all government revenue. Their loss will cut deeply into income that currently bankrolls social services for a population where unemployment hovers near 20 percent and nearly 1 in 4 people is HIV-positive (only nearby Swaziland has a higher prevalence rate).
“But the economy of the future will require a whole different style of policymaking from government and a massive modernization of the private sector,” Mr. Jefferis says. “That’s a fundamental shift that’s proving very difficult.”
Banks and bovines hint at change
The streets of Botswana’s boxy capital city, Gaborone, are littered with clues about stuttering attempts to begin realigning Botswana's economy.
A cluster of high-rise banks near the city center reflects the country’s perhaps outsized ambition to position itself as an alternative to Johannesburg for financial services in Africa. In the nearby offices of Botswana Tourism, meanwhile, glossy travel magazines describe the high-end eco-safaris and adventure tourism available in the pristine north — an industry that draws in nearly $400 million per year.
“We are hoping and praying that our diamonds don’t go extinct, but it’s an inevitable thing … so you want to have a fallback plan,” says Keitumetse Setlang, communications manager for Botswana Tourism.
Even the groups of cattle huddled in the shade of trees or sauntering across roads in Gaborone are a probable piece of the puzzle. Botswana is one of the European Union’s largest sources of beef.
Still, one major answer to what Botswana will do after diamonds may well be … diamonds.
“Even when diamonds run out, we can still offer downstream diamond services to the world,” says Kago Mmopi, communications manager for the Diamond Trading Company of Botswana. “Look at India — they don’t have a single diamond but they have one of the largest diamond operations in the world.”
Diamonds, after all, don’t emerge from the ground as the glittering gems. The gritty shards of rock must be cut, polished, and set, then sold — operations that have traditionally happened far from the countries where they are mined.
A deal with De Beers
But beginning in 2006, Botswana’s government struck a series of deals with De Beers – the diamond magnate with which it jointly owns the major mining house, Debswana – that would upend that order.
Its biggest coup was an agreement to move all of De Beers’ sales operations from London to a gleaming new office complex in northern Gaborone, where some $6 billion in diamond sales now takes place annually.
Since October 2013, major diamond sales — what De Beers calls “sights” — have happened here every five weeks, bringing with them a troupe of high-end businesspeople who also spend in the city’s luxury hotels, restaurants, and shopping malls. And thousands of Botswana citizens — known as Batswana — have been trained to sort, value, and polish the diamonds for those sales.
But even if Botswana can position itself as a diamond production hub, minerals remain a particularly volatile source of revenue. Between 2008 and 2009, for instance, as the world descended into a massive recession, the country’s diamond exports fell by half, forcing government to scale back on social programs and take out huge loans.
“The problem is that diamonds are a luxury good — no consumer has to have them, and we saw that very clearly during the global economic downturn,” Mmopi says. “But even though they’re a luxury, here in Botswana diamonds are also a need.”