Many African nations that relied on Earth-mined diamonds for it’s economic progress and foreign exchange reserves are experiencing a sharp downswing as global diamond demand stagnated since some time, especially slump in China, and Earth-mined diamond production suffered decline.
Case in point is Botswana, which was pushed back by Russia last year as the world’s biggest diamond producer. In spite of the diamond production in Botswana being operated by Debswana – a JV between De Beers and Government of Botswana, the diamond industry in the country is witnessing a downfall, with possible shaft closures, job losses and stagnating demand on cards.
So much so that Botswana’s Finance Ministry cut its 2015 economic growth forecast by almost 50%, to 2.6%, and also expects the country’s first budget deficit in past 4 years. Besides, the country’s central bank lowered interest rates twice during the year to stimulate spending. Moreover, Botswana is also witnessing other problems including water and power shortages.
As diamonds are running out from the surface and mines are getting deeper, cost of operations has rose significantly resulting in diminished competitiveness of diamond miners. According to Bank of Botswana, the country’s diamond exports dropped 63% in September to USD 173.4 million vis-à-vis last year.
Additionally, diamond prices have also fallen around 17% in past 12 months, according to Bloomberg. This has compounded the problems.
Former De Beers sales consultant Charles Wyndham says “They have just had so much easy money for such a long time… They are perhaps a victim of having all their eggs in one basket.”
To address the economic stagnation, though the official statements suggest increased government spending, Botswana has started to diversify the economy. The downfall of diamonds has made tourism, including wildlife tourism, more important for Botswana.
However, Botswana is not the only victim. Zimbabwe is also facing plethora of problems in its diamond sector. Diamonds exports from Zimbabwe fell by 20% in September since the beginning of the year. Further, the country’s diamond miners and government are on a path of collision over the controversial decision of merging Zimbabwe’s diamond mines. Earlier this year, Rio Tinto completely exited from Zimbabwe by selling its 78% stake in Murowa diamond mine.
Similar cases only signals the downfall of the African diamonds. Also, the issue of conflict diamonds from Africa still persists and consumers are becoming more wary of buying Earth-mined diamonds from Africa. Going by the trends, it is not impossible that the diamond industry in Africa may become an ancient ruin soon.