Diamond Demand Slump Threatens Botswana's Economy

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00:00Botswana is losing its shine. The diamond-fueled boom that made it one of Africa's richest nations

00:06is faltering as lab-grown gems eat into the market for natural diamonds. For more, we're

00:11joined by Bloomberg's Matthew Hill. Matthew, well, you know, up until recently, Botswana has

00:17always been held up as an African success story. What has gone wrong? Was the country simply too

00:23reliant on this single resource? That's a really important point. People have always

00:31pointed to Botswana as being an African country that has used its natural resource wealth to

00:37develop the nation responsibly, to educate its people and provide better services. But suddenly

00:44in Botswana, things have drastically changed, as you say, because the diamond market has

00:50changed so drastically with lab-grown gems coming onto the scene and having a really serious

00:57impact on prices. Now, Botswana depends on diamonds for about 80% of its exports, about 33% or a

01:08third of government revenues, and the sector makes up for about a quarter of the total economy.

01:15So when there's pain in that market, the country rarely feels it. Because of that, we've seen debt

01:23levels in Botswana as the country resorts to borrowing to balance its budget, to pay for its budget,

01:30nearly doubling just in the space of three years. So the impact has been really, really drastic.

01:38Yeah. And is it specific to Botswana? Is it having an impact on other countries as well,

01:47that rely on revenues from these natural stones?

01:52Certainly. But you'll be hard pressed to find an economy in the world that is as heavily reliant on

02:01diamonds as Botswana is. 80% of its exports, for example. So, I mean, there are a group of countries,

02:09including Botswana, Angola is another one, that have clubbed together to pool their resources. And

02:16they've pledged to spend 1% of their revenues on promoting natural diamonds that are produced in

02:23their countries to try to win consumers back, try to convince them that it's worthwhile paying a much

02:30higher premium for natural diamonds over one that is grown in a lab. But those efforts are probably

02:38more longer term and may take some time to pay off if they do at all.