The Brilliance of Botswana
Past, present and future of the country’s relationship with diamonds
As one of the largest producers of gem-quality diamonds in the world, Botswana is an African nation that is rich in both cultural and natural resources. From its beginnings as a British colony to its current role as one of the global leaders of the diamond trade, the country represents a success story of how mineral resources can be harnessed to drive modern economic growth.
Located near the southern tip of Africa, Botswana first emerged in 1885 as a British colony called the Bechuanaland Protectorate. By the late 1950s and early ‘60s, however, the people of Bechuanaland began pressing for independence. Fortunately for them, the colony had not proved overly profitable to Britain; at the time, it was one of the poorest in the world, with an average per capita GDP of US$84.
When the colony became the country of Botswana in 1966, however — and discovered diamonds less than a year later — all of that would quickly change. Indeed, the discovery in the north-central part of the country created a diamond rush that facilitated Botswana’s rise from abject poverty to a valuable leader in the gem industry.
Botswana has shot towards economic growth over the last 50 years, averaging a rate of roughly 5 percent per year — one of the longest booms in world history. Botswana also boasts eight mines, including the wealthiest single diamond mine in the world: the Jwaneng Mine, which produces about 15 percent of the world’s diamonds by value. And, in 2015, out of the Karowe Mine in northern Botswana emerged the world’s second-largest stone: the 1,111-carat Lesedi La Rona (meaning “Our Light”), sold for US$53 million. In 2017 alone, the country produced around 23 million carats worth of the jewels, valued at $3.3 billion.
De Beers and Botswana Relationship
In many ways, DeBeers represents the face of diamonds. And for a long time, the company held a near monopoly on the diamond trade, until new laws and regulations put a stop to that in the late 90's and early 2000's
It was De Beers, however, that helped create Botswana’s first diamond mine at Orapa, and it was the company’s team that actually first discovered the gems.
Prior to Botswana’s independence, in 1954, De Beers began prospecting for the minerals, considering that
no survey had been completed of the region before that point. The only other entity prospecting for diamonds in the area was the Central African Selection Trust. Although CAST found a few small gems along the Motloutse River in the country, it concluded that they originated upstream, so the company stopped searching altogether.
De Beers picked up where CAST left off, and its team found a few other stones along the same river. They started searching for the source, which eventually led them to discover kimberlites (rocks containing diamonds) in the Orapa region.
What’s most notable, though, is that the company decided to work with the newly formed Botswana government, rather than exploit the area for its own means. From the beginning, the country and the company have shared a 50/50 split in the diamond operation and profits; Debswana is the business entity that controls the diamond operation in Botswana, and both De Beers and the local government hold equal shares of it.
De Beers even moved its sorting and valuing operation, known as the Diamond Trading Corporation, to Botswana from London in 2013. The move not only made sense from a logistical standpoint, but it also shifted the center of the diamond world from Europe to Africa. Indeed, for hundreds of years, rough stones from various parts of the globe were shipped to London, where they were sorted and valued and cut. Now, however, all of that is done in Botswana — providing a major boon to the country.
No longer would locals be employed solely in the mining operation, but now they could work other jobs in valuation and sorting. These days, the Diamond Trading Company is one of the largest employers in Botswana. As with Debswana, the DTC is another 50/50 joint venture between De Beers and the country’s government. This means that mining, sorting and valuation is all handled in a single place, making it a rival to other diamond trading hubs of the world. better position for working with other companies. One component of the deal is that the DTC allows Botswana to
sell 15 percent of its rough diamonds independently, which enables the country to entice other businesses to set up shop in the region.
The long-term goal of this move was to provide more employment opportunities for Botswana’s roughly two million residents, as well as to create a global hub for diamond sorting and valuation in the capital, Gaborone. As more companies move to the area, they can bring additional jobs and revenue for the country’s government and banking system.
Though success has been somewhat limited thus far, Gaborone and the surrounding country continue to modernize and move forward, though perhaps at a slower pace than initially anticipated. But as the diamond industry changes, the impacts will hit Botswana more substantially than other producing countries.
So far, the story of Botswana’s relationship with diamonds has been overwhelmingly positive. Unlike other
African nations that were plundered or brought into violent conflict over these precious stones, Botswana has become a symbol of peace and progress throughout the continent. Since the beginning, the diamond trade has been very kind to the country, and it seems as though that prosperity is reaching beyond merely those at the top.
According to Transparency International, a global watchdog group that ranks countries by corruption (or perception of corruption), Botswana lies at number 35 (the United States is 18, by comparison) — meaning it is the least-corrupt country in sub-Saharan Africa. For a nation that brings in so much wealth, that’s an almost astonishing rank.
Since Botswana first gained independence, its average per capita has risen from $84 to over $7,500. When diamonds were first discovered, the government realized that it had an opportunity and an obligation to make that money work for the people. Much of it was used for infrastructure and social programs, which have become a hallmark of Botswana’s culture.
Today, diamonds account for 76 percent of export revenue and 33 percent of total GDP. Roughly 45 percent of the government’s budget comes from the diamond industry, and yet the government knows an expiration date on the diamonds’ success exists. Some estimates claim that the mines may only produce at these levels for another two to three decades at most.
The country hopes to revitalize itself in a few other areas, namely tourism and technology.
Safari tours are popular in the country, and the government is trying to make them more accessible. In 2015, Botswana received about 1.6 million tourists, which earned approximately $888 million. Other industrial exports include copper, coal and soda ash, although they, of course, currently pale in comparison next to diamonds. Still, the government is hoping that it can diversify the economy fast enough to offset any future diamond decline.
Till then, Botswana’s success right now rises and falls with the precious little stones. Diamonds are intrinsically tied to the nation’s history and identity, but it will need another monumental shift to keep the future looking bright.