Diamonds Are Not Forever: Botswana's Status as the One of the World's Most Successful Economies Has Largely Been Built on the Revenues of Its Diamond Mining Industry. Now the Country Wants to Broaden Its Economic Base. (Botswana)

By Ford, Neil | African Business, July 2003 | Go to article overview
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Diamonds Are Not Forever: Botswana's Status as the One of the World's Most Successful Economies Has Largely Been Built on the Revenues of Its Diamond Mining Industry. Now the Country Wants to Broaden Its Economic Base. (Botswana)


Ford, Neil, African Business


Botswana has long been regarded as one of Africa's most successful economies. Prudent fiscal policies, targeted international assistance and the benefits of a diamond industry have all transformed what was one of the poorest countries in Africa.

Since independence in 1966, Botswana has enjoyed the world's highest average annual growth in GDP at around 9%. However, the events of the past couple of years have underlined the country's dependence upon diamond revenues and the government is at last beginning to look to broaden the economic base.

One of the government's main worries centres on the campaign again 'conflict diamonds'. While Botswana's own diamond production cannot be regarded as anything but legitimate, it is feared that the campaign against diamond sales that are used to fund armed conflict around the continent could trigger an overall reduction in demand for African diamonds in general.

Batswana political leaders visiting the UK and elsewhere in the West over the past two years have been eager to make the point that not all African diamonds are so called 'blood diamonds' and that checks should be put in place to ensure that any form of certification does not obstruct the export of legitimately mined stones.

Although Botswana's diamond production rose by 2.1m carats to 28.5m carats last year, government revenues from the industry fell on the back of lower global prices. Revenues in 2002 fell to $1.8bn from $2.3bn the year before, which equates to an average price of $63 a carat, substantially down from the $87 figure recorded in 2001.

Most Batswana mines are managed by Debswana, a joint venture between the government and diamond giant De Beers, but it is somewhat difficult to determine the exact figures paid by De Beers as the company has stopped publishing dollar per carat prices per mine.

Putting the issue of conflict diamonds to one side, the Botswana diamond sector was stung by more bad publicity earlier this year. The UK based campaign group Survival International claimed that the forced removal of thousands of San people from their land last year was not the result of the government's desire to improve their living standards by providing access to education and health services -- as had been claimed -- but rather was an attempt to secure access to the Central Kalahari Game Reserve for diamond prospectors. The government has denied that there is any link between the increase in prospecting in the area and the removal of the San but the country's reputation may have been affected by the claims.

The final blow to the country's diamond industry was dealt by a recent report by Partnership Africa Canada, which has shed doubt upon the benefits of the diamond industry for the bulk of the population. The report admits: "In pure economic terms, diamonds have resulted in Botswana having higher economic growth rates than any other country in the world over the past thirty Years." However, it argues, the country ranks only 126th out of 173 countries on the benchmark UNDP Human Development Index, down from 95th position in 1991 and behind countries such as Swaziland and Equatorial Guinea.

Part of this fall is undoubtedly the result of the impact of HIV/Aids pandemic, which has reduced life expectancy to around 40 years. As well as the obvious horrifying social impact and human loss of HIV/Aids, the economic impact upon Botswana is huge.

The country possibly has the highest rate of HIV infection in the world: according to the United Nations Programme on AIDS over 35% of the adult population carry the virus. However, the report argues: "A major reason for Botswana's low ranking is the high percentage of the population living below the poverty line, along with the country's highly skewed income distribution."

The report concludes by disputing the notion of trickle down development. While diamonds accounted for 79% of exports by value and 33% of GDP in 2000, the industry provided employment for just 6,000 Batswana nationals.

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Diamonds Are Not Forever: Botswana's Status as the One of the World's Most Successful Economies Has Largely Been Built on the Revenues of Its Diamond Mining Industry. Now the Country Wants to Broaden Its Economic Base. (Botswana)
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