Lab-grown alternatives crush world's only diamond economy

Telegraph

10-05-2025

When Botswana last year unveiled the second-largest diamond ever excavated, the country's now former president was quick to pose with the fist-sized gem.
Mokgweetsi Masisi no doubt hoped some sparkle from the 2,492-carat stone would rub off on his beleaguered administration and the mining industry that keeps Botswana afloat.
The small southern African nation is more dependent than any other country on diamonds, which make up a third of revenue and the majority of exports.
Botswana has been particularly badly hit by a dramatic slump in demand, which has blown a hole in the finances of one of Africa 's richest and most stable countries.
Slowing business in China and the hangover from a pandemic spending splurge have both knocked prices, but worryingly diamond miners more than anything else has seen the dramatic rise of laboratory-grown stones.
These artificially made gems are chemically identical to natural diamonds, and can only be told apart by expert testing.
Yet they are grown in a matter of days in laboratories, rather than formed over geological ages deep in the earth.
As a result, they are a fraction of the price, allowing consumers to buy diamond jewellery for less, or get a much bigger stone for the same money.
Advocates also argue they are more ethical, because they avoid the environmental and human rights issues that have at times haunted the mining industry.
While natural stones still command a higher price, the cost of each one has tumbled and laboratory-made stones have taken a big chunk of the market.By last year, as many as 45 per cent of engagement rings sold in America were set with lab-grown diamonds.
The US retail price of a one-carat natural diamond has fallen by 32 per cent to £3,480 ($4,618) since the peak in May 2022, according to Tenoris, which tracks prices.
The retail price of a similar lab-grown diamond has fallen 75 per cent since the start of 2020, to £625 ($828).
Paul Zimnisky, an expert on the market, said: 'I wager there have been three major factors that have subdued the diamond market over the last three years. The more widespread distribution of man-made diamonds is one of them.
'The other two are: a severe luxury recession in China and an overall global hangover from boom years in 2021 and 2022, where people bought enough diamonds for a while.'
All this has put pressure on Botswana, and the impact of the slump spurred voters to oust Mr Masisi's government in October 2024.
Ndaba Gaolathe, the new vice president and finance minister, has now warned of deep spending cuts and said the government is preparing to make 'drastic' fiscal adjustments to stay afloat.
'The first thing we need to do, obviously, is to live within our means,' he said late last month.
'That means cutting spending — doing away with what we believe is some of the fat.'
Botswana has tried to diversify its economy so it is less reliant on diamonds, but has a long way to go.
Zoë McCathie, a country risk analyst at Signal Risk, said: 'Botswana's economic position will remain subdued for as long as the diamond slump continues.
'Dependence on diamonds will also be a longer-term economic headwind for the country.'
'Going forwards, the new government's ability to diversify the economy and facilitate recovery in the diamond sector will be essential for retaining popular favour.'
Amid the downturn, mining giant Anglo-American is seeking to off-load its De Beers diamond arm, which is partly owned by Botswana.
De Beers, the world's largest diamond producer, is meanwhile trying to revive demand by using marketing muscle to persuade consumers of the natural stones' worth.
Botswana and De Beers recently signed a 10-year deal to fund global marketing efforts.
The industry has been built on some of the most successful marketing campaigns in history, including the idea that a diamond is forever.
Producers are now hoping they can regain that magic and persuade shoppers that lab-made diamonds are no substitute for a natural sparkler.
The Natural Diamond Council, set up by producers, insists that 'the immense time and geological forces behind every natural diamond make them some of the rarest treasures on Earth, adding to their value and significance'.
It is also trying to correct what it says are inaccuracies, and employing celebrities like the actress Lily James as ambassadors for their stones.
Producers say high energy costs mean lab-made stones are not as environmentally sensitive as they claim, and insist that natural stones will still hold their value better.
Mr Zimnisky said: 'Diamonds are a luxury product. For consumers, it's an emotional purchase. Thus marketing is key. The diamond industry is famous for its marketing campaigns. Stakeholders in the industry cannot forget this.'