12-06-2025
Synthetic Stones Are Sinking Botswana's Diamond-Based Economy
Diamonds are losing their sparkle, at least for the stones dug out of the ground. The rapid development of lab-grown synthetic diamonds increasingly looks like it will deliver a death blow to diamond mining, with major repercussions for countries that built their economies on the sector.
The basic problem is that lab-grown diamonds are now virtually indistinguishable from natural stones. They have the same chemical properties and appearance as natural diamonds, and to tell the difference requires specialist equipment and expertise. What's more, labs can now make a diamond in a few weeks, whereas the timescale to create natural diamonds is more like billions of years.
Labs also have the advantage of being much cheaper. In 2020, lab-grown diamonds were about 25 percent more expensive than natural diamonds. Now they are about 80 percent cheaper. This trend is dragging down the price of natural diamonds, which are now almost 40 percent lower than their all-time high in 2022.
As mining diamonds is usually complicated and expensive, the diminished payoff is making the economic calculus unsustainable. For the countries that depend on diamonds for their economic wellbeing, that has now become a major problem.
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There has been much speculation over the years about when the growth of synthetic diamonds would begin hurting diamond mines. It looks like the real impact has now begun.
Botswana is currently the world's biggest diamond producer by value and relies on diamonds for almost 80 percent of its export revenues. Yet in May, the government announced that 1,000 workers would be laid off at the country's largest diamond mine, which is jointly managed by a state-owned company. This was followed by an announcement that production would be halted at some mines for three months.
The layoffs represent a substantial proportion of the total mining workforce in the country. Despite their longstanding economic importance, diamonds are not a big driver of employment, with less than 10,000 people working in Botswana's mining sector.
It is a risky move from a government that was propelled to power in 2024 by voters angry over rising unemployment, bringing an end to six decades of rule by the Botswana Democratic Party. It is perhaps unavoidable, though, as in June the government cut its forecast for annual economic growth from 3.3 percent to almost zero.
Other countries in the region will be hit hard too. Diamonds are by far Lesotho's largest export, and they are Namibia's and Angola's second-biggest. This represents a dramatic and unfortunate economic reversal for these countries, which as recently as 2022 enjoyed a boost after diamonds from Russia, then the world's largest producer by volume, were hit by sanctions and shunned by Western buyers.
In one sense, this is a kind of final reckoning that the diamond industry has been postponing for the past 150 years. Diamonds are valuable not only because of their translucent beauty and durability. They are also valuable because they are scarce. But their scarcity is not entirely a natural phenomenon.
In the 1870s, the first in what turned out to be a series of big diamond discoveries in Southern Africa threatened to flood the market with precious stones and drive down prices. The feared price collapse did not happen, though, because of the sharp insight of a company that became synonymous with diamonds: De Beers.
Founded in 1888, De Beers realized that it could make more money by selling fewer diamonds, so long as it could control the global supply. By limiting production, it could keep prices high, something it was highly successful at doing.
This created a peculiar economic structure in the diamond industry. Usually, high prices for a commodity encourages greater production. The opposite occurred with diamond mining, where production remained limited despite high prices. The scarcity of diamonds was artificially induced.
This strategy had been more or less perfected by the time huge diamond deposits were discovered in Botswana in the 1960s. It was not only De Beers that benefited from these discoveries, however. Careful management of this bounty of precious stones transformed Botswana from one of the world's poorest countries into a relatively wealthy one.
A landlocked, mostly desert nation so neglected by Britain, its colonial ruler, that even the territory's capital was located outside its borders, Botswana defied the odds and became something of an economic miracle. All of this was built on diamonds.
De Beers, however, is not what it once was. Although the company lost its monopoly on diamonds in the early 2000s, its fortunes were buoyed by rising demand from China. By the 2010s, in fact, it was selling more diamonds than ever. However, diamond sales in China have declined steeply in the past two years.
The slump has battered De Beers, and its parent company, Anglo American, is now offloading it after a century of ownership. Ahead of the sale, Anglo American has twice written down the De Beers' value, by $1.6 billion in 2024 and $2.9 billion this year. The world's biggest diamond company is worth less than half of what it was two years ago.
This is a major problem for Botswana. After years of tough negotiations, the government signed a new deal with De Beers covering the diamonds mined by their longstanding joint venture Debswana.
Even a few years ago, the deal would have been viewed as something of a coup. For decades, Botswana has sought to sell diamonds independently of De Beers to gain a greater share of the revenue. As recently as 2010, Botswana could only sell 10 percent of the stones they mined. Under this new deal, Botswana's share of diamonds will rise to 50 percent by the late 2030s. The deal also allows Botswana to sell diamonds to selected buyers on long-term contracts for the first time, something that was previously the preserve of De Beers.
There is a painful irony that this long sought-after goal has been achieved precisely at the moment when diamonds are collapsing in value. Sales are due to begin in September. The question is: Who will want to buy the diamonds by then?
More than anything, lab-grown diamonds cut away at diamonds' image of exclusivity. A natural stone was once the ultimate ostentatious status symbol. It is not quite the same now that a synthetic replica is available for a fraction of the price, and no one can tell the difference between the two. Optimists for the industry point to the romance and glamor of large natural stones, like the enormous 2,492-carat diamond discovered at Karowe Mine in Botswana in 2024. But in the near future, this won't be hard to replicate in a lab.
The dilemmas of the wealthy whose exclusive symbols can now be copied by anyone pale in comparison to the dilemma faced by countries like Botswana, which must now build post-diamond economies, at a time when global trade disruption has made investors skittish and development aid has dried up.
What Botswana and other Southern African heavyweights will do after diamonds is a question with no easy answer. And they don't have a billion years to come up with one.
Duncan Money is a historian and researcher who works on the mining industry, with a focus on copper, as well as on Southern Africa more broadly. He has a doctoral degree in history from Oxford and has worked in various countries in Africa, Europe and North America.
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