GABORONE – Botswana is grappling with a historic diamond inventory crisis that has effectively paralyzed its primary economic engine, with national stockpiles swelling to 12 million carats by the end of December 2025. This accumulation represents an 85% overshoot of the government’s maximum allowable ceiling of 6.5 million carats, a threshold intended to maintain price stability and operational efficiency. The bottleneck, revealed in the 2026/27 Budget Strategy Paper, signals a prolonged period of production stagnation as the world’s second-largest producer of natural gems struggles against a tide of weak global demand and aggressive competition from lab-grown alternatives.
The economic fallout from this oversupply has been severe, with Botswana’s GDP projected to contract by nearly 1% in 2025 following a painful 3% shrink the previous year. For a nation that relies on diamonds for 80% of its exports and one-third of its total revenue, the collapse in prices—averaging around $99 per carat compared to $129 a year earlier—has created a fiscal vacuum. The finance ministry has warned that mineral revenues for the 2025/26 cycle are expected to reach only 10.3 billion pula, less than half of the historical annual average of 25.3 billion pula, leaving the government with little room to stimulate non-mining sectors.
The crisis has already forced Debswana, the high-stakes joint venture between the government and De Beers, to suspend operations at selected mines to prevent the stockpile from reaching unmanageable levels. “Over the short term, production is expected to remain broadly unchanged, until the level of inventories is drawn down closer to minimum allowable levels, creating room for additional production,” the Ministry of Finance stated in its recent budget document. This policy of enforced restraint suggests that any recovery in mining activity will be slow and contingent on a global market turnaround that has yet to materialize.
To mitigate the immediate cash flow crunch, the state-owned Okavango Diamond Company (ODC) took the unusual step last year of holding an ad-hoc “closed” tender, offloading approximately 1 million carats to raise emergency liquidity. However, such measures are viewed by analysts as temporary sticking plasters for a structural problem. With external pressures mounting, including a 15% tariff on exports to the United States and evolving consumer preferences in key markets like India and China, the government is now under unprecedented pressure to accelerate economic diversification and reduce its existential dependence on the gem trade.
