Botswana's Diamond Crisis: 85% Oversupply Stalls Sales

The finance ministry reported that the country’s diamond inventory reached 12 million carats at the end of December 2025, about 85% above the government’s allowable level of 6.5 million carats, according to the 2026/27 Budget Strategy Paper seen by Reuters. The glut comes amid persistent weak global demand and falling prices, leaving the country unable to boost output to lift its economy. Diamonds contribute around one-third of Botswana’s national revenue and three-quarters of its foreign exchange receipts, highlighting the sector’s critical role. ADVERTISEMENT The finance ministry warned that “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”, signaling constrained near-term growth. BI Africa Botswana’s revenues under pressure from oversupply The oversupply comes as the country’s economy struggles. Botswana’s GDP is projected to shrink by almost 1% in 2025, following a 3% contraction the previous year, largely due to collapsing diamond prices under pressure from lab-grown gems and weak global demand. Debswana, the government’s 50/50 joint venture with De Beers that accounts for 90% of diamond sales, temporarily suspended production at some mines last year. ADVERTISEMENT The ministry highlighted the broader risk: “A slowdown in mining activity would reduce government’s fiscal revenues from the sector,” a key concern as diamond earnings historically drive public spending and foreign exchange inflows. With limited scope to raise production, Botswana’s government faces mounting pressure to diversify revenue streams and strengthen non-mining sectors. Last year, Botswana held an unprecedented diamond auction to shore up revenues hit by a prolonged global downturn in the gems market. State-owned Okavango Diamond Company (ODC) offered around 1 million carats of rough diamonds in a one-off “closed” tender. Unlike its regular, pre-scheduled auctions, the sale was organised at short notice. Sources said the ad-hoc auction was aimed at raising quick cash for the government, with two additional tenders planned later in the year. ADVERTISEMENT Diamonds remain the backbone of Botswana’s economy, accounting for about 80% of exports and roughly a third of government revenue, but the sector has been under sustained pressure.