Botswana: the sharp edge of diamond slump

Here’s another country on the global recession’s front line: Botswana, hailed as the longest continuous multi-party democracy in Africa.

Botswana is classified by some economists as an “upper middle-income” country, but the wealth is very unevenly spread, so – according to DFID – 49 per cent of the population lives on less than $2 a day.

And when I tell you that Botswana depends on diamonds for around a third of its national income – and that those diamond exports plunged by around 90 per cent in the second half of 2008 – you may get some sense of what is at stake here.

In Europe and America and Japan, diamonds are not a Girl’s Best Friend right now, which is very bad news for Botswana, the world’s biggest producer.

The government has shut down its joint operation with De Beers for two months and is suspending production at two mines until next year. The only way Botswana feels it can boost growth is by eating into its reserves and running up a budget deficit – in a country famous for budget surpluses.

Hundreds of miners are being put on 30 per cent of salary, while contractors are being laid off. The electrification of schools and improvement of roads in remote areas is in jeopardy.

You can argue that the economy should have diversified – more wildlife tourism, perhaps – but diamond mining has been central since independence from Britain in 1966.

As per my blogs on Tanzania and Zambia, a country with a precious commodity to sell is anxiously waiting for the world’s rich, gathering at next week’s G20 summit in London, to sort themselves out. And until they do, more and more Botswanans will slide into poverty and despair.

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