Botswana’s Diamond Glut

https://www.youtube.com/watch?v=Q01IPa1OCBM

Transcript of the video above: Botswana’s diamond industry is at crossroad and not for the first time. 2026 is another pivotal year for Botswana diamonds, and therefore the country as a whole.

The finance ministry published its annual budget strategy paper in January revealing some crucial information we didn’t know about previously, namely the level of diamond inventory circulating in Botswana.

The treasury said that Botswana’s diamond inventory stood at 12 million carats in December, nearly double the government’s 6.5 million-carat target.

In other words, 85% above normal levels.

This is significant for two reasons. The first is in the context of De Beers, the potential sale of the company by majority shareholder Anglo American, and its presence in Botswana.

And the second relates to Botswana’s heavy reliance on the diamond market, the risk that involves and the government’s strategy moving forward to stimulate economic growth.

Let us first consider the De Beers question.  

Now, De Beers is very coy about the inventory it holds. It’s a very closely held secret within the confines of the company. Those 12 million Botswana carats give us some insight into the annual build up at De Beers.

Grant it, it is not clear where that inventory sits. Remember De Beers has a layered structure in Botswana, governed by joint ventures with the government in Debswana, the local mining operation, as well as in DTC Botswana, which sorts and distributers local production.

In addition, all De Beers production, including from its operations in Canada, Namibia and South Africa, is aggregate, its mixed together, and sold in Gaborone through its sights and auctions.

So, does that 12 million carat inventory reflect goods held by Debswana slash DTC Botswana, representing Botswana’s own production?

Or does it capture inventory across the broader system, including De Beers production from Canada, Namibia, and South Africa that is aggregated in Gaborone?

Plus, there’s polished that are manufactured in Botswana as well.

It’s not clear, but either way, it marks a significant deviation from the norm and underscores the disconnect between different segments of the diamond market. As demand continues to shift toward value, parts of the supply side are left holding the large volume of inventory that are increasingly difficult to move.

From a De Beers point of view, the high inventory is not surprising considering the decline in rough sales, which will be revealed in Anglo American’s fourth quarter production report on February 5th and its full year results to be published on February 20^th.

I estimate that De Beers sales rose slightly or were at least flat in 2025, but that buries the lead. There was a significant decline from 2023 to 2024, about 8 million carats worth, which bloated De Beers inventory and led us to today’s inventory challenge, to put it lightly. In other words, current levels of demand are well below historic norms.

The 12 million carats are more about Botswana than De Beers, but we need to remember how intricately the two are connected.

Botswana owns 15% stake in De Beers and is considering raising that stake to a majority share as Anglo American prepares to sell its 85% share in De Beers.

And that raises the question that for me stood out in the treasury’s strategy paper.

Is it good strategy for the government to increase its exposure to diamonds by purchasing more of De Beers, given that inventory and given market conditions. Would that be a hindrance to its goal to diversify the economy?

To be clear, the bloated inventory is actually not the story, it’s a reflection of what’s going on.

The paper noted that Botswana’s economy is expected to have contracted, negative growth, in 2025, largely because of continued weakness in the global diamond market.  

Some other diamond-related bullet points to take note of the ministry said:

US tariffs on diamonds is a source of concern.

Diamond production volume fell 3.2% in the first nine months of the year, mining activity being a major contributor to GDP,

Subdued global demand, lower rough prices, shifts in consumer preferences, increased competition from lab-grown diamonds, and rising production costs, all considerations contributing to lower production number,

Rough sales fell in the first half of the year but improved significantly in the third quarter due to accelerated purchases ahead of the new US tariffs, which as I mentioned help with overall annual sales number.

But, despite that improvement, the ministry stressed the overall outlook for the diamond sector remains highly uncertain, end quote.

Now the short-term and long-term goal is to reduce that inventory.

Botswana can do so by selling more diamonds, which is dependent on demand or or and it can reduce production, which is not ideal given that mining activity carries significant weight in the GDP calculation, which is a cold way to look it.

And that sounds like a cold way to look at it but really mining carries significant weight in Botswana's economy. It affects jobs, it affects the extent to which the government can provide for its citizens, who enjoy free education and health care.

Last year, the government fell short of its budget and could not provide some critical health services. And that’s a direct result of the drop in diamond revenue, in diamond production.  

So, there are very real consequences to all of this.

What do we expect in 2026 from Botswana. Firstly, we’re keeping an eye on that Anglo American sale of De Beers. I’ve said it before, I don t think it’s Botswana’s best interest to take a controlling interest in De Beers. It can't afford to increase its exposure to diamonds at this time given current market conditions.

I think it needs foreign investment and an outside investment in De Beers would be an expression of confidence in the country, let alone the diamond industry. That’s the first thing.

Secondly, the government’s rough sales arm, Okavango Diamond Company, is also a crucial player in reducing that inventory glut. ODC is entitled to 30% of Debswana production and is changing the way it operates.

ODC is undergoing management change and is introducing contract sales, so it will come under some scrutiny to improve its performance this year, especially because the government has suggested that it can do a better job than De Beers. ODC will be the test case in that regard.  

And finally, Botswana needs to take a leading role in marketing natural diamonds, independent of De Beers, and independent of the Natural Diamond Council, of which ODC is a member and contributes funds.

That doesn’t mean only telling the Botswana diamond story. It has the most to gain from raising demand across the category.

But that said, the Botswana story is a special one and it needs to be told in a fresh and creative way.

Because if this strategy paper that the Treasury published told us anything, it reminded us of the good that diamonds do in Botswana, and how reliant the country is on the diamond industry, and particularly on demand.   

Every retailer in the United States and elsewhere should be aware of that. Every natural diamond sale has far-reaching implications.