Diamond Mines Are Not Forever

by Cornell Overfield, Blogger for African Affairs

In American media, Africa has generally been caricatured as a chaotic and poor continent, undeveloped and prone to devastating civil wars and ethnic conflicts. While some states, such as the DRC, or Somalia, fit this image, others – most notably Botswana –  prove that Africa is not doomed to conflict and poverty.

With a largely homogenous population and well educated leaders (particularly Sir Seretse Khama), Botswana enjoys a strong, stable democracy, while responsible management of the country's tremendous diamond wealth has catapulted Botswana from one of the poorest countries in the world to upper-middle income status (according to World Bank statistics). [1] Botswana's rule of law and stability means that the World Bank rates it as one of the easiest African countries in which to do business. Botswana was one of the countries hit hardest by the AIDS epidemic of the early 2000s (in 2005, prevalence was over 25%), but the government's responded robustly (in part with help of the American PEPFAR program), and today testing and treatment are widely available. [2]

Despite this rosy tale, Botswana's future is far from certain. A recent report from The Economist highlighted the overall decline facing the diamond industry; De Beers is losing its ability to artificially prop up prices, global diamond production has begun to decline, and new generations of lovers are spurning the diamond as a sign of commitment. Botswana itself remains the world's second largest producer, but experts expect production to decline for the next 30 years until the mines run out around 2050. [3] [4]

Unlike many other mineral rich African countries, Botswana has successfully capitalized on its diamond wealth, but the republic's early leaders realized that, while diamonds may be forever, diamond mines are not. Since the 1970s, the Batswanan government has consistently embraced policies which would use the diamond-fueled budget to diversify Botswana's economy by spurring growth in other sectors.

Attempts to develop agriculture unsurprisingly flopped as the country is largely arid, is unsuitable for anything but cattle grazing, and suffers cyclical droughts. After briefly flirting with export-substitution policies, in the 1990s, Botswana shifted towards promoting globalized manufacturing and tourism. More recently, the government has hoped to promote Botswana as a communications and financial services hub for Southern Africa. [5]

The results have almost been as impressive as Botswana's initial ascent. In 1975, mining accounted for almost 50% of the country's GDP; today that percent has fallen to around 30%. That decline of the mining sector's relative size is largely driven by the growth of the tourism sector to account for 12% of GDP, as Botswana has leveraged its stability and natural beauty to attract tourists from around the world. [4] The Southern African Development Community (SADC) has also promoted major opportunities for growth, however SADC's integration lags behind that of other regional blocs, such as the East African Community.

Over the coming decade, Botswana will face three major, interconnected challenges. We'll start with government spending. National debt is a manageable 21%, but this figure stood at only 5% in 2008 and the budget deficit was over 5% in 2016. [6] Botswana's has won praise for its financial-services friendly policies, but light taxation in that sector has been largely subsidized by diamond revenues. [4] As mining receipts tumble in the years to come, the government will need to either cut spending or raise taxes, potentially stifling growth. The new administration in the United States may encourage taking a chain-saw to the Batswanan budget, but they ought to keep Botswana's demographic conditions in mind.

Botswana has thus far successfully managed its AIDS crisis, but only thanks to expanded government expenditures and foreign aid. AIDS treatment is a long-term expense, which Motswana have come to expect the government will provide, but the U.S. government has already slashed foreign aid in half from its peak. The government will be hard-pressed to choose to make cuts here, as ensuring public health through AIDS programs is critical for economic performance, but this significantly constrains their options.

Another key demographic consideration is that official unemployment stands at 20%, but youth unemployment nears 40%. Wealth distribution is unequal, and, in 2009, the Gini coefficient was 60.9. [1] Extensive government employment and social support programs have given Motswana jobs or made subsistence farming a viable profession, and like in the Gulf States, cutting these programs could produce significant political and social instability.

Ultimately, Botswana faces a possible political crisis. Political stability has secured economic growth, but it has not nurtured a vibrant civic life or political landscape. While elections are free, Botswana has been ruled by Sir Seretse Khama's Botswana Democratic Party (BDP) since independence. In a parallel to the Indian National Congress, the Khama family remains powerful in the BDP, and Seretse Khama's son Ian is currently President of Botswana. While Seretse Khama did much to put Botswana on the path to success, Ian Khama has been accused of suppressing dissent and expanding his own power and personal networks.[7] Khama is no Mugabe or Zuma – no one has been jailed for political reasons, the economy still shows promise and he has, so far, avoided corruption. However, the Botswana Movement for Democracy has gained support for promoting a reversal of Ian Khama's supposed authoritarianism, but the movement has seen little concrete electoral success. 

Hopefully, the challenges of declining diamond revenues, sustaining growth and a growing social service budget will foster new political parties with fresh visions and solutions for Botswana, finally pushing it into the ranks of a truly competitive democracy. But the possibility for a descent into flawed democracy or authoritarianism, or for massive social upheaval in response to economic struggles, cannot be ruled out.  Botswana has been a star in Africa and in development literature, but a stagnant, or increasingly authoritarian Ian Khama-led-BDP, may test whether Botswana's democratic institutions are as enduring as its diamonds or as finite as its diamond mines.

Cornell Overfield is a junior at the University of Pennsylvania, where he studies International Relations and History. The SIR Journal Team would like to wish him a very happy birthday!