Sunday, June 23, 2024

End of diamonds era will bring political instability

Botswana has for over fifty years now relied on diamonds for economic growth.

The days of diamonds are however coming to a close.

It is political instability that authorities in Botswana should most be worried about.

We need to look at countries that used to rely heavily on oil for their upkeep.

They still have oil, but the market dynamics have shifted.

Firstly, countries are reducing their use of oil.

They are going for alternative energy, especially renewables.

Secondly countries like the United States that used to big oil importers are today self-sustaining when it comes to oil, so much that they have become net exporters.

In the end countries like Nigeria, Angola, Libya and Iraq are no longer able to use petrodollars to balance their national budgets.

From a face value, this is a pure economic issue.

But when revenues fall by as much as 50 percent as is the case for some of the, dynamics immediately change from economics to security.

Many such countries have failed to diversify economies away from overdependence on oil.

In exactly the same, if not worse, Botswana has failed to diversify away from overreliance on diamonds.

Infact right now diversification appears out of reach.

The mood has totally changed.

Momentum has badly slowed.

It might still vaguely count among political priorities – but only just.

It certainly is no longer at the top, overtaken by such pressing matters like employment creation and food security.

There are economists who believe Botswana has squandered its opportunity to diversify. And that doing it now when the pocket is no longer as deep as it used to be, appears out of reach.

The ongoing conflicts across many of the traditionally stable oil producing countries can very easily be traced to increased competition for scarce resources in fiancé, especially from oil.

For Botswana that time is not far off.

When it arrives, it will be far worse than what we are seeing in oil producing countries.

This is because diamonds account for a much larger part of Botswana budget.

SACU receipts and of course tourism come a distant second and third. But even when combined, we are still way off from looking at them as substitutes for diamonds.

Urgency and mathematics are pulling in different directions.

Botswana should diversify the economy as soon as yesterday.

But maths has other goals.

Diamonds in Botswana are already proving too expensive to get off the ground.

Mines are getting deeper.

And while it will be some time before diamonds get depleted, the reality is that there is need for adjusting to reduced income.

That process will be painful.

It will increase substantially as diamonds either get finished or get replaced altogether possibly by synthetics.

That adjustment process will be painful.

And will breed fear, anarchy and political instability.

And when it happens no security machinery will be able to stop the people.

We need political will now because it might prove too little, too late.


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