BEIJING, CHINA – Botswana’s economy needs to diversify, not just because it’s unsustainable to depend solely on diamonds as a source of revenue but also because of the possibility of them losing favor and relevance as the waves of development roll in.
Economic drivers develop and change with the difference of times and space. A recent important transformation within the diamond sector was reported by the Goldman Sachs Global investment research indicating the disruptive change relating to its demand trends. These developments are seen with the generation of millennials who are described as people who largely seek experiences more than they pursue to own tangible aesthetics. “Millennials are poised to re-shape the economy; their unique experiences will change the ways we buy and sell, forcing companies to examine how they do business for decades to come,” cited the research. Gareth Mostyn, Executive Head of Strategy and Corporate Affairs at De Beers previously told the local media that millennials opt for smaller and cheaper diamonds than their parents did, indicating a change in the size and price of diamonds desired by this generation. He however asserted that millennials’ desire for diamonds was relatively stable. Be that as it may these developments suggest that new demand patterns may likely re-shape the appetite to buy diamonds. This could present new dynamics and challenges to Botswana if it continues to rely mainly on diamonds as its economic driver.
Take China for example, for decades following its open door policy in 1978 one of its economic drivers was its cheap labor. In his lecture on China’s economic journey from 1978 to 2018 Business School Associate Professor at Renmin University of China, Majid Ghorbani, said that the country witnessed the setting up of factories by foreign companies because of the cheap labor. The country’s high population size also played a key role in attracting foreign investment. Following that the ‘made in China’ tag gained solid ground establishing China as a strong manufacturing base in the world. Fast forward to 2018 Ghorbani depicted China’s economy as one that is undergoing a transitional economic period which is ushering new economic drivers. He said that in the new China the country is working to establish a different kind of manufacturing than the earlier version. Previously China was simply a hub of manufacturing but without ownership of design and software of the goods it was producing. In this sense manufacturing will continue to sustain growth of China’s economy but with greater involvement in her own innovation.
Still on the subject of cheap labor, another Associate Professor, Wei Huang, pointed out that China lost its advantage of cheap labor. She said that though the country realised tangible growth in manufacturing processes over time the nature of such production was however primarily labor intensive and generated low revenue because of the lack of ownership of the design and software of the materials it produced. Huang said in that regard that the new way of manufacturing will see China claim a bigger share of the value creation process by way of establishing ownership of the design and innovation of products. Consequently, instead of ‘made in China’ the new tag line will become ‘made by China’.
The journey of China’s economy shows that cheap labor which earlier played a chief role in the country’s rapid growth has, as a result of the waves of development, relegated its part to make way for new engines of growth such as local innovation. Without undermining the role diamonds have played in building and sustaining Botswana’s economy since independence in 1966, the experience of China demonstrates clearly that economic drivers shift and as such offers an example to Botswana to inject further momentum on diversification of the economy.