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Diamonds in the Rough: Exporting and Investing in Botswana’s Mineral Brilliance

As one of the fastest growing economies in Africa, Botswana’s gross domestic product (GDP) grew by 4.1 percent in 2022,  the IMF estimated. The diamond industry is driving most of its growth, contributing over 90% of total exports. The southern African country is the world’s second-largest diamond producer, and while diamond exports declined during the pandemic, the sector experienced steady growth in 2022, a trend expected to continue in the coming years.

Under the African Growth and Opportunity Act (AGOA), Botswana is an eligible country for duty-free access to the U.S. market for almost all products manufactured in the country, including diamonds. The U.S.-Africa trade law has bolstered the country’s competitiveness by encouraging reforms that improve the business and investment climate. 

Botswana has steadily improved its regulatory and policy environment, making it an increasingly attractive destination for foreign investment. AGOA eligibility provides a strategic gateway for U.S. companies to tap into the lucrative diamond trade, and also opens the door for further bilateral trade and investment ties. 

In July, a Prosper Africa-led delegation of U.S. institutional investors visited the Diamond Trading Company Botswana (DTC Botswana), the world’s largest and highly technological rough diamond sorting and valuing operation. The investors were part of Prosper Africa’s investor delegation trip to Botswana, held from July 11-14, on the sidelines of the U.S. Africa Business Summit, hosted by the Corporate Council on Africa and Government of Botswana.

The investor trip aimed to reduce high investor perceptions of risk in Africa by exposing them to a pipeline of investable deals and introducing them to credible transactions, fund managers, and local co-investment partners.

U.S. investors gained a deeper understanding of how diamonds are expertly priced, polished, and sold – a sophisticated process blending art, science, and economics. A joint venture partnership between the Government of the Republic of Botswana and De Beers, known as Debswana in Botswana, fuels DTC Botswana’s operations. Unearthing diamonds optimally and responsibly, Debswana operates four key mines – Jwaneng, Orapa, Letlhakane, and Damtshaa – forming the backbone of the nation’s economic strength.

Through AGOA, U.S. investors are presented with an opportunity to diversify investment portfolios while fostering economic growth and development in Botswana.

“AGOA benefits the industry as diamonds can be locally sourced and the jewelry can be made locally and exported to the United States,” said Siddarth Gothi, Assistant Business Development Manager, KGK Diamonds Botswana.

DTC Botswana sorts an astounding 45 million carats annually. On the site visit, investors witnessed the sparkle of precious stones, and explored promising investment opportunities. The country’s substantial investments into the Pula Fund underscore the viability of the diamond industry.

Established in 1994, the Pula Fund is one of Africa’s largest and oldest sovereign wealth funds, serving as a long-term investment portfolio for revenue derived from diamond exports. Contributing to the fund, the Botswana government and central bank form a potent triad with the diamond industry, forging a vibrant, sustainable, and profitable downstream diamond industry in Botswana.

Given that the Pula Fund aptly represents the convergence of fiscal prudence and the robust diamond industry, the investor delegation met with officials of the Pula Fund to learn more on how long-term investors can align their strategic interests with Botswana’s growing potential. 

The potential returns are not only financial but contribute to the socio-economic development of a burgeoning African economy, reinforcing the dual-benefit investment philosophy of responsible and sustainable investing.

The strength of the diamond industry also bolsters its substantial contribution to Botswana’s GDP, foreign exchange earnings, and government revenue. Debswana, the largest private-sector employer in the country, further enhances this appeal, embodying an industry that doesn’t just create wealth, but drives socio-economic development.

For investors, the real treasure extends beyond the brilliance of the country’s gemstones; it lies in Botswana’s promising economic landscape and the investment  opportunities it presents.