Lab-grown diamonds and Khama’s return: Masisi’s tough road to re-election in Botswana

27 Oct 2024

Botswana’s President Masisi confronts his arch-rival at next week’s election, but the real economic enemy may be elsewhere.

Botswana’s President Mokgweetsi Masisi faces two major challenges when he seeks re-election on 30 October. One is his predecessor and now bitter rival, Ian Khama; the other is lab-grown diamonds.

On the plus side, he is competing with an opposition that has failed to fully unite against him.

Masisi fell out with Khama after he succeeded him as president in 2018. Some of the issues that caused the conflict were important policy differences, such as a ban on shooting elephants, while others were more personal and seemingly petty — like restricting Khama’s post-presidential privileges.

As a result, in 2019 Khama stormed out of his political home, the ruling Botswana Democratic Party (BDP) and helped form a new party in the Botswana Patriotic Front (BPF). The BPF ran against Masisi and the BDP in that year’s elections. Even though it took three parliamentary seats off the ruling party, the BDP beat off the opposition challenge, increasing its seats by one overall.

Read more: Ian Khama makes risky return from exile to fight his bitter foe in Botswana elections

Since then, Masisi and the law enforcement authorities seem to have been hounding Khama. His business associates were charged for allegedly defrauding the state of billions, supposedly to finance Masisi’s overthrow. The High Court tossed out the case as pure fiction. Then Khama was charged with illegal possession of arms and ammunition, money laundering and receiving stolen property.

Khama fled to South Africa in 2021, fearing arrest or assassination. A warrant was issued against him for failing to appear in court, and he only returned to Botswana last month when a regional magistrate set aside the arrest warrant. Khama has now entered the electoral fray, canvassing vigorously for the BPF against Masisi and the BDP.

Khama cannot run for president again as he has served his maximum two terms. He is backing BPF leader Mephato Reatile for that office, and has made it clear that his goal is simply to unseat Masisi. So he would probably be satisfied if Duma Boko, leader of the main opposition, the three-party Umbrella for Democratic Change (UDC), got the job.

Lab-grown diamond share

Masisi’s other major headache is lab-grown diamonds. These synthetic gems — physically indistinguishable from natural diamonds but costing about a quarter of the price — are steadily eating into the market for the original stones, which Botswana’s economy so heavily depends upon.

Lab-grown diamonds, among other factors, have caused exports of Botswana’s rough diamonds to implode by 42% year on year in March 2024, according to Econsult’s Economic Review. Other factors contributing to plummeting exports are weak demand in China, supply chain disruption due to the Ukraine war, and the negative impact of sanctions on Russian diamonds.

The drop in exports led to zero GDP growth over the same period. The International Monetary Fund forecasts 1% growth for 2024, down from 5.5% in 2022 and 2.7% in 2023. And lower diamond revenues and “expansionary” budgets have led normally fiscally prudent Botswana into a projected budget deficit of some 17 billion pula — or 6% of GDP — in the 2024/2025 fiscal year, according to the Econsult review.

One impact of this slowdown is an increase in overall unemployment from about 21% in 2019 to nearly 28% in the first quarter of this year. For youth aged 15-24, the rise has been from about 35% in 2019 to a worrying 48% in 2024.

This economic decline has prompted rumblings of discontent in the electorate. Botswana’s mainstream newspaper Mmegi recently accused Masisi of betraying the electorate’s trust by failing to deliver on his 2019 electoral promises of increased growth and employment — and failing to deliver on the perennial commitment to diversify the economy away from its dangerous dependency on diamonds.

What impact the economic downturn and Khama’s return might have on the elections is hard to quantify, not least because no polling is being done. Zibani Maundeni, a University of Botswana political science professor, recently told Daily Maverick that Khama was “the Jacob Zuma of Botswana … a great tactician” who posed a real danger to the BDP’s dominance.

Maundeni told ISS Today that the opposition parties promised to create jobs, revive a collapsing economy, root out corruption and inefficiency, and restore flagging confidence in the diamond industry.

“In contrast, the ruling party, which is more isolated and on the defensive, promises to stabilise the economy, revamp services, and above all, it’s carrying out several groundbreaking [new projects] giving the false impression that new projects would commence despite the fact that there is no money for them. It’s a tough election, which the BDP is unlikely to win, or win with a small margin. It’s too close to call.”

However, Dr Leonard Sesa, a political science lecturer at the same university, thinks it’s unlikely that Masisi and the BDP will be toppled. Mainly because the UDC has failed to form a broader alliance with the BPF and the Botswana Congress Party, thus splitting the opposition vote. But whatever happens next week, Botswana must take serious stock of its economic future.

In the Econsult review, economist Keith Jefferis observes that: “A critical question from a policy point of view is whether the current set of problems afflicting the diamond market is adjudged to be the result of short-term volatility or long-term structural change.

“If it is short-term volatility, then accumulated financial buffers can be used to smooth and offset the broader macro-economic impact. But if the problems are a result of long-term structural change, then running down financial buffers is not a sustainable option — instead, adjustment to the new reality is required.

“The risk facing Botswana is that the increasing encroachment of lab-grown diamonds in the market is a structural change that has permanently reduced demand for natural diamonds, requiring a policy response that reflects lower levels of exports and government revenues.”

As Maundeni implied, Masisi appears to have made the former assumption, trying to shore up support with massive government spending when he should be reining in spending to preserve the government’s financial position.

In 1947, De Beers — Botswana’s steadfast partner in mining the glittering gems — penned its famous slogan “A Diamond is Forever”. What the country must seriously consider though, is that even if diamonds themselves are immortal, the market for them isn’t, and it is high time Botswana found some others. DM

Peter Fabricius is an Institute for Security Studies (ISS) Consultant.

First published by ISS Today

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Lab-grown diamond share