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JOHANNESBURG: Botswana and southern African peers that built much of their prosperity on diamonds are scrambling for alternatives as cheaper, lab-grown stones threaten their economies.
Diamond-dependent Botswana is leading the way and launched a sovereign wealth fund this week to lay the “foundation for a more resilient, sustainable and diversified future beyond diamonds.”
It is exploring other avenues too, like boosting luxury wildlife tourism, launching into the medicinal cannabis market and exploiting its abundant sunshine for solar power.
President Duma Boko has even mooted taking a majority stake in industry giant De Beers and selling Botswana’s diamonds independently.
“Countries such as Angola, Namibia and South Africa are all exposed but not to the same degree as Botswana,” economist Brendon Verster at the Oxford Economics Africa think tank told AFP.

The stones are the country’s main source of income and account for about 30 percent of its gross domestic product (GDP) and 80 percent of its exports, according to the International Monetary Fund.
But, as consumers turn to cheaper diamonds created in China and India, the average price of a one-carat natural diamond is falling.
The price dropped from a peak of $6,819 in May 2022 to $4,997 by December 2024, according to the World Diamond Council.
Botswana, which is 70 percent desert, was lifted from poverty by the discovery of diamonds in the 1960s. It is already feeling the effects of the lab-grown competition.

‘Risks of economic collapse’

As its foreign reserves deplete, the government has turned to debt to fill the public coffers.
Government funds ran so low that the health system teetered on the verge of collapse in August, leading Boko to declare a state of emergency.
“If left unaddressed, there is a real risk of the situation becoming not just an economic challenge but a social time bomb,” he said in July.
Highlighting the fears, global ratings agency S&P on Friday dropped its long-term ratings on Botswana one notch to “BBB” and declared a negative outlook, citing the rapid expansion of the lab-diamond market.

Synthetic stones had captured “approximately 20 percent of the global market by value and up to 50 percent by volume in the US engagement ring segment in 2025,” it said in a statement.
Diversification is “essentially now or never,” Verster said.
“We don’t really see anything that would cause a monumental shift back in favor of natural diamonds to curb the rising popularity of synthetic diamonds.”
Also suffering is tiny Lesotho, where diamonds contribute up to 10 percent of its $2 billion GDP and the larger, vital textile market has been hit by US tariffs.
This month its biggest diamond mine, Letseng, said it would lay off a fifth of its workforce, citing “sustained pricing pressure” and “softer demand in key markets.”
The mine closures “could heighten risks of economic collapse,” independent economic analyst Thabo Qhesi told AFP, stressing an urgent need to explore other options, such as rare-earth resources.

The ‘real thing’ 

In a bid to keep the sparkle alive, Angola, Botswana, Namibia, South Africa and the Democratic Republic of Congo pledged in June to allocate one percent of their annual diamond revenues to marketing natural diamonds.
The campaign would need to reframe their value as a coveted “luxury product,” former Bank of Botswana deputy governor Keith Jefferis told AFP.
“We see a significant opportunity to engage consumers in the story of responsibly sourced diamonds from Botswana,” De Beers, also taking part, told AFP.

The South Africa-British firm is meanwhile exploring the potential of synthetic diamonds in high-tech fields like quantum networks and semiconductors, as prices fall below $100 per carat.
For Botswanan ministry of minerals official Jacob Thamage, natural and lab-made diamonds “offer different value propositions to different consumers and therefore can and will coexist.”
In an upscale Johannesburg mall, behind fortified steel gates, a natural yellow diamond priced at over $50,000 stood as a symbol of exclusivity.
Just steps away, a lab-grown diamond valued at $115 was unguarded.
“We each have our target,” one jeweller said. “So long as everyone is happy.”

SHANGHAI: China’s leaders have pledged to put an end to aggressive price cuts by some Chinese companies which regulators say are spurring excessive competition that is damaging the economy.
The so-called “anti-involution” campaign has been sparked by overcapacity among Chinese manufacturers — a legacy of past government efforts to stimulate the economy — and price cuts made to clear stock or spur consumption. Those cuts have prompted price wars across various sectors that are raising concerns deflation may become entrenched and hinder efforts to stabilize China’s $19 trillion economy.
What is involution?
The Chinese term for involution, “neijuan,” began trending online in 2020 and was initially used by young people to describe the hypercompetitive and often self-defeating pursuit of traditional markers of success.
Some of the contexts they used it in included questioning what was the point of working hard to get into a good school if the reward was working 996 hours (9 a.m. to 9 p.m., six days per week) in a tech company? If you were lucky enough to land a job, that is, in an era of high graduate unemployment.
Though the term is far less commonly used in English, involution comes from a latin term which means “to roll or turn inwards.” It was popularized by American cultural anthropologist Clifford Geertz in the 1960s — in relation to his studies of Javanese agriculture — to describe economic or cultural stagnation despite increasing complexity or effort.
More recently, neijuan has become shorthand in China for the exhausting but also often futile and sometimes self-destructive grind of hyper-competition more broadly.
The concept is now also linked to the country’s pivot from property-driven growth to an industrial complex encompassing a third of global manufacturing, which has seen more resources invested without any accompanying increase in returns. It’s a race to the bottom.

Why is competition a bad thing?
On social media in China there is an oft-repeated joke that goes something like this: In other countries, governments intervene to prevent anti-competitive behavior; here (in China), they intervene to curb competition.
The issue is that the level of competition has reached a point where the returns are not only diminishing, they are threatening economic stability.
Beijing is facing decisions to take action against overcapacity, excessive competition and brutal price wars because deflationary pressures have been mounting in the world’s second-largest economy.
Consumer behavior is changing in ways that could lead to further downward pressure on prices, economists say, raising concerns that deflation could become entrenched, and posing more headaches for China’s policymakers.
The fight against deflation is a complicated one that poses risks to employment and growth. It comes as an unresolved trade spat with the US intensifies the squeeze on factory profits.
Beijing sees employment as key to social stability. Exporters and even the state sector are already shedding jobs and cutting wages, while youth unemployment runs at 17.8 percent.

Which industries are most exposed?
Excessive competition has led to shrinking corporate profit margins across multiple sectors, including electric vehicles (EVs), solar panels, lithium batteries, steel, cement and food delivery.
In the EV sector, a brutal price war erupted in the world’s largest auto market in 2023 between dozens of brands including BYD and Tesla. In May, Chinese regulators ordered the sector to stop its incessant price cuts.
According to data from LSEG covering 33 listed automakers headquartered in China, the sector’s median net profit margin fell to just 0.83 percent in 2024 from 2.7 percent in 2019.
China’s solar industry has also been in the cross-hairs of the anti-involution drive as massive levels of overcapacity and price wars have led to losses in the photovoltaic manufacturing value chain reaching $40 billion last year, according to Trina Solar Chairman Gao Jifan.
Even though restructuring to cut oversupply has begun, there is a long way to go before China’s solar output matches demand. Analysts estimated that China’s 2024 wafer, cell and module capacity alone is sufficient to meet annual global demand through to 2032.
Some industries remain embroiled in the policy change.
In the food delivery sector, tech giants Alibaba, JD.com and Meituan have poured billions of dollars into a subsidy-driven battle for “instant retail” market share in an expensive bet that the fast-growing one-hour delivery segment will be vital to the future of China’s e-commerce market as a whole.
Analysts at Nomura estimate industry-wide cash burn exceeded $4 billion in the second quarter alone, investment expected to further depress their short- to medium-term profits.