It has been some time since I have had a country visit quite like my trip to Botswana. For many years Botswana was regarded as Africa’s most stable, well-managed country. Wealth was high and social security was in place, with all citizens entitled to healthcare and education. Diamonds generated such good revenue that the Botswana government almost never borrowed – unheard of in Africa. It was all made possible by a small population sharing in the royalties from its diamonds. We always knew that Botswana was a one-trick pony.

In the last two or three years though this diamond pony has been upstaged. Lab grown diamond prices have collapsed and dragged down the prices of natural diamonds. Further, laboratory diamonds have taken significant market share. So not only are prices down, but volumes are also down. So, in contrast to De Beers’ famous tag line, it seems that natural diamonds are not forever.

The diamond market’s collapse has seen many of the diamond mines going into care and maintenance modes. The diamonds that are being sold come from stockpiles. And the lack of activity has a negative effect across the country.

• Diamonds were around 80% of Botswana’s export revenues and around 35% of government revenues. The shortage of foreign currency inflows has resulted in Botswana burning through its foreign reserves. Foreign reserves have dropped from $8bn to $4bn (at a time when most African economies have been building reserves).  

• Businesses feeding off the mining industry have come under pressure.
• Bank defaults have risen.
• The economy declined by 3% in 2024 and another 1% in 2025.
• Government debt has gone from 20% of GDP in 2023 to an estimated 45% of GDP in 2026.

• Yields on government treasuries have gone from less than 2% to above 5%.
• Fiscal deficit has widened.
• The central bank has adjusted its exchange rate policy, leading to a one-off currency adjustment versus the South African rand.

While the reported statistics are concerning, what I heard and saw in the country was more alarming.

Gaborone has always been neat and tidy. This time, the city was looking unkept. There were potholes in the roads, and the vegetation along the roads had just been left to grow. The local people said this was partly due to a change in the ruling party (for the first time in 58 years). The new leaders do not have experience in running a country.

One of the consumer companies, Sefalana, indicated that its volumes were down 20%. In my time as an African investor, I cannot recall a food retailer experiencing this level of volume decline. Clearly, the local people are under financial pressure. During the visit, Choppies, another listed food retailer, put out a trading update saying its earnings (six months to December 2025) were down around 50%.

According to the listed companies I met, banks are offering 15-20% interest rates on deposits, in a country where previously, deposits earned next to nothing. The banks are competing with government treasuries for savings. FNB Bank (listed on the Botswana Stock Exchange) in its results to December 2025, showed that its interest expenses on deposits increased more than 100% (see the snapshot of FNB’s results). At the same time, its impairment cost (charge for bad loans) also increased by more than 100%. The overall result was flat, though, thanks to higher interest on loans, and growth in fee income, helped by higher margins on foreign exchange transactions. Banks are selling dollars at a rate of nearly 7% higher than the official rate. Banks across the African continent tend to be defensive assets.

The Botswana Stock Exchange has 25 local listed companies. The Old Mutual African Frontiers Fund has held a number of positions in Botswana over time. This includes FNB Botswana (bank), Botswana Insurance Holdings Limited (insurance and asset management), and Sechaba (beverages). The fund’s Botswana position peaked at more than 10% a few years back, but currently it holds less than 2%.  

Overall, Botswana is not looking in good shape. Botswana has been talking about diversification for some time, but little has been done. Regardless of whether the diamond market recovers, Botswana needs to get cracking on developing other industries. Interestingly, we met with an African insurance company looking to list on the Botswana Stock Exchange to take advantage of tax incentives, as it wants to be a regional financial hub.

Botswana’s investment story is about consistency, credibility, and choice. Its institutional strength, fiscal discipline, and policy continuity continue to differentiate Botswana within the region. In an environment where emerging market risk is often painted with a broad brush, Botswana reinforces the value of selectivity – and the importance of grounding investment decisions in on-the-ground insight.