Botswana VP on diamonds, diversification and Trump tariffs

The 159-year-old debating chamber of the Cambridge Union Society has played host to some of history’s most consequential leaders. From British Prime Ministers Winston Churchill and Margaret Thatcher to US Presidents Theodore Roosevelt and Ronald Reagan, the wood-panelled theatre has resounded to orators of world renown.

A year ago, Botswana’s vice-president and finance minister Ndaba Gaolathe might not have expected to find himself addressing the famous venue at the annual conference of the African Society of Cambridge University.

Until November, the ruling Botswana Democratic Party had reigned supreme since the dawn of independence in 1966. But following President Duma Boko’s stunning victory – propelled by his pledge to create 500,000 new jobs in five years – his deputy Gaolathe found himself launched into two senior offices, and onto the world stage.

Gaolathe looks at home as he talks to African Business on the Society’s famous scarlet benches, under the watchful eyes of portraits of past society presidents. But taking in the historic surroundings and basking in electoral success is far from his priority. The honeymoon period which attended the election of Boko’s Umbrella for Democratic Change is quickly drawing to a close. Just days after Boko’s shock election win in November, President Donald Trump swept back into power in the United States – and set the world economy on a path of trade war, tariffs and turmoil.

Botswana, the world’s second-largest producer of diamonds by volume, finds itself exposed to an underperforming global market for the stones, Trump’s caprice, and the very real threat of 37% tariffs on its exports to the US.

The IMF expects the economy to shrink by 0.4% this year – hardly encouraging grounds for the promised employment revival. Given such a discouraging start, can Gaolathe build the economy that Boko promised his voters?

While cognisant of the worsening global economy, the finance minister insists that his plans to impose fiscal discipline, diversify the economy, reinforce policymaking credibility and invest in transformative infrastructure remain unchanged.

“We have to be optimistic because, as I continue to say, we’ve been blessed with all the ingredients we need to build our country. The first of our priorities is to halt the haemorrhaging of our fiscus [treasury], because even though Botswana over the last few decades has outperformed everyone else on the African continent, we need to accept that there has been a period of lapse which has taken place, arguably, over the last 12 years or so.

“The fiscal discipline we used to have has broken down. In the past it was accepted that we don’t allow politics to interfere with the work of the professionals that manage the economy, particularly the finance ministry; we contaminated that culture; we allowed politics to make the economic decisions.

“We threw away priorities and the emphasis on investing for the future – infrastructure – in favour of immediate consumption. We allowed corruption to set in. So our first priority is to halt all this, and I believe that given that we have been there [in office] a few months, we’ve already done well on that front.

“You find we’re allowing politics to a large extent not to decide what makes sense in economics. We are galvanising ourselves around priorities, managing properly again, building capacity and our capabilities around properly managing infrastructure, doing things on time.”

The unemployment challenge

It’s a vision of fiscal conservatism that does not often find favour with voters in Southern Africa, but Gaolathe believes it will chime with investors and help to achieve the hugely ambitious jobs goal that Botswana’s citizens demand the new administration meet.

While the country has long been a standout economic performer in Africa, largely due to its judicious management of diamond revenues – it was ranked sixth on the continent in 2024 with a GDP per capita at purchasing power parity of $19,039, according to the IMF – its people have long suffered from elevated unemployment.

It was a joblessness rate of over 23% – perhaps 11% higher among the country’s youth – that provoked the unprecedented electoral revolt against the BDP. In many voters’ eyes the ruling party had grown complacent after six decades in office.

The softly-spoken son of Baledzi Gaolathe, the former finance minister under Presidents Festus Mogae and Ian Khama, pulls few punches in assessing the past. He argues that the governing elite and civil service have proven themselves unequal to the challenges of running a modern economy: training has lagged; knowledge of cutting-edge sectors is weak; and the country has produced too few engineers, ICT experts and tradespeople, he says.

“We don’t have the capabilities and capacity to do what the modern world requires. We don’t have the capacity to structure the public-private partnerships that we need to build mega-infrastructure projects. We don’t have capabilities to leverage and bring out the best of AI and tech.

“We need to build it. We need to retrain and revitalise the government civil service. We’ve never experienced the type of unemployment levels we have now, particularly of young people and educated young people. The education system has been purely geared to creating social sciences graduates. Unemployment is highly educated. This means we have a real opportunity to upskill rapidly to AI, tech, and indeed there are steps we’re taking and partnerships we’re putting in place.”

Keeping the state out of business

Gaolathe argues that the dead hand of the state has stifled Botswana’s economic potential, including through an extensive network of state-owned enterprises (SOEs).

“The second priority is that we need to modernise, revitalise and restructure our state-owned enterprises. In a small economy like that of Botswana, that has maybe 50 SOEs across every sector, from water and power to telecoms and financial services, these are an important part of the economy.

“If it’s not efficient, if its sub-optimised, if governance is not strong, if you don’t have enough competent CEOs, that affects the economy in a big way,” he says.

The VP says the government is looking to proceed with plans to unbundle power generation and transmission while allowing the private sector to enter the market. In agriculture, Gaolathe says the country’s huge ranching economy – it boasts up to 2.8m head of cattle – is to be freed from the strictures of the state-run Botswana Meat Commission and its monopoly role in beef exports.

That process began under the last government and will be completed. “We’re allowing different players into different parts of the food value chain. In financial services we are much more open to partnerships to bring technical expertise and capital.

“All of these SOEs are very much scalable, they can become continental players… We have not really had a forecast on sectors that have the highest prospects of success – it’s time we did. In the past, government poured money into SMEs [small and medium enterprises] because it was popular. Now we need to support commercialised, high-productivity agriculture.”

The idea of this diversification drive, he says, is not that diamonds will play a smaller role in the economy – but that “everything else will play a bigger role than it used to.”

In a straitened fiscal climate, one of Gaolathe’s major premises is that much can be achieved with self-funding public-private partnerships. In particular, he wants to push forward with a string of what he refers to as “mega-infrastructure” projects – including massively boosting road and railway connectivity to the major urban centres in neighbouring Southern African countries – that will one day pay for themselves. Still, he adds ruefully, “we will always need borrowing” to optimise investments.

On 16 May the African Development Bank confirmed it would loan $304m to “cushion Botswana from the financial shock caused by declining diamond revenues”.

All that glitters

If Gaolathe still sounds as though he’s operating from the opposite benches, it may be a reflection of the speed with which events have proceeded in recent months. After years on the sidelines, President Boko and his team no longer enjoy the luxury of opposition – they find themselves having to make decisions of immense consequence for the future of Botswana.

Perhaps the government’s most significant move so far was the signing of a long-delayed 10-year diamond sales agreement with De Beers, in which it has a 15% shareholding and with which it runs the 50-50 Debswana joint venture.

Few African countries and companies have a more symbiotic relationship than Botswana and De Beers – and against the backdrop of a struggling global diamond market and speculation over the sale of De Beers by parent company Anglo American, it was crucial for both parties that the deal extension brought a measure of certainty.

Under the final deal, Botswana’s state-owned Okavango Diamond Company will sell 30% of Debswana’s rough diamond production in the first five years of the deal and 40% for the second five years; De Beers will sell the rest. That 40% could be increased to 50% under a proposed five-year extension.

Both parties will supply stones to the domestic industry in a bid to boost local value addition. Debswana’s mining licences, which were due to expire in 2029, will be extended until 2054. Gaolathe says the government will establish a diversification fund from diamond proceeds which will operate like a private equity fund to invest in emerging entrepreneurs and sectors.

“We have us a good deal and we trust that it will carry us into the future. To the people of Botswana, this agreement is about you, about the jobs it will create,” President Boko said at the signing ceremony.

With an eye to the future, Gaolathe says the success of the deal will be dependent on skills and technology transfer.

“The generation before had good relations with De Beers; the generation currently believe maybe that the type of relationship that the generation before had was not entirely optimal.

“We believe there’s more that can be done. When you look at diamond production in Botswana, a lot of technology emanates from De Beers. Even though our country has created a lot of engineers and diamond people, we haven’t been able to develop our capacity as a country, our own proprietary knowledge of the mining process.

“Botswana by now should really be a leader on the African continent, not based on De Beers – we should be in the lead in terms of our knowledge, we should be selling technology to miners across Africa. We should be conversant with all the processes from aggregation to mining, and leaders in a longer value chain as well as the design and manufacture of jewellery.”

Gaolathe was not drawn on whether Botswana will increase its stake in De Beers, which could be one way of ensuring greater skills and technology transfer. Anglo American, which has an 85% stake in the miner, is looking to sell after taking impairments of $2.9bn on De Beers in 2024 alone, amid fierce competition from lab-grown diamonds. But he says that pragmatism will be the watchword of future relations.

“Frankly, every young generation doesn’t like multinationals, whether in Africa or anywhere else… we need to be responsible enough to be pragmatic, we need the right, balanced relationships where there is value derived on all sides.”

Trump’s tariff threat

Looming behind an already unsettled diamond market is the spectre of Donald Trump. The US president’s insistence that a trade deficit with a country means that it is being subsidised by the US has put Botswana in the president’s line of fire.

According to the office of the US Trade Representative, US goods imports from Botswana in 2024 were $405.1m, down 17.4% from 2023. By contrast, US goods exports to Botswana in 2024 were $104.3m, up 52.7% from 2023. The US goods trade deficit with Botswana was $300.8m in 2024, a 28.7% decrease on 2023.

In Trump’s “Liberation Day” tariffs announcement, Botswana was slapped with a tariff rate of 37%, the fourth highest rate in Africa. That rate has been replaced by the 10% universal tariff on all exports to the US, pending a three-month review. But the danger facing Botswana is clear. Does Gaolathe think that the US can be persuaded to relent prior to the reimposition of the higher tariff?

“On this one I want to keep my cards close to my chest. But I think what has to be said is the following. At least in the case of diamonds, the US doesn’t have diamonds, the US doesn’t produce diamonds, yet the US has created a huge sector out of diamonds, the jewellery sector, a lucrative sector that generates employment, that has high wages, that is good for the US.

“Our diamond exports to the US don’t take anything away; there is not unfairness to the US. If anything, we have added great value to the US, we’ve given them the opportunity to create an entire sector which they wouldn’t have without our diamonds, which pays well.”

While guardedly diplomatic in his response, it is clear that Gaolathe sees the policy as deeply misguided.

“We believe that the US has the right to look out for their interests, but the fact is our exports are in their interests because it builds their economy. In tax its economics 101, all that happens is that it [the tariff] is a consumer tax. It basically raises prices on diamond products. It’s a consumer tax on themselves. It doesn’t do anything else to help them.”

A punishing 37% tariff from the US could put Botswana’s job creation ambitions even further out of reach. Pending economic diversification, Botswana still remains reliant on diamonds: according to the IMF, the stones account for around 80% of exports, one third of fiscal revenues, and one quarter of GDP.

As he leaves the Cambridge Union building and emerges into the sunshine of an English spring, Gaolathe says the work of attracting new partners in multiple sectors must begin in earnest.

“We have sat down with the President and leadership and asked ourselves, what type of partners are we looking for? The first thing is: we’re looking for partners in it for the long term, not for the quick buck. The second is: those that have the types of insights and experiences we don’t have. The third, I’m embarrassed to say but must say, is that we’re looking for partners with deep pockets! And the fourth is: partners who want to be associated with who you are.”