Botswana and other 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 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.

Botswana's main source of income

"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% of its gross domestic product (GDP) and 80% 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.

Effects of lab-grown diamonds

The economy of Botswana, a 70% desert nation, grew exponentially following the discovery of diamonds in the 1960s. It is already feeling the effects of the lab-grown competition.

As its foreign reserves deplete, the government has turned to debt to fill the public coffers.

Government funds were so low that the health system was significantly affected in August, leading President 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.

International marketing of natural diamonds

Also affected, is Lesotho, where diamonds contribute up to 10% 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."

In a bid to keep the sparkle alive, Angola, Botswana, Namibia, South Africa and the Democratic Republic of Congo pledged in June to allocate 1% 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.

Value propositions

"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.

'So long as everyone is happy'

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."