The Largest Diamond Producer Faces Falling Demand 0 9

The authorities of Botswana are increasing taxes for businesses and citizens to compensate for the decline in diamond sales and to reduce the growing budget deficit.

The Ministry of Finance this week submitted proposals to parliament to raise the corporate income tax by 2.5 percentage points to 24.5%. The upper rate of personal income tax is also planned to be increased by 2.5 points to 27.5%.

According to data published by the Ministry of Finance, the deficit in the next financial year could reach 8.9%. Meanwhile, the established benchmark is 4%.

Finance Minister Ndaba Gaolathe emphasized in his speech that the government needs stable revenues. "Every government needs sufficient revenues to effectively perform its functions," he stated. "Taxation is not a form of punishment. It is a collective investment in our common development."

Not long ago, Botswana was the world's largest diamond producer by value of extraction. Uncut diamonds accounted for about a third of all budget revenues and brought in the majority of foreign currency earnings for the southern African country. However, since 2023, demand has begun to decline. The main reason is the rapid spread of synthetic stones, which are displacing natural diamonds from the market.

According to the finance minister, in the upcoming financial year, revenues from mineral extraction will account for only about 16% of budget revenues. The majority of revenues—45%—are expected to come from taxes in the non-mineral sector, including income tax and value-added tax.

The country's largest diamond mining company, Debswana Diamond Co., has already reduced its production volumes and cut its expenses. Management does not expect a quick recovery in the market.

"In 2026, we still expect the market situation to remain quite tense," said the company's CEO Andrew Maatla Motsomi in an interview. "We hope that in the second half of 2027, the situation will begin to improve."