Botswana: Diamonds Without the Curse

How Botswana turned from one of the world's poorest countries into an upper-middle-income economy by managing diamond wealth well.

When Botswana became independent from Britain in 1966, it was one of the poorest countries in the world. It had very few paved roads, few university graduates and an economy based on cattle. Within decades, it became one of the fastest-growing economies in the world and an upper-middle-income country. Its story is one of Africa’s most remarkable.

The diamond discovery

Shortly after independence, large diamond deposits were discovered, including at Orapa and later Jwaneng, one of the richest diamond mines in the world. Many countries rich in natural resources have suffered from corruption, conflict and slow growth, a pattern called the resource curse. Botswana largely avoided it.

How Botswana did it

A good deal with the mining company: the government formed a joint venture with De Beers called Debswana, owned equally by the two, giving the state a large share of diamond revenue.
Strong institutions: Botswana maintained democratic elections, a relatively independent judiciary and a professional civil service.
Careful spending: diamond revenue was invested in roads, schools, health care and water supply rather than wasted.
Saving for the future: Botswana set up the Pula Fund, a savings fund, to save part of its revenue.
Low corruption: Botswana has consistently ranked among the least corrupt countries in Africa.

Economists Daron Acemoglu, Simon Johnson and James Robinson have argued that inclusive institutions, partly inherited from pre-colonial traditions of consultation and limited chiefly power, were key to Botswana’s success.

Education from diamonds

Botswana used diamond revenue to expand education dramatically. At independence, the country had very few secondary school graduates. Within decades, it had expanded schooling and built a national university. The diamonds were finite, but investing their revenue in people created lasting value.

Challenges

Botswana still faces serious problems. It remains heavily dependent on diamonds, which make up most of its exports. Falling demand for natural diamonds, partly due to laboratory-grown diamonds, has hurt the economy in recent years. Inequality and unemployment are high, and the country was badly affected by HIV and AIDS. Diversification remains its central challenge.

Thinking Botswana succeeded simply because it had diamonds

Many countries have valuable resources and remain poor. What made Botswana different was how it managed its wealth: good institutions, a fair deal with the mining company and investment in public services. The diamonds were an opportunity; the choices made them a success.

Key takeaways

Botswana was among the world's poorest countries at independence in 1966.
It used diamond wealth to become an upper-middle-income country.
Its joint venture Debswana, strong institutions and careful spending helped avoid the resource curse.
Heavy dependence on diamonds, inequality and unemployment remain challenges.