Synthetic Gem Quality Diamonds and their Potential Impact on the Botswana Economy

Abstract

This paper considers the development of synthetic gem quality diamonds and the potential impact on Botswana, the world’s largest producer of mined diamonds by value. The paper considers the rapid growth of CVD diamonds in the past 20 years and argues that there is reason to believe that given the market conditions prevailing in the mined gem quality diamond industry, synthetics do constitute a serious threat to the industry. There is consideration of the price decay function in light of the experience of synthetic industrial diamonds as well as the impact on mining tax revenue. There is an analysis of the various actors in the diamond industry and their response to synthetics. Policy responses to the threat of synthetics are considered in the final sections. While the diamond and jewellery industry has responded to the threat of synthetics, there has been no attempt to address the most serious risk, which is the possibility of a sudden and catastrophic loss of confidence by consumers in the long term market value of diamonds. The paper argues for mandatory global documentation and disclosure of mined and synthetic diamonds.