The Bank of Namibia (BoN) has stressed the urgent need for the country to diversify its economy and reduce reliance on the mining sector, especially diamonds, given the ongoing challenges in the global market.
The central bank’s latest monetary policy announcement underscored the impact of declining diamond prices and called for diversification efforts to ensure economic stability.
“From an advisory standpoint, it’s time to diversify and avoid putting all our resources into one sector. While we do have a diversified mining sector, we need to focus on further diversifying the economy as a whole,” said BoN Governor Johannes !Gawaxab.
He acknowledged the significance of diamonds to Namibia’s revenue but emphasised the challenges facing the sector.
“Diamonds are very important for our country in terms of revenue for our country. But the diamond industry is going through a very difficult time, not only in Namibia but throughout the world,” he said.
According to !Gawaxab, three primary factors are driving the downturn in the diamond sector.
“One, the demand for diamonds from the big markets, the US and China, has declined. So that’s the first reason. The second big reason that we have got is that you have got severe competition from lab-grown diamonds. And you are so right that, year on year, the prices of diamonds have reduced from about US$465 per carat to about US$325 per carat,” he said.
The governor noted that the downward trend in diamond prices is expected to negatively impact government revenue and spending, prompting BoN to recommend a diversified approach to mining investments.
Despite the challenges in the diamond sector, other commodities have shown resilience, with gold and uranium providing some relief to the country’s mining output.
The governor stressed the importance of economic diversification beyond mining.
Meanwhile, global commodity price trends have varied, with diamonds, uranium, and zinc experiencing declines, while gold and copper prices have risen.
BoN noted that weaker global demand and increased competition from synthetic diamonds continue to place downward pressure on the sector.
