Botswana, long considered an African economic success story, is facing a slump due to a prolonged downturn in the global diamond market, its main export. To address this challenge, the country has launched a new sovereign wealth fund aimed at driving economic diversification, creating jobs, and managing state-owned companies.
Unlike the existing Pula Fund, which has been in place for over three decades to preserve diamond income and stabilize government finances, the new fund is focused on growth rather than mere liquidity stabilization. The Pula Fund has been strained by recurring deficits, highlighting the need for a different approach.
The initial board of directors for the new fund includes local and international experts. Farouk Gumel, the fund’s board chair, explained that the fund will manage not only cash but also assets such as state-owned enterprises. Emma Peloetletse, deputy board chair, emphasized that the fund will draw only from returns generated by investments, without touching the capital itself. Investments can be made both within Botswana and internationally.
Botswana’s economy has been contracting, with a 3% decline recorded last year and further contraction expected in 2025 due to falling diamond revenues. Diamonds still account for approximately three-quarters of the country’s exports and one-third of its fiscal revenue, underscoring the urgency of diversifying the economy through the new sovereign wealth fund.
