Gem Diamonds’ decision to lay off 240 workers, representing one-fifth of the staff at its flagship Letseng mine, has highlighted the mounting strain on Lesotho’s diamond-dependent economy, already battered by U.S. tariff uncertainty and weak global demand.
On Thursday, the company reported a half-year loss of $11.7 million, a sharp reversal from a $2.1 million profit a year earlier, as revenue plunged 42% amid falling diamond prices..
Letseng, renowned for producing some of the world’s most valuable stones including the 910-carat “Lesotho Legend,” has been forced to revise its mine plan and trim operations in response to weakening market conditions.
Gem Diamonds CEO Clifford Elphick attributed the cuts to “sustained pricing pressure, softer demand in key markets, ongoing macroeconomic and geopolitical uncertainty, and tariff uncertainties in respect of India.”
Reuters reports that the company booked a $10.7 million impairment on Letseng and reported an average diamond price of $1,008 per carat in the first half of 2024, a 26% decline compared to the same period last year.
Production also fell to 47,125 carats, down from 55,873 in the same period of 2023. According to the Zimnisky Global Rough Diamond Price Index, rough diamond prices have plunged nearly 35% since early 2022, driven by changing consumer preferences and the growing appeal of lab-grown alternatives.
Trade tensions disrupt India’s diamond imports from Lesotho
The decline in global diamond prices has been particularly damaging for Lesotho’s trade with India, one of its key buyers.
In 2023, Lesotho exported $85.8 million worth of rough diamonds to India, its third-largest market after Belgium and the UAE.
However, tariffs linked to global trade tensions are straining this long-standing relationship. Higher or uncertain duties have made Indian firms more hesitant to import Lesotho’s gems, squeezing margins for both sides.
For Lesotho, which relies heavily on diamond exports for revenue, this means less foreign exchange and weaker trade flows, while India’s cutting and polishing industry faces rising input costs and disrupted supply chains.
The strain deepened after President Donald Trump imposed sweeping tariffs on Lesotho’s exports earlier this year, initially as high as 50% before being suspended. Even so, a 10% levy on U.S.-bound exports remains, adding to the uncertainty.
The Lesotho government has since declared a national state of disaster, warning of mounting youth unemployment and job losses tied to the tariff war.
Already dependent on diamonds and textiles as its main export earners, the country now faces the dual hit of falling gem revenues and escalating trade frictions, exposing its vulnerability to global economic shocks.
