Tense Talks Result in a Favourable Diamond Deal for Botswana

By Prince Kurupati

The Botswana government and DeBeers agreed to a new diamond deal late on Friday, 7 July, just hours before the previous deal was due to expire. The new deal will run for 10 years, and it means DeBeers will maintain its hegemony as Botswana’s official diamond sales partner.

The Botswana government and DeBeers have been working as partners in the diamond sales sector since Botswana attained its independence. Debswana, which is jointly owned by the Anglo-American (AAL.L) unit and the Botswana government, is the mining partner. After mining, the previous Debswana deal, which expired last Friday, stipulated that De Beers cede 25% of all mined rough diamonds to the Botswana government, with the rest going to DeBeers. The new agreement, however, is much more favourable to the Botswana government as it increases the government’s portion to 30% in the first year of the agreement to 50% in the last year.

“From the start of the new contract period ODC(Botswana state-owned Okavango Diamond Company) will receive 30 per cent of Debswana production, progressively increasing to 50 per cent by the final year of the contract, ensuring a sustainable transition path for both partners,” DeBeer said in a statement.

Botswana President Mokgweetsi Masisi had threatened to sever ties with its diamond mining and sales partner if its share was not increased. Earlier on in May, President Masisi publicly criticised the country’s deal with DeBeers. Since 2018, the negotiations have been stalling owing to this demand, but DeBeers eventually backed down just hours before the expiry of its previous deal.

In addition to the 10-year sales deal for Debswana’s rough diamond production, the new agreement also caters for a 25-year Debswana mining license valid until 2054. As reported by Reuters, DeBeers, as part of the new agreement, “will pump in 1 billion pula ($75 million) towards a diamond fund which would invest in ‘additional value to the Botswana economy’… the contributions would grow 10 times over the next 10 years”. The New York Times weighed in, saying that part of the diamond fund will be used to “establish an academy in Botswana that will train locals in skills in the diamond trade”.

Speaking on Botswana’s demands for more investment apart from the rough diamonds portion it receives as part of the Debswana agreement, DeBeer’s chief executive Al Cook said, “I believe the deal (diamond fund) that we have agreed does all of that”.

In a joint statement released after the signing of the new agreement, DeBeers and the Botswana government said, “The transformational new agreements between Botswana and DeBeers reflects the aspirations of the people of Botswana, propels both Botswana and DeBeers forward, and underpins the future of their Debswana joint venture through long term investment”.

The Botswana economy is heavily reliant on diamonds, with two-thirds of foreign currency revenue coming from diamond mining, sales and ancillary. Botswana is currently the number 1 diamond producer by value in the world.