Botswana has signed a crucial new diamond sales agreement with De Beers after seven years of negotiations. The government will receive an increased share of diamond sales through the Debswana joint venture, with a deeper impact on its economy, significantly reliant on diamonds. This agreement aims to enhance economic stability amid recent declines in diamond demand and prices.
Gaborone, Botswana (AP) — On Tuesday, the Botswana government finalized a significant diamond sales agreement with De Beers, which has been in the works for seven years. This new deal is essential for the nation’s economy and increases Botswana’s share of diamond sales through the Debswana company, a joint venture with De Beers, a subsidiary of Anglo American.
As the largest producer of diamonds by value, Botswana relies heavily on the diamond industry, which constitutes approximately 80% of its exports and a quarter of its GDP, as reported by the International Monetary Fund. However, the country has faced economic challenges following a decline in diamond prices and demand, which influenced the results of a recent national election.
The revised 10-year agreement escalates the government’s share of Debswana’s sales from 25% to 30% for the initial five years, reaching 40% in the subsequent five years. An option for a five-year extension could further increase the government’s share to a 50-50 split. In exchange, De Beers secured a 25-year extension for its mining licenses in Botswana, extending to 2054.
After having agreed to broad terms earlier in 2023, the finalization of this deal was prioritized by new President Duma Boko, who assumed office in October. “We are people of durable relationships,” Boko remarked during the contract signing ceremony, expressing optimism for the future of the partnership.
Botswana has been the site of extraordinary diamond discoveries, including the second-largest diamond ever found, a 2,492-carat stone discovered last year. In 2021, Debswana unearthed its most substantial diamond to date, weighing 1,098 carats. However, total sales dropped significantly, from $3.19 billion in the first nine months of 2023 to $1.53 billion in 2024, as noted by the Botswana central bank, highlighting the economic vulnerabilities tied to diamond dependence.
In summary, Botswana’s new agreement with De Beers marks a pivotal change in its diamond sales that aims to bolster its economy amid declining demand and prices. The government’s increasing share in diamond sales reflects efforts to adapt to economic conditions while ensuring the stability of its mining sector. As the relationship progresses, Botswana hopes to mitigate vulnerabilities and secure economic growth for the future.
Original Source: www.thespec.com
