The Botswana government has signed a new 10-year agreement with De Beers, enhancing its share of diamond sales from Debswana, the joint venture company. This deal, resulting from seven years of negotiations, reflects a response to economic difficulties stemming from the diamond industry’s downturn. The agreement aims to increase Botswana’s financial stake in diamond revenues while securing extended mining rights for De Beers.
GABORONE, Botswana — After seven years of negotiations, the Botswana government has finalized a significant new diamond sales agreement with the De Beers mining company. This crucial deal for Botswana’s economy was signed on Tuesday and enhances Botswana’s share of diamond sales through the Debswana joint venture with De Beers, a subsidiary of Anglo American.
Botswana is renowned for being the largest producer of diamonds by value and the second-largest by volume, following Russia. Approximately 80 percent of Botswana’s exports and a quarter of its GDP are derived from diamonds, as per the International Monetary Fund.
The diamond industry in Botswana has faced harsh challenges, such as declining prices and demand, impacting the economy and swaying the outcome of the previous year’s national elections. This dissatisfaction led to the ousting of the long-standing ruling party, which had held power for 58 years due to the economic downturn associated with the diamond sector.
The new agreement outlines a progressive increase in the government’s share of Debswana’s sales, starting from 30 percent for the first five years and increasing to 40 percent for the subsequent five years. Additionally, the contract includes a provision for a five-year extension that, should it be executed, will result in a 50-50 split for both parties.
In exchange for the adjusted sales agreement, De Beers has secured a 25-year extension of its mining licenses in Botswana, extending from 2029 to 2054. In 2023, the parties had expressed general consensus about the terms but delayed finalizing the contract until now.
President Duma Boko emphasized the importance of this agreement at the signing ceremony, stating, “We are people of durable relationships. We have us a good deal and we trust that it will carry us into the future.” Botswana has discovered significant rough diamonds, including a historic 2,492-carat gem in 2022.
Despite such discoveries, Debswana’s total sales fell sharply, with reported earnings of $1.53 billion in the first nine months of 2024, a notable decline from $3.19 billion during the same timeframe in 2023. The reliance on diamonds continues to expose Botswana’s economy to vulnerabilities, as identified by the World Bank.
The recent agreement between Botswana and De Beers marks a pivotal restructuring of the diamond sales framework, boosting Botswana’s financial share while extending De Beers’ operational rights. Despite recent economic downturns, this agreement aims to foster a more sustainable relationship in the diamond sector, reflecting the new government’s priority to stabilize the economy. Continued dependence on diamonds presents ongoing challenges, highlighting the need for diversification.
Original Source: www.zimlive.com
