Botswana, De Beers ink deal on diamond
The Government of the Republic of Botswana and the De Beers Group have reached a preliminary agreement for a 10-year sales agreement for Debswana’s rough diamond production until 2033.
This agreement is significant as Debswana is a mining company that operates four diamond mines in Botswana and is the world’s leading producer of diamonds by value. The government of Botswana and De Beers each own a 50% stake in Debswana.
The two parties have also agreed to a 25-year extension of the Debswana mining licensing deal, which will now run until 2054. The joint statement released by De Beers and the Botswana government states that this agreement reflects the aspirations of the people of Botswana and supports the long-term investment and future of the Debswana joint venture.
Key highlights
One of the crucial aspects highlighted in the deal is the increased share of Debswana’s supply that will be sold through the Okavango Diamond Company (ODC). Currently, the ODC has access to 15% of Debswana’s mine production, but under the new contract, this share will progressively increase to 50% by the final year of the agreement. The ODC is the rough diamond marketing company owned by the Botswana government.
The negotiations between the parties were tense and public, with the Botswana government pushing for a larger share of rough diamonds from the Debswana mine. President Mokgweetsi Masisi had threatened to walk away from the deal if their demands were not met. However, De Beers argued that the government already receives a substantial share through taxes and royalties from the diamond mines in the country.
As part of the agreement, there will be a long-term capital investment to secure Debswana’s position as one of the world’s leading diamond producers and Botswana’s largest private employer. An upfront investment of around $75 million will be made to the Pula Diamonds for Development Fund, with additional contributions of up to $750 million over the next 10 years. The Pula Fund is a sovereign wealth fund co-owned by the Botswana government and the Bank of Botswana.
The agreement is expected to create tens of thousands of new jobs in Botswana, both within the diamond industry and emerging sectors, with a focus on supporting the growth of a knowledge-based economy. It is seen as a transformative agreement that aligns with the country’s aspirations.
If the agreement had not been reached, it would have been detrimental for both parties. De Beers relies on Botswana for approximately 70% of its rough diamond supply, while the diamond industry contributes around 30% of Botswana’s revenue and 70% of its foreign exchange earnings.
The industry has played a crucial role in providing free education, free healthcare, and plans for a more diversified future in Botswana. Debswana alone employs about 6,300 individuals, with the majority being local citizens, and DTC Botswana, the sorting and marketing arm of De Beers, employs approximately 500 skilled diamond sorters and salespeople, most of whom are also locals. The Okavango Diamond Company has around 27 employees according to reports.
