Botswana’s President Mokgweetsi Masisi’s government has successfully negotiated a renewed deal with De Beers, the world’s largest diamond company, securing a 54-year partnership that has been vital for the country’s economic growth. The agreement, reached just before the deadline, ensures the continued marketing of diamonds from Botswana and brings substantial benefits to both parties involved.
Under the terms of the new 10-year sales agreement, Botswana’s diamond production from the Debswana joint venture will be marketed by De Beers. Additionally, the mining licenses for De Beers have been extended by 25 years, solidifying their long-term commitment to the country. In a joint statement, both parties describe the agreement as “transformational” and aligned with the aspirations of the people of Botswana, guaranteeing long-term investment and propelling both Botswana and De Beers forward.
The previous deal, established in 2011, allocated 25 percent of diamond output to Botswana for sale, with the remainder going to De Beers. The interim agreement will maintain these terms while the formal agreement is being finalized. President Masisi’s government had made it clear that a better production share was a priority, and they were prepared to walk away from the negotiations if necessary. With De Beers relying on Botswana for approximately 70 percent of its rough diamond supply, or 24 million carats, last year, the outcome of the negotiations was crucial for both parties.
For Botswana, diamond mining plays a pivotal role in its economy, contributing a third of the nation’s gross domestic product and propelling it to become Africa’s sixth richest nation per capita. The country’s aspirations go beyond mere mining, as President Masisi aims to move Botswana up the value chain by increasing the cutting and polishing of diamonds within the country itself. This renewed partnership with De Beers is seen as a significant step in achieving that goal.
De Beers has long argued that Botswana receives a substantial portion of the value generated from its diamonds, considering the taxes and royalties involved. However, uncertainties surrounding the costs of extending the life of Jwaneng, Debswana’s flagship and the world’s largest diamond mine, have complicated the future of the relationship between De Beers and Botswana. Analysts suggest that Anglo American, the owner of De Beers, should evaluate the strategic value of the diamond miner within its group portfolio, citing potential economic implications resulting from the negotiations.
To add further pressure on De Beers during the negotiations, Botswana entered into a deal, yet to be finalized, to acquire a 24 percent stake in HB Antwerp, a Belgian diamond manufacturer. This move could offer an alternative channel for Botswana to market its diamonds, potentially altering the dynamics of the diamond industry.
Market Insights:
The renewal of the partnership between Botswana and De Beers has significant implications for both the country and the diamond industry as a whole. Botswana’s economy heavily relies on diamond mining, and this agreement secures the nation’s position as a major player in the industry. With President Masisi’s vision to move up the value chain, Botswana aims to enhance its diamond cutting and polishing capabilities, which would generate more value domestically and create job opportunities.
For De Beers, the partnership with Botswana remains vital as the country provides a substantial portion of the company’s rough diamond supply. However, the uncertainty surrounding the costs of extending the Jwaneng mine’s lifespan poses challenges and raises questions about the future of De Beers within Anglo American’s portfolio.
