Botswana’s state-owned Okavango Diamond Company (ODC) is seeking a substantial $300 million credit facility from local banks to support an anticipated increase in diamond purchases, according to Finance Minister Peggy Serame’s announcement on Thursday. The initiative comes as part of a broader strategy to augment the country’s revenue from its diamond resources.
Established in 2012, the ODC was designed as an independent conduit for the Botswana government to sell diamonds outside of the traditional De Beers framework. Currently, ODC sources 25% of its diamond production from Debswana, a joint venture between Botswana and Anglo American’s De Beers. The recent agreement between Botswana and De Beers, which was finalised in June 2023, outlines a new 10-year diamond sales arrangement. Under this deal, ODC’s share of Debswana’s output is set to increase from 30% initially to 50% by the conclusion of the contract, reflecting Botswana’s push to enhance its diamond revenue.
In light of a $140 million working capital facility that matured in 2023, ODC has engaged Standard Chartered Bank to orchestrate and manage a new $300 million syndicated revolving working capital facility. Currently, ODC’s purchasing capacity is limited to $70 million based on its own cash reserves. Minister Serame has sought parliamentary approval for a $175 million government guarantee to underpin this new credit facility.
“The $175 million government guarantee will be instrumental in supporting ODC’s elevated 30% entitlement to Debswana’s rough diamond supply and will assist the company in securing favourable terms within the local market,” Serame explained to legislators.
The diamond sector is currently experiencing a downturn, evidenced by a 49% drop in sales at Debswana during the first half of the year. In response to a global reduction in demand for jewellery, ODC temporarily suspended its rough diamond sales in October last year, aiming to alleviate the excess inventory affecting the cutting and polishing industry.
Looking ahead, Serame anticipates a recovery in global diamond demand in the fourth quarter of 2024. The availability of the proposed credit facility would position ODC to capitalise on this expected market rebound.
