Botswana Secures Enhanced Diamond Sales Agreement with De Beers

Botswana has signed an improved ten-year diamond sales agreement with De Beers, boosting its share from 25% to 30% initially, and then to 40%, with an option for a 50-50 split afterward. The deal follows a significant decline in diamond sales, representing about 80% of Botswana’s exports. This agreement is crucial for the economy, which has been impacted by recent market challenges.

The Botswana government has finalized a significant new agreement with De Beers, the major diamond mining company, enhancing their diamond sales partnership after seven years of negotiations. The deal establishes an increasing share of diamond sales to Botswana through Debswana, the joint venture between the government and De Beers, a subsidiary of Anglo American.

As the world’s leading diamond producer by value, Botswana’s economy heavily depends on diamonds, which constitute around 80% of its exports and roughly 25% of its GDP, according to the International Monetary Fund. However, a recent decline in diamond prices and demand has adversely affected the economy, contributing to political changes after a national election that resulted in the exit of a long-standing ruling party.

Under the new ten-year agreement, the government’s share of Debswana’s diamond sales will rise to 30% for the first five years and then to 40% in the subsequent five years. There are provisions for a five-year extension of the agreement where the shares would be split evenly. In return, De Beers has secured a 25-year extension on its mining licenses in Botswana, lasting from 2029 to 2054.

Following the conclusion of broad agreement terms in 2023, the finalization of this deal became a priority under the leadership of new President Duma Boko. During the signing ceremony, President Boko expressed confidence in the enduring relationship, 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 continues to yield some of the largest diamonds globally, including a historically significant 2,492-carat diamond discovered last year. However, recent sales reports indicate a significant drop, with Debswana’s sales falling from $3.19 billion to $1.53 billion within the first nine months of 2024. Economists note that the country’s heavy reliance on diamond exports has rendered its economy vulnerable to fluctuations in the diamond market.

In conclusion, the enhanced ten-year agreement between Botswana and De Beers signifies a pivotal moment for Botswana’s diamond economy, aiming to secure a more favorable share for the government while addressing existing economic vulnerabilities. The outcome reflects a commitment to collaboration amidst the challenges posed by a declining diamond market, with aspirations for a strengthened economic future. The signing marks a new chapter for Botswana under the leadership of President Duma Boko, emphasizing the importance of strategic partnerships in navigating economic landscapes.

Original Source: www.newsday.com