On Tuesday, the Botswana government finalized a significant diamond sales agreement with De Beers, marking a pivotal moment for its economy after seven years of negotiations.
This new deal enhances the government’s stake in diamond sales through Debswana, the joint venture with De Beers, which is a subsidiary of Anglo American.
The agreement is expected to bolster Botswana’s economic landscape, as the nation is recognized as the largest producer of diamonds by value and ranks second in volume, following Russia.
Diamonds play a crucial role in Botswana’s economy, contributing approximately 80% of the country’s exports and accounting for a quarter of its GDP, as reported by the International Monetary Fund.
However, the recent downturn in diamond prices and demand has severely impacted the economy, becoming a focal point during last year’s national elections.
The ruling party, which had been in power for 58 years since gaining independence from British rule, was ousted in a surprising election outcome largely driven by public discontent over economic challenges linked to the diamond sector.
The newly established 10-year sales agreement stipulates that the government will receive a 30% share of Debswana’s sales for the first five years, increasing to 40% in the subsequent five years, with a potential five-year extension that could lead to a 50-50 split.
In exchange, De Beers has secured a 25-year extension of its mining licenses in Botswana, extending from 2029 to 2054.
President Duma Boko, who took office following the recent elections, emphasized the importance of this agreement, expressing confidence in its potential to foster a prosperous future for Botswana.
Over the past ten years, Botswana has been the site of remarkable discoveries, unearthing some of the largest rough diamonds in the world.
Among these was a stunning 2,492-carat diamond found last year, which stands as the second-largest ever extracted from a mine and the largest in over a century.
This extraordinary gem was unearthed by the Canadian mining company Lucara, showcasing the rich potential of Botswana’s diamond reserves.
In 2021, Debswana, a joint venture between the Botswana government and De Beers, made headlines with the discovery of a massive 1,098-carat diamond, marking it as their largest find to date.
This significant discovery further solidified Botswana’s reputation as a leading player in the global diamond industry, highlighting the country’s geological wealth and the expertise of its mining operations.
However, despite these impressive finds, the economic landscape for Botswana’s diamond sector has faced challenges.
In the first nine months of 2024, Debswana reported total sales of $1.53 billion, a stark decline of over 50% compared to $3.19 billion during the same timeframe in 2023, as noted by the Botswana central bank.
The World Bank has pointed out that Botswana’s heavy dependence on diamond exports has rendered its economy susceptible to fluctuations, emphasizing the need for diversification to ensure long-term stability.
