Botswana’s government has signed a new diamond sales agreement with De Beers, increasing its share of sales from 25% to 30% initially and 40% later, amidst economic challenges due to declining diamond prices. The deal includes a potential extension for equal shares and a 25-year license extension for De Beers. President Duma Boko affirmed the importance of the agreement for Botswana’s economic future.
The government of Botswana has successfully negotiated a crucial new diamond sales agreement with De Beers following seven years of discussions. This agreement, significant for Botswana’s economy, will increase the government’s share in diamond sales from the joint venture, Debswana, which is a collaboration between the government and De Beers, a subsidiary of Anglo American.
Diamonds represent approximately 80% of Botswana’s exports and account for a quarter of the national GDP, as reported by the International Monetary Fund. Despite being the leading diamond producer by value and second by volume, the country faces economic challenges due to declining prices and demand for diamonds, which were highlighted in recent elections.
The new 10-year deal stipulates that Botswana will receive a 30% share of Debswana’s sales for the initial five years, increasing to 40% in the subsequent five years. Furthermore, there is an option for a five-year extension of the agreement, potentially raising the share to 50-50. In exchange, De Beers has secured a 25-year extension of its mining licenses in Botswana, extending from 2029 to 2054.
Newly elected President Duma Boko stressed the importance of sustaining strong relationships during the contract signing ceremony, emphasizing that the deal symbolizes a promising future for Botswana. The nation has recently uncovered significant rough diamonds, including a record-breaking 2,492-carat stone found by Canadian firm Lucara last year.
However, further economic concerns persist as Debswana’s sales fell to $1.53 billion in the first nine months of 2024, down over 50% from $3.19 billion in the same timeframe last year. The World Bank has highlighted that Botswana’s heavy reliance on diamond exports renders its economy vulnerable to fluctuations in the global market.
In summary, Botswana’s new diamond sales agreement with De Beers represents a strategic move to enhance the government’s share and secure long-term benefits amidst economic challenges. The deal, forged after extensive negotiations, aims to address declining revenues from diamond exports, which have historically been central to Botswana’s economy. The increased stake in diamond sales reflects the government’s commitment to ensuring sustainable economic growth and stability for the future.
Original Source: www.thespec.com
