Botswana Aims To Conclude De Beers Contract Talks by April

Mining and Exploration
14/02/2020 15:08

Botswana reportedly plans to conclude negotiations with De Beers on a diamond sales agreement by the end of April to replace the current 10-year deal that expires in January, write Matthew Hill and Mbongeni Mguni for Bloomberg

The previous 10-year contract stipulated that the Diamond Trading Company International (DTCI) would relocate its sights, aggregation, sales and marketing activities from London to Gaborone, Botswana, a move that took place in 2012. However, De Beers Diamond Trading Company (DTC) continued to sort and value Debswana’s production before selling it to the DTCI - Debswana operates four diamond mines (Orapa, Letlhakane, Damtshaa and Jwaneng) and recovered 24.1 million carats in 2018. The government of Botswana also secured the right to sell 10% of Debswana’s production independently.

It now appears that the government is looking to expand the part of the agreement that concerns activities beyond diamond mining, as it aims to facilitate more polished diamond manufacturing in the country, creating jobs and boosting the state coffers, according to Lefoko Moagi, the Minister of Mineral Resources, Green Technology and Energy Security. “We now want further to move into the value space; the bottom end of the business which involves your valuation, your pricing, cutting and polishing, marketing, selling, jewelry making," he said.

As Bloomberg writes, "An agreement is crucial for both parties." The fortunes of both the diamond mining company and the southern African nation are inexorably linked. Not only is Botswana De Beers' largest and most lucrative diamond-producing country, but it is also one of its two primary shareholders, holding a 15 percent stake in the enterprise, alongside the 85 percent stake owned by Anglo American. Meanwhile, Debswana, which is Botswana's dominant diamond producer, is jointly owned by De Beers and the government of Botswana, with each holding a 50 percent share. Botswana accounts for more than two-thirds of De Beers’ production, while the country relies on the gems for 90% of its exports and wants to derive as much benefit as possible from its mineral wealth. “We are looking at April, not beyond, for all of this to happen and be successfully concluded,” Moagi said. De Beers, for its part, is clearly committed to the country of Botswana, but has been reticent about the negotiations thus far.

Matthew Hill and Mbongeni Mguni conclude by pointing out that while Botswana’s economy grew 3.5% in 2019 after averaging nearly 4% from 2016 to 2018, unemployment at 18% is still high, especially for youth, according to the African Development Bank. The government wants to boost employment in the diamond sector through a new deal with De Beers, said Moagi. “What more really we need is to see jobs coming through, we want to see young people participating in these jobs,” he said.