On Tuesday, the Botswana government secured a landmark diamond sales deal with De Beers, marking a significant achievement for the country’s economy after seven years of intensive negotiations.
This new agreement strengthens the government’s stake in diamond sales through Debswana, the joint venture with De Beers, which is a subsidiary of Anglo American. This move is expected to have a substantial positive impact on Botswana’s economy, further cementing its position as a major player in the global diamond industry. Botswana is currently the world’s largest producer of diamonds by value and ranks second in production volume, behind Russia.
Diamonds have long been a cornerstone of Botswana’s economy, contributing around 80% of its exports and a quarter of its GDP, according to the International Monetary Fund (IMF). However, recent declines in both diamond prices and demand have significantly affected the nation’s economic stability, becoming a central issue in the recent national elections.
In a surprising election outcome last year, the ruling party, which had governed for 58 years since Botswana’s independence from British rule, was ousted, largely due to public dissatisfaction with economic issues tied to the diamond sector.
The newly concluded 10-year sales agreement outlines that the government will receive 30% of Debswana’s sales during the first five years. This share will increase to 40% in the following five years, with a possibility for a five-year extension that could lead to an even split of 50-50. In return, De Beers has secured a 25-year extension of its mining licenses in Botswana, ensuring operations from 2029 to 2054.
President Duma Boko, who assumed office following the elections, expressed his optimism about the deal, calling it a pivotal moment for Botswana’s future prosperity. He believes the agreement will provide a solid foundation for the country’s economic growth.
Botswana has recently made headlines with some remarkable diamond discoveries. In the past decade, the country has unearthed some of the largest rough diamonds in history, highlighting its immense geological wealth. One such gem, a massive 2,492-carat diamond found last year, is the second-largest diamond ever discovered, and the largest in over a century. It was unearthed by Canadian mining company Lucara, reinforcing Botswana’s reputation as a major diamond-producing nation.
Additionally, in 2021, Debswana made a record-breaking discovery of a 1,098-carat diamond, the largest in its history, further showcasing Botswana’s standing in the global diamond market.
Despite these impressive finds, Botswana’s diamond sector is facing significant challenges. In the first nine months of 2024, Debswana’s total sales amounted to $1.53 billion, a sharp decline of more than 50% compared to $3.19 billion during the same period in 2023, as reported by the Botswana central bank. The World Bank has warned that Botswana’s heavy reliance on diamond exports makes its economy vulnerable to market fluctuations, highlighting the need for diversification to ensure long-term economic stability.
Main Image: Diamond World
