Botswana leader sees new diamond pact with De Beers

Source: BWgovernment (Facebook)

The Botswana government and De Beers are in “cordial” negotiations about a new diamond-sales pact to replace their current 10-year deal which expires in 2020 and it should be concluded after next month’s election, President Mokgweetsi Masisi said.

“Everything is going as planned,” Masisi said Thursday in an interview with Bloomberg TV at the World Economic Forum on Africa in Cape Town. 

“We need to improve the profitability of the business for both of us. So great returns for both of us.”

The southern Africa nation is the world’s biggest diamond producer after Russia, and the gems generate the bulk of the country’s export revenue. Most of its diamonds are mined by Debswana, a 50-50 joint venture between the government and De Beers. Anglo American owns 85% of De Beers, with Botswana’s government holding the balance.

Masisi declined to give the details of the negotiations or the preferred duration of the new pact. A global economic slowdown is affecting both diamond sales and prices negatively and having a knock-on effect on Botswana’s economy, but the government expects the downturn to be temporary, he said.

Diamonds were discovered in Botswana in 1967, the year after it gained independence from Britain. Revenue earned from gem sales transformed the nation from an undeveloped farming community into one of the continent’s wealthiest societies and was used to pave thousands of miles of dirt roads and build schools and clinics. Tourism and livestock farming are the other major industries.

Botswana is one of the continent’s most stable countries — it has never experienced civil war or a coup and has Africa’s highest credit rating at Moody’s Investors Service. A former schoolteacher and vice president, Masisi, 58, was appointed the nation’s leader in April last year when Ian Khama stepped down. The two men have since fallen out over Masisi’s decision to reverse a hunting ban and high levies on alcohol to curb consumption.

Elections scheduled for October 23 will see Masisi’s Botswana Democratic Party compete against a Khama-linked breakaway party that’s formed a loose alliance with the Umbrella for Democratic Change coalition. Khama is the son of the country’s first president, Seretse Khama and still yields some influence in the nation of 2.3 million people.

Masisi said the BDP had been reinvigorated and his victory was “a done deal.” He pledged to transform the government and re-prioritise spending to create jobs.

“Top of the agenda is to revamp the pace and posture of the public service, of our institutions, our education services, our social services, our health sector, our infrastructure,” he said. 

“We are making the collection of tax more efficient. We are inviting more investors to come in and many have come in. We are liberalising, opening up the economy.”

Botswana on track to sign new diamond sales deal with De Beers after elections

Discussions regarding a new 10-year sales agreement were described by Masisi as “cordial”. They come amid depressed prices for rough diamonds which De Beers has said might show a revival by the end of the year.

De Beers said last month sales for the seventh sight came in at $280m, somewhat higher than the $250m sold in the previous cycle, but 44% lower year-on-year. Commenting during Anglo American’s interim results presentation on July 25, De Beers CEO, Bruce Cleaver said there was no need for panic regarding the diamond market. He said there was “reasonable demand” in the downstream sector.

Bruce Cleaver

“It is still robust; there is reasonable demand, it is not awful. So as long as you have downstream demand you would expect the midstream to play themselves out over time,” he said. 

Cleaver added, however, that De Beers would be marketing in order to boost fourth-quarter sales on which the fortune of the year seem largely to turn.

“It is not a bad space but we will spend money on marketing to boost the fourth quarter. There is no need to adjust expectations,” said Cleaver.


3 months ago

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