Partnership with DeBeers: Botswana’s diamond deal on the brink

Botswana is considered the best mining country in Africa, and diamonds are the backbone of the economy. The government’s partner has been industry giant De Beers for over 50 years. President Masisi is now threatening to change that.

In fact, it’s a successful model. Botswana and De Beers jointly mine diamonds with joint venture Debswana. It belongs to both sides equally. This agreement is considered one of the most successful public-private partnerships in Africa. Debswana extracts almost all of the rough diamonds from the country’s mines. According to the company, production last year was 24 million carats, the second largest amount in the world after Russia.

Botswana wants to grind more itself

75 percent of the gemstones are sold to the industry leader De Beers, a subsidiary of the global mining group Anglo American. The remaining 25 percent goes to the state-owned Okavango Diamond Company (ODC), which was founded in 2011 to independently market gemstones.

Botswana wants to increase the ODC share and no longer just earn from rough diamonds. President Mokgweetsi Masisi left no doubt about that when he opened a gem-cutting and polishing facility in Gaborone in March. The plant is operated by the Belgian company HB Antwerp, in which Botswana has secured a 24 percent stake. Masisi stressed: “It is time that Botswana did not just engage in mining diamonds and selling them without processing them. The returns derived from the sale of our value added diamonds are much higher than that from the sale of rough diamonds alone.”

Top Secret Negotiations

Masisi has already openly threatened to drop negotiations with De Beers if Botswana does not receive a higher stake. Both sides have been negotiating a new agreement that regulates the sale of rough diamonds since 2018. The current one expires in June – time is of the essence. The talks are top secret. Nothing leaks out, and De Beers has one too ARD-Request not made.

Dithapelo Keorapetse, leader of Botswana’s largest opposition party, recently complained in parliament that the government does not allow enough transparency in mining contracts. “Who are the guardians? Who checks these agreements? What is the role of Parliament?” he asked.

Is it all just an election campaign?

Botswana is considered one of the richest, most democratically stable and least corrupt countries in Africa. An estimated 35,000 people work in the diamond industry. Investors therefore seem unsettled. Many analysts say President Masisi is playing at risk. He is jeopardizing a successful partnership for a win in next year’s general election. Even Minerals and Energy Minister Lefoko Moagi said in January that anything disrupting the diamond trade would unsettle the market.

Some financial experts question whether it would make economic sense at all for Botswana to be entitled to a larger share of its rough diamonds. They cite recent media reports from Botswana that the ODC cannot even sell the 25 percent of rough diamonds it is already entitled to. However, various economists agree that it would be catastrophic if there is no agreement by June.

Allegations against De Beers

The government in Gaborone, the media report, is also investigating a study according to which De Beers is said to have evaded taxes in Botswana between 2013 and 2020. According to an investigation by the tax authorities, the diamond producer owes the state four billion Pula, the equivalent of a good 280 million euros. Analysts speculate the government may want to replace De Beers with competitors. However, they emphasize that De Beers is so dominant in the industry that it is difficult to switch him off.

President Masisi did not give any figures. He did not say publicly what share of rough diamonds he would like for Debswana in the future. However, he recently emphasized that Botswana has always been a prudent and sensible country. This gives employees, financial experts, retailers and investors hope that a new arrangement with De Beers will apply from July.