Botswana has secured a ten-year diamond sales agreement with De Beers following seven years of negotiations. The deal increases the government’s share of sales through Debswana, crucial for the economy. This move aims to address declining diamond prices and stabilize the economy since diamonds comprise 80% of exports and 25% of GDP.
GABORONE, Botswana — The government of Botswana has finalized a significant ten-year diamond sales agreement with the De Beers mining company after a protracted seven-year negotiation process. This agreement, vital for Botswana’s economy, allows the government to receive an increased percentage of sales through its joint venture with De Beers, known as Debswana. The deal highlights the importance of diamond revenue, which constitutes 80% of exports and approximately 25% of Botswana’s GDP according to the IMF.
As the world’s largest producer of diamonds by value and the second largest by volume, Botswana’s economy has faced challenges due to declining diamond prices and demand. This downturn became a critical topic during national elections last year, leading to a substantial change in government. The newly elected President Duma Boko has prioritized finalizing this sales agreement as a way to stabilize and enhance the economic landscape.
Under the new agreement, Botswana will gradually increase its share of diamond sales from Debswana, starting at 30% for the initial five years and moving to 40% for the subsequent five years. Furthermore, there is a provision for a five-year extension, where the share would equalize to 50%. In exchange, De Beers will receive a 25-year extension of its mining licenses in Botswana, extending from 2029 to 2054.
Despite recent successes, such as the discovery of some of the largest diamonds globally, including a remarkable 2,492-carat gem found last year, the country’s diamond sales declared by the central bank have significantly dropped. Sales totaled $1.53 billion in the first nine months of 2024, a decline of more than 50% compared to the same period in 2023. The World Bank has pointed out that Botswana’s heavy reliance on diamonds poses risks to the stability of its economy.
The new diamond sales agreement between Botswana and De Beers marks a critical step in addressing the economic challenges faced by Botswana, especially in a context of declining diamond prices and demand. With future sales shares set to increase, the government aims to bolster its revenue from this vital resource. Continued dependence on diamonds remains a concern, emphasizing the need for diversification in Botswana’s economy.
Original Source: www.thespec.com
