De Beers Deal Is Boon for Botswana’s Economy, President Says

Jennifer Zabasajja and Mike Cohen
·3 min read
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(Bloomberg) -- A new deal Botswana signed this month with De Beers will give it access to more diamonds and help it secure 10 billion pula ($762 million) in development funding, President Mokgweetsi Masisi said in an interview.

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The 10-year arrangement between the gem giant, a unit of Anglo American Plc, and the world’s second-largest producer is crucial to both sides and plays a central role in the global diamond supply chain.

“We’re very happy with the outcome. It could have been better but you know with a partnership you’ve always got to give as you take,” Masisi said in an interview with Bloomberg TV in Gaborone, Botswana’s capital. The funds will help Botswana “diversify the economy and improve the diamond value chain” and help impart skills to young people and create jobs, he said.

Under the new accord, Botswana’s state-owned diamond trader will get 30% of output from Debswana, the De Beers unit that generally accounts for about two-thirds of the group’s annual production. The government said there’s also an agreement — still tentative at this stage — for that share to eventually increase to as high as 50%.

Read more: De Beers Loses More Diamonds to Botswana in Last Minute Deal

Botswana’s Okavango Diamond Company currently gets 25% of Debswana production. The agreement with De Beers includes a new 25-year mining licenses for Debswana. It also provides for De Beers to invest 1 billion pula up front in a so-called Diamonds for Development Fund and contribute about 9 billion pula more over the duration of the contract.

More gems will be now processed within Botswana and tax revenue is set to “vertically increase,” Masisi said. “The deal with De Beers is one that is going to make a big difference.”

Botswana’s government had become increasingly vocal of the 54-year-old agreement, and threatened to walk away if it didn’t provide more benefit to the country. The partnership with De Beers remains enduring and solid, the president said.

Tensions between the authorities and De Beers also arose over the role of Belgian gem trader HB Antwerp, which has established a close relationship with the government. Earlier this year Botswana said it was taking a 24% stake in the company, without disclosing how much it paid, and would get some supply from ODC.

Botswana sees no conflict with De Beers over its ties with HB Antwerp and is open to taking a bigger stake in the Belgian gem trader, but that would depend on the attractiveness of any deal, according to Masisi.

“If it makes businesses sense we will talk to them,” he said. “We are in business, you know.”

Other highlights:

  • The government is open to approaching international debt markets for funding and has space to take on new loans. “It depends on the projects that we put together and the position of the economy,” Masisi said.

  • Botswana is seeking additional investments in industries including livestock, tourism and vaccine production.

  • Production of copper, nickel and other minerals is expected to increase.

  • The country plans to start exporting fruit to the US and European Union.

  • Oil exploration and fracking won’t be allowed to take place in the environmentally sensitive Okavango Delta region. Oil exploration is taking place in other areas.

--With assistance from Nadine Theron and Paul Richardson.

(Updates with details of De Beers deal starting in second paragraph.)

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