Botswana has secured a new 10-year diamond sales agreement with De Beers, enhancing its share of profits from 25% to 30% for the first five years, and 40% thereafter, with a potential for equal distribution later. This deal is vital for the economy, which heavily relies on diamond exports. Recent declines in diamond prices have hit the economy hard, influencing political dynamics during elections.
On Tuesday, the government of Botswana finalized a significant diamond sales agreement with De Beers following seven years of negotiations. This new deal enhances the government’s share of diamond revenues from Debswana, a joint venture with De Beers, increasing from 25% to 30% for the first five years and 40% for the subsequent five years, with an option for a five-year extension that could establish a 50-50 split in shares.
Diamonds represent approximately 80% of Botswana’s exports and account for a quarter of its GDP. However, fluctuations in diamond prices and decreased demand have adversely affected the nation’s economy, prompting a shift in political power during a recent election. The former governing party, which held power for 58 years, was ousted due to the economic challenges linked to the declining diamond industry.
The new agreement also grants De Beers a 25-year extension on its mining licenses in Botswana, effective from 2029 until 2054. President Duma Boko prioritized finalizing this agreement upon taking office after the October elections, emphasizing the importance of strong relationships in moving forward successfully.
Botswana has unveiled several of the world’s largest rough diamonds in recent years, including a 2,492-carat stone found last year, marking the largest diamond extraction in over a century. Meanwhile, Debswana’s total sales for the first nine months of 2024 dropped over 50% from $3.19 billion in 2023 to $1.53 billion, indicating the economic vulnerability stemming from the nation’s reliance on diamonds, as reported by the World Bank.
In summary, Botswana’s newly established diamond sales agreement with De Beers marks a crucial economic development for the nation, aiming to alleviate the challenges posed by declining diamond revenues. The arrangement not only enhances government revenue shares but also strengthens the long-term partnership between Botswana and De Beers. The ongoing vulnerability of Botswana’s economy due to its dependence on diamond exports remains a critical concern, with political changes reflecting public sentiment about economic hardship.
Original Source: www.newsday.com
