Botswana has signed a vital 10-year diamond sales agreement with De Beers, enhancing government revenue from diamond sales through a joint venture called Debswana. The agreement outlines a gradual increase in the government’s share from 25% to 40%, reflecting the pressing economic concerns posed by declining diamond prices and output. Newly elected President Duma Boko emphasized the importance of durable relationships in securing this agreement.
On Tuesday, the Botswana government formalized a pivotal 10-year diamond sales agreement with De Beers, concluding seven years of negotiations. This agreement is vital for Botswana’s economy, as it provides the government with an increasing portion of diamond sales through the Debswana joint venture with De Beers, a subsidiary of Anglo American. Botswana is recognized as the largest producer of diamonds by value and ranks second in volume globally, following Russia.
Diamonds constitute approximately 80% of Botswana’s exports and contribute nearly a quarter to its GDP, according to the International Monetary Fund. However, recent declines in diamond prices and demand have seriously impacted the nation’s economy, sparking significant political changes, including the ousting of a long-standing ruling party during the last national election, primarily due to economic hardships linked to the diamond industry’s downturn.
The new agreement stipulates that the government’s share of Debswana’s sales will rise from 25% to 30% during the first five years and subsequently to 40% over the next five years. Additionally, there is a provision for a five-year extension, potentially leading to a 50-50 sales share. In exchange, De Beers has been granted a 25-year extension for its mining licenses in Botswana, valid from 2029 to 2054.
Although terms for the agreement were generally established in 2023, the formal signing was pursued aggressively by new President Duma Boko, who assumed office following the October elections. At the signing ceremony, he stated, “We are people of durable relationships. We have us a good deal and we trust that it will carry us into the future.”
In recent years, Botswana has produced several significant rough diamonds, including the 2,492-carat diamond discovered last year by Lucara, which is the second-largest ever mined. Furthermore, in 2021, Debswana unearthed its largest diamond to date, weighing 1,098 carats. However, the company’s sales figures illustrate a stark decline, with total sales dropping from $3.19 billion in the first nine months of 2023 to $1.53 billion in the same period of 2024, raising concerns about the economy’s ongoing vulnerability due to its heavy dependence on diamonds.
The newly formalized diamond sales agreement between Botswana and De Beers marks a crucial advancement for the nation’s economy, promising increased government revenue from diamond sales. However, the ongoing decline in diamond prices and the economic challenges that have surfaced in recent years remain significant factors affecting Botswana’s economic landscape. Continued adaptation and strategic partnerships will be key to ensuring future economic stability.
Original Source: spectrumlocalnews.com
