BOTSWANA STILL BETTING ON ITS DIAMONDS
The renewal of De Beers’ sales agreement with Botswana, which is due in 2020, will provide the country with an opportunity to use its diamonds to further boost its economy
The partnership between De Beers and Botswana has undergone major changes recently due to the 2011 renewal of the sales agreement between Debswana Diamond Company and De Beers.
The 2011 deal saw De Beers move its global sightholder sales division from London to Gaborone, meaning that 90% of its diamonds are now sold from there, including stones from South Africa, Namibia and Canada.
De Beers sells most of its diamonds to between 70 and 80 so-called sightholders – pre-approved buyers with long-term off-take agreements.
De Beers CEO Bruce Cleaver said: “They all have different kinds of businesses. Some can deal with big diamonds, some can deal with different shapes and colours, and so on.”
Instead of going to London, these companies now send 150 to 200 people to Gaborone 10 times a year for sights that last for up to a week
Another development from the 2011 deal was the creation of the state-owned Okavango Diamond Company, which is essentially a small version of global sightholder sales division that gets to sell 15% of Debswana.
This complements the 15% stake Botswana has in the overall De Beers group.
Botswana has also drawn in a number of cutting and polishing operations. Before 2008, there were two in the country, and now there are 20.
Mineral revenues amount to about a third of Botswana’s national budget, but can fluctuate wildly.
In this year’s budget, mineral revenue was projected at 17 billion pula (R22 billion) compared with 19 billion pula last year and 15 billion pula the year before
Debswana, De Beers’ mining entity in Botswana, is owned 50-50 with the government. The government, however, gets 80% of its mining profits due to royalties. Those profits derive from selling 85% of Debswana diamonds to De Beers’ sales arm.
The other 15% of Debswana’s diamonds gets sold to the Okavango Diamond Company.
This new part of the partnership gives the government 15% of the trading profits, which previously all went to De Beers.