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De Beers Extends Botswana Sales Deal As It Negotiates New Contract 1536x952 1 1024x635

Statement on Botswana’s Stance on the De Beers deal

The Southern Africa Resource Watch (SARW) sees credence in the government of Botswana’s stance to walk away from a diamond mining deal with industry giant De Beers if the firm does not accept better terms than the current ones.

The deal of 2011 on diamond sales expires in June this year. Under the 54-year-old joint venture – Debswana between De Beers and the Botswana government, 75% of the output is sold to De Beers, while 25% goes to the state-owned Okavango Diamond Company.

The expiry presents the country with an opportunity to renegotiate a bigger share of its diamonds, especially since De Beers has fully paid back its capital investment. This deal is important for a country whose economy is dependent on diamonds. In the new deal, Botswana should have more control over how much value the country’s rough production generates further down the supply chain after it is cut and polished. The best scenario for Botswana is to get shares from value-added and polished diamonds than raw diamonds.

Generally, there is a sentiment that Botswana is in a strong position to push for a 50-50 arrangement on the diamond sales agreement. However, the centrality of Diamonds to the country’s economy gives it less wiggle room. Diamond sales, almost entirely from Debswana, account for two-thirds of Botswana’s foreign currency receipts and a fifth of its gross domestic product.

To bolster Botswana’s negotiations, other African diamond-producing countries, especially South Africa and Namibia which also have a partnership with De Beers – a unit of Anglo-American, need to add their voice in solidarity because of the precedence this deal will set for the continent. A unified position by Africa will uphold the aspirations of the African mining vision and change the future dynamics of negotiations of mining contracts and deals. This is especially important given the growing interest in Africa’s critical minerals required for the energy transition.

SARW however advises the government of Botswana to immediately explore concrete options would this deal fall-off so that it does not destabilize this critical sector of the economy. The government should take this as an opportunity to be more transparent on its contracts to ensure adequate public scrutiny and accountability which are key in promoting better management of the resources and collective understanding of the decisions that will be taken and the use of the revenues.

Botswana supplies 70% of De Beers’ rough diamonds which makes it an important investment for the company. To De Beers as well, a win-win might not necessarily mean getting the dominant share but rather a shift towards a more favourable deal to host countries after more than 50 years of an unbalanced formula. Although it is a tough call to forgo profit maximization, the company stands on the verge of making history that might shift the entire global industry towards becoming fairer and just.

SARW notes how crucial this deal is for Botswana and Africa and appeals to both parties to consider the mutual benefit but most importantly secure the best deal for the people of Botswana.

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