*Economic trouble for BW as diamonds continue to struggle
*Diamond industry top of the agenda for President Boko
In a worrying sign of the times, sales of rough diamonds at Debswana dropped by more than half during the first nine months of the year.
According to data released by Bank of Botswana (BoB) on Tuesday, by the end of September, the mining giant had sold $1.53 billion worth of diamonds, considerably less (52 percent) than the $3.19-billion managed over the same three-quarter period last year.
Debswana, equally owned by Botswana and Anglo American’s De Beers, sells 75 percent of its output to De Beers, with the remaining 25 percent going to the state-owned Okavango Diamond Company (ODC).
Last year, Botswana and De Beers agreed to a new 10-year diamond sales agreement, where ODC will receive 30 percent of Debswana’s produce, an amount that will be scaled up to 50 percent by the end of the contract.
The deal was approved in principal, although the two parties were still to iron out the finer details.
Now, following last week’s stunning general elections result, there will be a new diner at the table.
With little time to waste, newly-elected President, Duma Boko has already taken a stance to conclude talks with De Beers as soon as possible.
“The relationship with De Beers could have been damaged by the way the negotiations were handled. The first thing that needs to be done is to engage the other party. A proper negotiation involves compromise, where you get a bit of what you wanted; the other person gets a bit. Then you have a durable, sustainable agreement,” said Boko adding his administration wants to engage with De Beers to understand its concerns.
Adding an extra layer of intrigue to the situation, Anglo American is desperate to divest in De Beers as part of a broader restructuring of its business.
Back in July, then President, Mokgweetsi Masisi revealed his government were considering increasing its shareholding in De Beers from its current 15 percent; it remains to be seen if the new regime follows this course.
The world’s top producer of diamonds by value, Botswana gets 30-40 percent of its revenue, 75 percent of its foreign exchange earnings, and a third of its national output from diamonds.
However, as has been well documented, the price of diamonds is falling fast, as is demand.
In the important markets of China and the United States, demand has virtually collapsed while artificial diamonds grown in laboratories are becoming increasingly popular.
This means that Botswana’s state revenues are also collapsing.
Almost 80 percent of the country’s export revenue comes from the diamond business. In July, the International Monetary Fund slashed Botswana’s growth forecast for 2024 from 3.6 percent to 1 percent.
Jan – Sep 23 $3.19 billion
Jan – Sep 24 $1.53 billion
