*President shrugs off IMF warning and justifies De Beers acquisition
Despite warnings from International Monetary Fund (IMF) advising Botswana against increasing its stake in De Beers due to economic pressures and the country’s heavy reliance on diamonds, President Duma Boko has stood firm on the decision.
Speaking at a Kgotla meeting in Kanye on Monday, Boko said Botswana fully understands the implications of acquiring a larger share in the global diamond giant.
“Others are saying don’t buy De Beers, yet it gets 70% of its diamonds from Botswana and we only own 15% of it. We want to take a bigger share and become the real owners. The IMF is not Batswana. They are not the ones feeling the pinch of low standards of living because our resources add value outside the country. Seventy percent of De Beers’ production comes from Botswana. We are therefore buying De Beers,” said Boko adding that since De Beers is anchored by local diamonds, acquiring the company will make Botswana the headquarters of the global diamond industry.
IMF is of the view that Botswana‘s fiscal risk is compounded by the fact that the government has expressed interest in increasing its 15% participation in De Beers. Anglo American is currently in the process of selling its 85% stake in De Beers. Botswana has indicated its intention to increase its shareholding from the current 15% to a majority stake. Angola and Namibia have also expressed interest in participating in a potential deal.
“Once we acquire De Beers, we will have control over who it partners with, how diamonds are marketed, and which beneficiation initiatives to pursue, including local cutting, polishing, and the production of luxury jewellery, creating thousands of jobs in the process, “said Boko.
The IMF in its review of Botswana’s fiscal situation published this December believes the challenging situation in the diamond market creates considerable uncertainty for Botswana. Botswana is in a tight corner because of weak demand for natural diamonds and the need to diversify its sources of economic growth, according to the document. The IMF expects the country’s economic activity to continue contracting this year, reflecting further decreases in diamond production as well as activities outside the mineral sector.
“The decline in demand for natural diamonds has been sharper and is expected to be more persistent than anticipated. It has contributed to a sharp economic contraction in 2024, to the persistence of high unemployment, particularly among the youth, and to sizable increases in the fiscal and current account deficits.” read the report, further warning that buying De Beers could well increase public debt.
While IMF has no power to block Botswana from increasing its stake in De Beers, its warning carries significant weight with investors, lenders and rating agencies, particularly as the government explores financing options for a multibillion-dollar acquisition. Anglo values De Beers at $4.9 billion but many in the industry believe the company’s true worth is considerably less.
