HB, gov’t equity deal signing ‘imminent’
Mbongeni Mguni | Monday May 22, 2023 06:00
Speaking at the launch of HB’s local subsidiary in late March, President Mokgweetsi Masisi announced that government had decided to take up equity in HB Antwerp and provide the firm with a portion of the Okavango Diamond Company's (ODC) rough diamond supply for five years.
Details of the value of the equity stake and the percentage of ODC’s supply going to HB Antwerp were due to be clarified two weeks after the launch when the two signed a formal agreement.
Last November, HB signed a 10-year deal with Lucara last year under which stones from Karowe bigger than 10.8 carats are sold through HB at prices based on the estimated polished values, rather than the industry standard where traders purchase based on rough values. An earlier 24-month arrangement between HB and Lucara reportedly resulted in 40% higher diamond royalties to the Botswana government over the period.
“While the completion date for the deal is still being finalised, it is set to be imminent,” HB Botswana communications manager, Omogolo Mathumo said in an emailed response to BusinessWeek. “Long-term, together with Botswana and ODC, what we want is to ensure a successful partnership, not only for us but for the government and Batswana.”
It is believed the negotiations ongoing between government and HB Antwerp centre on allocations from the ODC, and the sizes of stones to be channelled through the Belgium firm, frequency of supply and other factors. The ODC is entitled to purchase up to 25% of Debswana’s production and at present, it sells this as rough through spot auctions throughout the year, as well as arrangements with platforms such as the Dubai Multi Commodities Centre.
Industry insiders say the ODC has generally bought less than its entitlement from Debswana over the years and the envisaged contract with HB, the state diamond trader’s first sales deal, will provide a firm marketing and revenue avenue.
HB officials declined to specifically answer BusinessWeek’s questions on the negotiations with government and the ODC and whether these would focus on larger stones. BusinessWeek had also asked whether HB had a target for the upside it would seek for government on the stones from ODC.
“The HB-Botswana partnership will not only yield better returns ultimately leading to better revenue for the government, but it will also introduce different jobs and skills, attract international partners like Microsoft and MIT, and create data to see how Botswana is performing on its assets,” Mathumo said. “It will also position Botswana as a brand, a luxurious destination for tourists.”
He added: “The pricing model we have developed accounts for the estimated polished value of each diamond, giving governments access to profits from polished – rather than rough diamonds. “Through this model, countries of origin will rightly benefit from their natural resources.”
Mathumo said HB was “very proud” to be working with Botswana to pioneer “an entirely new, innovative approach to how extractive industries can benefit communities for the better”.
“Our goal is to replicate this model to successfully create a scalable, state-of-the-art infrastructure based on excellence, fairness, honesty, and maximum value for all stakeholders.” Government’s equity stake in HB will be the state’s first shareholding in any private diamond-type entity since it burnt its fingers in the DiamonEx collapse around 2015. Government is an equal equity partner with De Beers in Debswana, under a 54-year-old deal which is currently being renegotiated. The state also holds 15% equity in De Beers, alongside Anglo-American.