Should Botswana buy a bigger stake in De Beers?

Mbongeni Mguni | Thursday August 14, 2025 10:34

A bigger stake in De Beers would fulfil Botswana’s dream of controlling the diamond industry from mine to market and the company’s valuation is possibly at its cheapest ever. However, a larger stake also means shouldering more for projects such as the $6bn Jwaneng Underground. MBONGENI MGUNI writes

With Anglo American’s 85% stake in De Beers up for grabs and the sale process heating up, all eyes are on the other shareholder in the diamond group, the Government of Botswana.

“President Duma Boko remains resolute in his quest to increase Botswana’s stake in De Beers to ensure Botswana’s full control over this strategic national asset and the entire value chain including marketing,” Minerals and Energy minister, Bogolo Kenewendo was quoted as saying recently by the Financial Times.

Increasing the country’s stake, officials say, would allow Botswana to control its destiny by giving it control over its most strategic asset, the stones that have built up the modern Republic from its agrarian origins.

A 15% equity partner in De Beers since 2004, Botswana is eager to exercise its pre-emptive rights and increase its stake to a controlling one – a figure that is technically set at 51%.

The statements the Financial Times attributes to Kenewendo suggest government wants to go beyond 51% and take over full ownership of De Beers.

Mmegi is informed that the government has engaged Swiss advisers to negotiate with Anglo American, ramping up a sale process that has taken centre stage in the global diamond industry.

For its part, Anglo American has confirmed its talks with government, as well as other suitors, a process Botswana is involved in assessing as a shareholder in De Beers. Anglo American CEO, Duncan Wanblad told analysts last week that the process had reached a shortlist of suitors and potential takeover partners, following on from the initial interests expressed.

“On the trade sale route, we are currently engaging with a credible set of interested parties in a formal process now,” he said in a virtual monitored by Mmegi. “In parallel we have been engaging with the government of Botswana in respect of its interest to increase its shareholding in De Beers.”

Anglo is however still keeping open its option of exiting De Beers via the open offer of shares to the public.

“A trade sale absolutely remains our preferred exit route for the business but only if we can find the right buyer on the right terms. “In parallel we are progressing preparatory activities for a capital markets process should that become the preferred route for our shareholders,” he said.

For Botswana, snapping up Anglo American’s shares would be the culmination of dreams held since the diamond boom of the 1970s. Securing full or a controlling stake in De Beers would give Botswana a “mine to market” hold on the natural diamond industry, allowing the country to reap the benefits of value creation along the pipeline from producing the stones to the retail end.

Botswana is not only one of the largest producers of natural diamonds in the world, but one that enjoys global ethical goodwill, is emblematic of the future of sustainable mining and also hosts an increasing proportion of the midstream of cutting and polishing firms.

This unique positioning in an industry worth upwards of $85 billion means the country can cement its centrality and dictate the strategic direction of an existentially significant sector. Having been beholden to the vicissitudes of diamonds over the decades, the booms and busts that have blessed and burnt citizens, Botswana would for once hold its destiny in its hands – for better or for worse.

In addition, analysts note that De Beers has never been cheaper for the taking, as Anglo American has written down the diamond group’s value several times in recent years due to the prolonged diamond downturn.

With the right move at the right time, Botswana could snap up a strategic asset on the cheap and in doing so, right the mistakes of 2011 when the government of the day passed on an option to increase its shareholding to 25%. At the time, the Oppenheimer family, which held 40% in De Beers, was exiting and had offered its fellow shareholders, Anglo American and the Government of Botswana, optionality on the shares.

“Such a purchase would have raised the government debt to GDP ratio thus precluding the government from raising additional debt in the international markets for other projects,” government said at the time.

Anglo, which at the time held 45%, pounced on the shares, paying $5.1 billion to increase its stake in De Beers to 85%.

While the idea of a controlling stake appears rosy, the flip side can be summed up in the popular phrase “more money, more problems”.

Those against the idea say while De Beers is at its cheapest, there’s no guarantee of a recovery in natural diamond valuations in the short or even medium term, given the structural damage done by synthetics.

Billions could be spent on an industry that may not pump out the returns it historically has, resulting in short to medium term negative yields and longer-term flat results. While Anglo American, as a private investor, has and had the stomach to ride out periods of turbulence and high risk in the investment, the same may not obtain for a government funded by taxpayers and beholden to their expectations and demands, as expressed electorally every five years.

Others argue about the prudence in a fiscally strained period of spending billions on an asset whose ownership runs counter to the critically required transformation and diversification the economy has been desperately seeking for decades. Put another way, if billions of Pula are available, there are more strategic, sustainable and longer-term investments that can be made while diamonds can remain under the purview of a strategic private sector partner.

More critically however, industry insiders point out that any additional stake government takes in De Beers opens it up to higher funding commitments for capital projects and marketing at De Beers.

“The Jwaneng Underground alone, which is the future of De Beers, is expected to cost $6 billion and government would essentially have to fund most of that, because De Beers’ own books are dry. “Major projects such as Cut 8 had to involve direct shareholding funding and at the time, Botswana funded by foregoing dividends. “Under the new agreement with De Beers, the shareholders have to pump more directly into capital projects and joint marketing and as the sole shareholder if full control is taken, this would be the sole responsibility of Botswana,” a diamond sector analyst told Mmegi.

In an exclusive interview from his base in New York, leading global diamond industry analyst, Paul Zimnisky, told Mmegi that government’s push for a controlling stake was likely not the best course of action.

“In my humble opinion, I think it would be in Botswana’s best interest to focus more on diversifying the economy rather than doubling down on diamonds,” he said in written responses. “I do think the diamond industry could still have a bright future ahead if everyone plays their cards right, but it’s risky to be all-in on one industry. “Secondly, when it comes to running a business I think public-private partnerships tend to work best when the government does not have the controlling share and instead leans on a strong private partner. “Governing and running a business are two separate things.”

According to Zimnisky, De Beers remains at the centre of the future of diamonds and the new owner needs vast amounts of capital and a long-term strategy.

“Diamonds are a luxury product and this industry requires patience: longer-term investment and longer-term strategy planning. “This means there will be peaks and troughs and panicking during a trough could not only prolong the lull but damage the longer-term viability of the industry. “For instance, there is now talk of dumping high volumes of diamonds into the market to raise revenue – but this would be at the detriment of consumer perception of diamonds. “The focus should be on coming up with ways to sell fewer diamonds at higher prices e.g. this is done through creating desire for natural diamonds with successful marketing and storytelling. “This is also the best way for natural diamonds to compete with lab-diamonds in my opinion. “Natural diamonds cannot compete with lab-diamonds on price, so don’t try – this is a suicide mission,” he said.

Creating desire for natural diamonds is a strategic focus the entire industry agrees on and for De Beers, this forms the core of restoring value to the business. All stakeholders involved in the ongoing sale process agree that there needs to be an injection of value in De Beers – no one, not government, Anglo American or even the industry, would like to see the 137-year old titan go for a song.

A giveaway price would lower values across the industry, knock the luxury positioning of natural diamonds and cast serious doubts on the industry’s future.

The quickest and most stable way of recovering value, analysts say, is through demand creation.

Botswana, along with other African diamond producers and companies such as De Beers and industry groups, recently signed the Luanda Accord where they pledged to set aside one percent of revenues for natural diamond marketing.

The campaign, run under the Natural Diamonds Council, is set to kick off soon with an emphasis on the platforms being used by Gen Zs, the emerging buyers of diamonds.

Government officials, Anglo American and De Beers executives agree that signs of stability and recovery are emerging in diamonds, despite the knock from the U.S tariffs.

For Botswana this points to not only a timely boost to the flagging fiscus and economy, but also more food for thought on the De Beers’ stake.

For Zimnisky, the focus should be on securing the ideal partner for De Beers, a transaction which will reverberate around the global diamond industry.

“A well-capitalised, stable partner that is focused on longer-term value and legacy creation for Botswana diamonds would be an ideal partner in my view,” he told Mmegi. “One that will not make hasty decisions when times get difficult. “To be fair, De Beers has ultimately played this role in the past.”

The brains trust within government has its work cut out for it, in making a play for De Beers.