Botswana and one other: De Beers’ race heats up
Mbongeni Mguni | Thursday October 23, 2025 06:00
Renowned diamond industry expert, Sheila Khama, says Angola’s proposal for a regional partnership to takeover De Beers, is not advisable.
“The idea’s pan-African undertones may resonate with some but is easier said than done,” she wrote in an opinion piece she shared with Mmegi this week. “Consider different legal systems, divergence national development goals, and politics. “Given the idea is driven by a financial sponsor and not national strategies, countries risk derailment by having to follow the vision of the sponsor. “It is too simplistic and short on details including why the Minister is inviting his counterparts through a press statement and not diplomatic channels.”
Khama is a former CEO of De Beers Botswana, a former non-executive director on the boards of Debswana and DTC Botswana as well as a former compliance officer at Anglo American Corporation Botswana.
Her comments come as debate within the industry rages on with Anglo American’s 85% stake in De Beers up for grabs. The larger group, a shareholder in De Beers for more than 90 years, is divesting to focus on minerals such as copper.
Botswana holds 15% equity in De Beers and enjoys a level of pre-emptive rights in the event that the majority shareholder decides to exit. President Duma Boko has said the country is seeking a controlling stake in De Beers, an entity he says is a strategic interest to Botswana and one whose future the country wants more control over.
Other bidders reportedly in the running for Anglo’s stake include a group led by former De Beers CEO, Gareth Penny, as well as another entity linked to the company’s former CEO and chair, Bruce Cleaver.
Anglo American had initially hoped to finalise a sale process by the end of the year, but recent reports suggest it is only now finalising a first round shortlist of bidders. Botswana, as a shareholder, is reportedly heavily involved in the process.
Angola, the most prospective ground for De Beers in terms of exploration, recently issued a statement indicating it would move for a minority stake in the diamond group and wanted to “ensure that no single party dominates”. The country said it preferred a “partnership in which Botswana, Namibia, South Africa and Angola all participate meaningfully”.
Khama said the assumption that having a diamond industry and being members of regional bloc justifies being partners, was flawed.
“It simplistically conflates regional diplomatic alliances with mergers and acquisition. “Conditions in each country offer a more realistic picture. “Firstly, the importance of the industry. Contribution of diamonds to GDP in Botswana it is 20%, 14.4% in Namibia and 1% in RSA. Debswana in Botswana, Namdeb in Namibia, are 50:50 JVs between national governments and De Beers. “Why would Botswana and Namibia need Angola as intermediary in negotiating with De Beers? “De Beers Consolidated Mines in RSA is a partnership with a BEE consortium adding another facet to the partnership. “Not exactly bedfellows.”
The identity of Anglo’s replacement on the De Beers share registry has captivated the industry. The choices, at the moment, appear to be between a sovereign (government), private equity or sovereign wealth fund.
Further to this, debate is also raging about the kind of arrangement or proportions of control the proposed partners should push for.
For Khama, Botswana would be “ill-advised” to seek a controlling stake in De Beers.
“Firstly, the government has a poor record of running companies and nothing suggests any change,” she said. “Importantly, Botswana is unlikely to raise finance but if successful, a partner with industry expertise and their financier, are unlikely to settle for a minority share. “Partners that accept such terms would most likely have a short-term goal. “Focusing only on the upside of a higher stake in De Beers is naive. “It exposes the country to significant financial risk from losses due to market failure, periodic shareholder guarantees and loans as was the case following the financial crisis of 2009.”
Her comments are backed by prominent economist, Keith Jefferis, who told the Bifm annual conference this week that the country could ill-afford the capital required for control of De Beers. By most estimates, De Beers’ value is about $4 billion, although some analysts suggest Anglo could accept a takeover at just over $2 billion.
Both figures are drastically down from the $5.1 billion Anglo paid the Oppenheimer family in 2012 to take over their 40% stake and increase its equity to 85%. The major factor behind the steep fall in value has been the downturn in diamonds over the years, most recently due to the encroachment of lab grown diamonds and – as analysts have noted – the failure by the industry to collectively market and innovate to a new generation of buyers.
In 2012, Botswana opted out of exercising its pre-emptive rights when the Oppenheimers exited. The country’s rights could have lifted its stake to 25% at a cost of about $1.3 billion.
“The $1.275 billion which is equivalent to about P9.8 billion represents about 10 percent of the Gross Domestic Product, a large cost for a country whose government budget is still in deficit, and is trying to bring the budget to balance within a year and a half,' the then Ministry of Minerals Energy and Water Resources said at the time.
Jefferis, a former deputy governor of the Bank of Botswana, said the cost of the current effort was too high.
“Talk about a majority stake in De Beers has been floated, but I'm still not convinced by the logic of this,” he said. “It doesn't make sense and it's not apparent where the funding will come from. “I know there's been ideas about borrowing but the sort of borrowing that would be required to acquire a majority stake in De Beers is not currently legally feasible with the current legislation which limits the government. “Obviously the law could be changed but at the moment the law is legal.”
Government’s domestic and external debt is hovering at its closest approaches to the 40% of GDP limit, than in previous years. Finance Ministry technocrats are also closely watching the amount of external debt the country takes on, in fear of the Original Sin where loans are taken in hard currencies while the foreign exchange reserves and Pula are dependent on fickle sectors such as diamonds.
Government has previously said it would be willing to have a partner in the De Beers’ takeover, one with deep pockets and the patient capital required to sit out the downturn in diamonds. Analysts this week said more than that, the partner would be required to have the technical skill and experience to navigate diamonds through their current crisis and into a more stable future.
That description leans more towards the former De Beers executives such as Penny and Cleaver and less towards the sovereign wealth funds.
“Botswana’s leaders should find partners with a track record, a good reputation and extensive knowledge of the industry,” said Khama. “It is particularly important for the new partners have in-depth expertise and experience of distribution and marketing business. “The reason is quite simply that it is this end of the business that faces major problems. “It is therefore urgent to address market challenges so purchases can resume and do so in meaningful quantities. “With one poor sales cycle after another, De Beers and its partners are haemorrhaging with losses estimated at $1.2m a day.”
Long-time minerals and diamond industry veteran, James Allan, believes sovereigns should not take control of De Beers. While Allan’s own Sable Mining and Exploration Limited, has run into problems over the years, he has advised on key transactions and developments in local diamonds over the years.
“I know a lot of people have said, well, what about a consortium of Angola, Namibia, Botswana, South Africa, or a government organisation to take control of the industry,” Allan said at the African Mining Summit on Wednesday. “If that happens, sell every diamond stock you've got because quite frankly, governments cannot run a diamond industry and a company that is reliant on marketing to drive demand for its product. “And also I don't believe they could come up with the money to buy it.”
Allan threw his weight behind Penny, saying the former CEO was the ideal partner in the De Beers’ takeover.
“De Beers must promote natural diamonds. “The industry needs someone who's steeped in the diamond industry; somebody who understands the industry, who understands the marketing side. “What you've got at the moment is not a supply issue; it’s a demand issue in the industry. “You've got to have a good relationship with the government of Botswana and your customers. “My opinion is the only person suitable for this job is Gareth Penny, who is one of the business leaders. “We can talk about the other people and all the rest, but I think Gareth Penny fills most of those,” he said.
Anglo, meanwhile, says it is working with Botswana as it moves into the second round of bidding for De Beers. This second round is expected to last for the next six months, Anglo American CEO, Duncan Wanblad, told a recent conference in London.
“What we are planning to do is now move into the second round with one or two of the potential selected buyers that came through the first round with us and work with the Government of Botswana in finalising an agreement that works not only for the potential buyers, but also for Botswana,” Wanblad was quoted as saying. “So that’s the process that we’re in now and I’m hoping that will take place over the next six months.”