BusinessWeek is informed that with the negotiations having dragged on for five years, finalising a deal by June is seen as key to settling market jitters that have grown, fuelled by speculation about why the industry’s major players are yet to wrap up their talks.
The current agreement expired in September 2020 and has been extended several times, initially because of the pandemic and later without clear explanations by either party. In 2018, when they kicked off their negotiations, both sides had established five-member teams to work on their heads of agreement.
The closely-guarded De Beers/Government of Botswana sales deal is one of the global diamond industry’s most valuable covenants and delays in finalising the talks have reportedly unnerved a broad ecosystem that includes contractors, sightholders, factories, retailers, financiers and others.
On Wednesday, Minerals and Energy minister, Lefoko Moagi told BusinessWeek that the negotiating partners were sensitive to the market sentiment. “Anything that would trouble diamonds would make the market jittery,” he said in a briefing on Tuesday. “Markets can start asking ‘what’s happening here and what’s going on’”.
He added: “Right now if one of the sightholders who has a factory here, perhaps polishing, cutting and wants to make jewellery or expand into that, if they don’t know what’s happening with us and De Beers, that holds back that sightholders’ intended investment. “That’s why we say the market, and even for us, it’s not comfortable, and that’s why we have to finalise.”
At its heart, the top secret sales agreement between De Beers and government governs the conditions around the sale of diamonds from Debswana, the world’s top producer of rough diamonds by value, through the De Beers’ process. The last such talks, concluded in September 2011, delivered by far the best deal for Botswana, with the migration of multibillion US dollar diamond activities from London to Gaborone. The deal also secured an independent pricing avenue for Botswana, via the establishment of the state-owned Okavango Diamond Company (ODC), which regularly reports revenues running into hundreds of millions of US dollars.
The agreement before that, in 2006, saw Gaborone secure the establishment of the 45-million carat per annum Diamond Trading Company Botswana (DTCB). While the sales negotiations are a highly confidential affair, involving closely-guarded commercial terms and forecasts, government officials have publicly stated that Botswana is seeking greater access to downstream value in the diamond industry, such as jewellery manufacturing and retail.
BusinessWeek has also been previously informed that government negotiators are possibly pushing for an improvement on the split that current gives Botswana 81 thebe of every pula produced at Debswana and De Beers the balance. Botswana is also reportedly demanding greater access and clarity around the value creation process De Beers takes rough diamonds on after they leave the country’s shores and head for international retailers.
The 15% offtake that the ODC is currently entitled to purchase from Debswana’s production could also come under negotiation. Moagi steadfastly refused to confirm the nature of any settled or outstanding issues in the current negotiations but said both parties were committed to resolving the remaining matters, which he said were not many, but material.
“We are all committed and we know what it means to our economy as Botswana and also to De Beers,” he told BusinessWeek. “We are all looking at June to say it must not pass without an agreement. “There’s not much left but the one or two issues left are material. “The challenge is just that they have to be negotiated as a package. “Much of the issues we have already passed them, but we are left with these two issues that we have to finalise on.”
The minister pleaded with Batswana to remain patient as government and De Beers hammered out the remaining issues in their agreement. “I can tell Batswana that ‘please do not lose patience’, although we know that people can become impatient. “Over the many years that we have been together as government and De Beers, we have learnt and understand each other.”
