In his initial remarks after his ascension to the highest post President Duma Boko, said De Beers had been ready to walk away from its 55-year partnership with Botswana, adding that negotiated deals should not result in one side celebrating and another feeling cheated.
“A proper negotiation involves compromise, where you get a bit of what you wanted, the other person gets a bit,” he said. “Then you have a durable, sustainable agreement. “De Beers was considering walking away, not signing at all, a very dangerous position to be in as a country.”
He added: “The relationship with De Beers could have been damaged by the way the negotiations were handled,” he said in a televised statement.
For his part, De Beers CEO, Al Cook, after his first meeting with Boko, hailed what he called “a spirit of renewal” between the two sides and – several times – spoke about standing shoulder to shoulder with government in seeing through the diamond downturn and the finalisation of talks.
Cook expressed steadfast confidence that the deal would finalised soon.
“We see the negotiations concluding in days and weeks, not months and years,” Cook said after the talks on November 14.
The two sides met again last week where both Boko and Cook said a deal was imminent. In fact, according to presidency officials, the negotiating teams were in touch even last week putting the finishes touches on the deal.
Lacking from their statements made thus far between the two sides is whether the terms of the June 30 agreement, known as an agreement in principle, are being revised or whether what is being finalised is inconsequential to the June 30 terms.
On June 30, 2023, the economy of Botswana and the broader global diamond industry stood on tenterhooks as the two sides seemed intransigent ahead of the expiry set for the talks. Thirty minutes ahead of the midnight deadline, the white smoke appeared and both Botswana and De Beers announced that a deal, in principle, had been reached.
The terms, as acknowledged by both sides, were highly transformative and include:
* State-owned diamond trader, Okavango Diamond Company (ODC) moving to a 30% allocation of Debswana’s output, before rising to a maximum of 50% over 10 years, * Establishing a diamond for development fund to be funded to the tune of P1 billion by De Beers * Jointly processing exceptional or special stones emerging from the mines * Jointly exploring for diamonds across the world * Setting up a talent council where Batswana will be taught diamond grading, pricing etc with an initial intake of 350 trainees * The ODC setting aside a portion of its allocation for uptake by Botswana owned citizen entities * Funding arrangements for the expansion of Debswana mines, which include the underground project planned for Jwaneng and deepening of the Orapa open cast
Recognised as the diamond industry’s single most valuable and longest enduring covenant, the sales agreement between De Beers and the Government of Botswana governs the conditions around the sale of diamonds from Debswana through the De Beers process.
The general terms of the deals over the years have included the renewal of mining licences in Botswana, commitments around the funding of capital projects such as the expansion of the Jwaneng Mine pit and – in more recent years – a move to relocate more value in Botswana.
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.
The agreement before that, in 2006, saw Gaborone secure the establishment of the 45-million carat per annum Diamond Trading Company Botswana (DTCB).
Negotiations to renew the 2011 agreement began in 2018, ahead of the 2020 expiry, but even to date there have been no signatures on a final, binding agreement.
Talks that at the beginning were described as a renewal of marriage vows, slowed over COVID-19, then deteriorated into open hostilities broadly over the allocation of value, risk and capital in the relationship.
On several occasions, former president, Mokgweetsi Masisi, dared De Beers to walk away from both the negotiating table and the 55-year old agreement, while also publicly engaging with other diamond players such as HB Antwerp in the search for downstream values in the industry.
De Beers – the industry’s most dominant player, responsible for 40% of all the Earth’s diamond discoveries and which has done more than any other to create both value around and demand for diamonds – struck a diplomatic tone for most of the period. At least in public.
Information reaching Mmegi suggests that while the basic terms agreed to last June may not be being re-negotiated, the two parties may be relaxing timelines and commitments around percentages.
Anglo American wrote down De Beers’ value by Anglo wrote by $1.6bn for 2023, valuing the diamond business at $7.6 billion., owing to the steep slump in sales. Anglo also put the diamond group up for sale, with the intention of finalising this by the end of next year.
Analysts believe a hardline stance for now by the new administration would be self-defeating, as both De Beers and the local economy are struggling to recover from the downturn.
“Stricter timelines or enforcing certain conditions such as the phased allocation to Okavango over ten years, could cripple De Beers at a time when it is also struggling, with uncertainty about its future,” an analyst tracking the latest developments told Mmegi “A weak De Beers is no good for Botswana or the industry and is only great for bargain hunters who will swoop onto the poor valuation, snap it up for nothing and may not be the best fit for working with a sovereign. “The best option now is for both sides to focus on resuscitating value in the industry, and whatever concessions were required of De Beers, relax the timelines to allow the company to recover. “After all, Botswana has a 15% equity interest in De Beers and no other major company is willing to venture into diamonds at the level or to take on the major capital works required at Debswana in years to come.”
Other analysts have suggested that rather than press for more concessions from De Beers, Botswana should speak to Anglo American about taking up a higher stake in De Beers, to better own the diamond group’s strategy and the values it creates.
In remarks made on Tuesday, Boko stressed the need to revitalise the natural diamond industry, but also hinted that the spirit of the agreement – at least in terms of Botswana is seeking – was being kept to.
“The first is the revitalisation of the diamond industry and the hope for recovery. “In Antwerp, I reaffirmed our partnership with De Beers and while talks are ongoing, I want to assure you that these discussions are progressing well and will soon result in a stronger, more equitable agreement for our nation. “Be confident that this partnership will secure a brighter future with a greater share of the value derived from our own natural wealth.”
New Minerals and Energy minister, Bogolo Kenewendo, in very brief remarks, touched on the issue of whether the terms were undergoing minor service or a major overhaul.
“The President gave some fresh instructions so that we get the most out of this deal. “It’s not just about dotting the Is and crossing the Ts,” she said, without elaborating.
By their own words, the two sides are expected to make an announcement soon, indicating which path their marriage is taking.
