De Beers and the Government of Botswana this week announced the finalisation of long-drawn out talks for a new diamond agreement. Dating back to 2019, the talks were, at various points, fraught with tensions to the point where, reportedly, both parties threatened to walk away from the five-decade long relationship.
This week in Cape Town at the Mining Indaba, a beaming Al Cook, CEO of De Beers, credited President Duma Boko and his administration, particularly Minerals and Energy minister, Bogolo Kenewendo, with getting the deal across the line, after years of talks.
“The agreement has been five years in the making and what I find extraordinary is that through the energy and determination of His Excellency the President, the Vice President and particularly Minister Kenewendo, within the first 100 days of this new government, we have successfully concluded the new agreement,” Cook said.
The CEO’s remarks crediting Boko set off criticism from the Botswana Democratic Party (BDP), the former ruling party, which fired off a statement on Wednesday.
“While the UDC-led government claims credit for this historic achievement, the facts remain indisputable: this agreement is the direct result of years dedicated work by the BDP. “It is both misleading for the new government to suggest that such a complex and high-value deal was negotiated and finalised in just 100 days. “High-stakes agreements of this nature require years of planning, expertise and careful execution, not rushed decisions made for political gain,” the party said.
The BDP also demanded more details on how the talks were concluded, particularly the treatment of alleged historical tax obligations De Beers is said to owe Botswana.
Boko’s administration will be pleased to have finalised an agreement that, despite the prolonged downturn in diamonds, remains central to the local economy and its future fortunes.
The closely-guarded agreement is one of the global diamond industry’s most valuable covenants, with the revenues providing the bulk of the country’s foreign currency receipts and about a third of budget revenues.
According to both parties, the talks concluded “in alignment with the Heads of Terms agreed on September 30, 2023”.
These terms include the renewal of Debswana mining licences from 2029 to 2052 as well as the state-owned diamond trader, the Okavango Diamond Company, being entitled to purchase and independently market 30% of the output from Debswana, up from the current 25%. The allocation will rise to 50% over 10 years.
In addition, the terms include the establishment of a multi-billion-pula Diamonds for Development Fund, with an upfront investment by De Beers of P1 billion. Further contributions over the next 10 years of the deal would be made that could total up to P10 billion “which will aim to create substantial additional value to the Botswana economy”.
Other terms include jointly processing exceptional or special stones emerging from the mines, jointly exploring for diamonds across the world as well as funding arrangements for the expansion of Debswana mines, which include the underground project planned for Jwaneng and deepening of the Orapa open cast.
At this week’s briefing it was revealed that the 10-year agreement covering sales from Debswana production will have a five-year optional renewal, which officials expect to make future processes smoother than the tense negotiations in recent years.
For Boko, the finalisation of the talks allow his government to begin strategising around the structural challenges facing the natural diamond industry. The growing popularity of synthetics has taken a permanent bite out of the natural diamond jewellery market, particularly in its most lucrative segments such as bridal and engagement.
This year, Botswana and other African diamond states such as Namibia and Angola, are joining industry groups in a global marketing and educational push for natural diamonds. Industry analysts have said the structural shift in the natural diamond industry means even governments need to come on board to help lift the stones out of their slump through marketing or the creation of demand.
This is particularly important for diamonds which are an emotional product whose marketing and branding needs to be nuanced and sustained.
Speaking in Cape Town, Kenewendo said the finalisation of negotiations injected more confidence into the global natural diamond industry and also meant the two partners could get down to pushing for recovery and empowering Batswana.
“We are hoping that the announcement of the conclusion of negotiations brings us not only to the end but the beginning of a working relationship where we can start to focus on developmental areas that are needed in this diamond industry to try and resuscitate and build market confidence. “We also need to ensure that we are not building for the past industry, but rebuilding around the structural changes that this industry is currently facing,” she said.
