GABORONE, Botswana - The Botswana government has successfully signed a new diamond sales agreement with the De Beers mining company after seven years of negotiations. This agreement is crucial to the country's economy, as Botswana is the largest producer of diamonds by value in the world and the second largest by volume, following Russia.
The deal involves the government receiving an increasing share of diamond sales through its joint venture with De Beers, known as Debswana. Diamonds play a significant role in Botswana's economy, accounting for approximately 80% of its exports and a quarter of its GDP, according to the International Monetary Fund.
Despite its diamond wealth, Botswana has faced economic challenges due to a decline in diamond prices and demand. This downturn in the diamond industry was a central issue in the national election last year, leading to a change in government after 58 years of rule by the previous party.
The new 10-year sales agreement grants the government a 30% share of Debswana's sales for the first five years, increasing to 40% for the subsequent five years. There is also an option for a five-year extension to the agreement, during which the share of sales will be split equally between the two parties.
In return for these terms, De Beers has been awarded a 25-year extension to its mining licenses in Botswana, ensuring its operations until 2054. The agreement, which was a priority for Botswana's new President, Duma Boko, solidifies the relationship between the government and De Beers.
Botswana has a history of unearthing large rough diamonds, including a 2,492-carat stone discovered last year, which was the second-largest diamond ever found and the largest in over a century. Debswana also found a 1,098-carat diamond in 2021, marking its biggest discovery to date.
Despite these significant finds, Debswana's total sales in the first nine months of 2024 saw a sharp decline to $1.53 billion, down more than 50% from the same period in 2023. The World Bank has highlighted Botswana's vulnerability due to its heavy reliance on diamond exports.
