Why Botswana Is Demanding Bigger Diamonds Share, And Threatening To Break De Beers Deal | The African Exponent.
- Botswana holds vast diamond riches, which have helped the country achieve economic growth and stability.
- Botswana mines the diamonds in a joint-venture with De Beers, a deal that spans for five decades.
- President Masisi insists that the resources belong to Africans in Botswana, and that if De Beers does not offer better terms, then his country is unafraid to walk away.
“We want what is ours … If talks become difficult … let everyone pack and go separate ways”. These were the words of Botswana’s leader Mokgweetsi Masisi a few months ago as he addressed party supporters at a rally.
Of late, Botswana has been relentless in demanding a bigger share from its five-decades contract with mining giant De Beers, threatening to walk away from the decades-long contract.
The Blessings of Diamonds in Botswana, And De Beers’ Permanence
Botswana’s president Mokgweetsi Masisi made clear his displeasure as regards the unfair nature of the agreement in February 2023; boldly stating that “these are our diamonds, and we want a larger share for us”.
Botswana is a country in southern Africa that is abundantly endowed with vast deposits of diamonds. It is Africa’s largest producer of diamonds, and the second largest producer of the mineral in the world (Russia is first).
And diamond riches have since made Botswana one of the fastest growing economies in the world; a feat achieved by way of its long-standing joint venture agreement with global mining behemoth De Beers (the mining corporation is 85% owned by the colossus UK-listed mining giant Anglo America).
A Tenuous Joint Venture Between Botswana And De Beers
The joint venture between Botswana and De Beers — called Debtswana Diamond Company — is a long-duree contract in which Botswana supplies the mining giant (owned by Anglo American) with diamonds. De Beers then processes the diamonds and sells them on global markets as Botswana does not have a noteworthy footprint in the global trading chains of diamonds. This agreement first came to life in 1969.
Botswana’s relations with De Beers have increasingly become acerbic, with President Masisi saying that he was “shaking a giant”. Botswana has openly expressed the unfair nature of the joint venture terms. President Masisi threatened to walk away from the deal with De Beers unless the latter is amenable to more favourable terms.
The current deal with the multinational mining conglomerate expires in June 2023, and under the current terms Botswana is entitled to buy up to 25% of the diamonds mined under the joint venture so that it can make its own sales.
Mining analysts and other stakeholders forecast a situation where Botswana might strive for a 50-50 arrangement, thus hinting at the country’s better bargaining position since it is threatening to break up the decades-long contract. Another sticky point of negotiation in this strained deal relates to the extension of De Beers’ mining rights, which expire in 2029.
The Loud Calls From Botswana: We want to own our diamonds…
In February 2023, President Masisi told party supporters at a rally, “We now know how the diamond industry operates. We used to receive 10% of the stake, but now, under my leadership, we are receiving 25%.” For Masisi, the stakes at hand are lucidly apparent: if De Beers does not offer better terms, Botswana is unafraid of severing this long-standing agreement.
Masisi remarked, “We are dealing with a giant. It is the first time it has been shaken like this. We want what is ours. This is our company, we want a majority stake, and we doing so through negotiations. If the talks become difficult, we will say, no, let everyone pack and go separate ways.”
The country is more than willing to sell its diamonds without the South African mining company De Beers. Botswana now possesses some laudable experience in selling rough diamonds, which it has been doing with the In demanding a larger portion of diamond output, Masisi did not expressly state the exact size of the share that Botswana seeks.
The Confidence To Break Long-Time Contract With De Beers
After having acquired a 24% stake in HB Antwerp, a diamond processor from Belgium, Botswana’s optimism is palpable. HB Antwerp is applying pressure to De Beers, despite the fact that the company is only three-years-old. The Belgian processor exudes some timely attitudes—it perceives the Debtswana deal as a continuation of colonization.
The relationship between Botswana and De Beers remains bitterly strained; and the stakes are higher than ever before. Debtswana’s existence is premised on the basis of equal ownership of the joint venture. But the prevailing material reality regarding the actual production and sale of these diamonds is diametrically opposed to the business tenets of equal ownership.
Masisi’s words, teeming with defiant confidence, are noteworthy: “Besides the fact that the diamonds are ours, it doesn’t make sense for us to continue to relegate ourselves to participating in the rough space only. So, it’s only logical that we want more and we are going to get more. But through negotiation.”
Botswana’s Urgent Need To Own Its Diamonds—A Lesson To Other African Nations
Throughout the 54-year-old, Botswana has never had the chance to sell its own diamonds. Almost three-quarters of Debtswana’s diamond production is sold to De Beers. In 2022, diamond production in the country totalled 24 million carats.
Botswana’s government is able to sell 25% of the diamonds extracted by Debtswana; and this is done through Okavango Diamond Company (ODC), which is a state-owned trader. The remaining 75% share of the rough diamonds goes to De Beers, which then sells this bigger share across global commodities markets.
De Beers’ parent entity, The Anglo American Plc Unit (which has mines in Canada, Namibia, and South Africa) is immensely profitable, in a repulsive manner, and in 2022 it sold rough diamonds worth $4.3 billion. This is clearly indicative of the mining behemoth’s large scale exploitation of African resources: the $4.3 billion sales meant a 13 percent increase over the sales in 2021.
This is what President Masisi is saying — that global private capital continues to get more from Africa resource, which they do not own, while upholding the status quo; a reality subtly upheld and abetted which keeps African countries in perpetual cycles of wealth inequality and poverty.
The Politics of Commodity Extraction and Sale
De Beers insists that the contract must continue to exist. For the mining giant, this deal must not be severed and cancelled; and such an agreement make “economic and strategic sense for both parties”. De Beers claims Botswana’s government “receives more than 80 percent from Debtswana” and this includes “taxes and royalties”.
The demand for diamonds has surged, particularly in Russia, and Botswana views this as a workable alternative—thus ditching Western markets. Demand for diamonds in Russia has dramatically soared.
This should be understood in the context of sanctions imposed on Russia because of the Russia-Ukraine conflict. Russia is the world’s leading producer of diamonds, but with sanctions in place, Western buyers have no other choice but to stay clear of such political repercussions.
And this makes Botswana confident that there is an alternative. American jewellers are also in the bandwagon of restricting the buying of Russian diamonds. Debtswana’s rough diamond output in 2022 resulted in record sales, cushioning the country’s economy from the harsh effects of a volatile, unpredictable, and uncertain global economy.
Having sold some diamonds outside the De Beers system, it is clear that Botswana is confident enough to abandon the half-a-century joint venture deal. Botswana’s government also hopes that a better deal will increase its chances of economic growth.
Conclusion – Botswana’s Vindication in Demanding Bigger Share
Botswana is ravaged with a myriad of socio-economic troubles, most notably high unemployment, ever-widening inequality, and corruption. Hence this position taken by Masisi can be attributed to populist politics as the ruling party seeks to bolster its dominance.
Masisi, like the previous presidents, believes in and preaches the message of neoliberalism which comes with platitudes pointing towards “foreign investment”.
However, the portent of hope that prevails is that Botswana’s government must be confidently in negotiating and dictating the terms of doing business with foreign private capital.
The true test in this counter-hegemonic move revolves around the notion of whether Botswana will be totally able to stand on its own without De Beers — can Botswana break free in absolute terms? And, what does this mean for Masisi’s ruling Botswana Democratic Party as the country holds its elections next year?