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Botswana govt says no guarantee on De Beers sales deal by end-2020

Credit: REUTERS/Siphiwe Sibeko

The Botswana government said there was no guarantee that it would be able to renew a new 10-year sales agreement with De Beers before the end of December, when the current one expires, as the coronavirus pandemic has delayed negotiations.

By Brian Benza

GABORONE, Botswana, Aug 25 (Reuters) - The Botswana government said there was no guarantee that it would be able to renew a new 10-year sales agreement with De Beers before the end of December, when the current one expires, as the coronavirus pandemic has delayed negotiations.

"The ideal situation would be to end the talks by December but there are no guarantees that will happen," said Mmetla Masire, Permanent Secretary in the Ministry of Minerals told Reuters in an interview late on Monday.

The deal is necessary for the Debswana Mining Company, jointly held by the world's biggest producer De Beers and the Botswana government, as it provides the country with around two-thirds of its foreign exchange and makes up a fifth of its GDP.

For De Beers, a new deal would mean another 10 years of clarity on the terms of its revenue stream from a country from where it sources 70% of its diamonds and 90% of its sales.

The wealth from diamond mining has helped transform the country from primarily a agri-based economy to one of Africa's richest countries.

A delay would set back President Mokgweetsi Masisi's efforts to boost a fledgling diamond polishing and cutting industry and create jobs in a country of 2.2 million with high unemployment.

Masire said the government had resumed talks for a new deal, but travel restrictions have kept the progress slow.

In 2011, De Beers agreed a deal to transfer its global sightholder sales, which accounts for 90% of its total diamond sales, from London to Gaborone, creating thousands of jobs and investment in the southern African country.

Botswana's government would want a higher allocation of diamonds produced by Debswana for sale from the current 15% agreed in 2011, or get a larger share of rough stones, said Avi Krawitz, an analyst from Israel-based diamond information provider Rapaport.

"This will be a sticking point for De Beers," he said.

Masire declined to divulge specific terms being negotiated in the talks.

De Beers, a subsidiary of Anglo American Plc AAL.L, is an important business division for its parent contributing a fifth of its revenue. De Beers has not responded to an emailed request for comment sent on Monday.

(Reporting by Brian Benza in Gaborone Editing by Promit Mukherjee and David Evans)

((promit.mukherjee@thomsonreuters.com; +27 64833 4448;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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