Botswana’s government is forecasting a recovery in the diamond market later this year, and a consequent expansion of the country’s economy.
It shrank by 3.1 per cent in 2024, but according to vice president and finance minister Ndaba Gaolathe it is now expected to grow 3.3 per cent in 2025.
“This growth outlook is premised on recovery of the diamond industry, which is expected in the latter part of 2025, and continued positive sentiment in the non-diamond mining sectors,” he said yesterday (10 February) in his budget speech for 2025/26.
Diamonds account for around 80 per cent of Botswana’s export earnings and a third of total budget revenues.
De Beers and the Botswana government have finally reached agreement on the long-term mining and rough sales deals.
But their joint venture Debswana reported sales for the first three quarters of 2024 were down by 52 per cent.
In December, Gaolathe warned that Botswana’s economy could contract by 1.7 per cent during 2024 as a direct result of the diamond. Slump.
But he predicted better times ahead, with an expected rebound in the diamond market driving overall growth in 2025.
Video grab shows finance minister Ndaba Gaolathe delivering his 2025/26 budget.
De Beers, the world’s leading diamond producer by value, has concluded negotiations with the Botswana government on a new sales agreement and the extension of mining licenses for their joint venture, Debswana, until 2054.
The finalized agreement, the Anglo American unit said on Monday, follows discussions aimed at setting a new framework for the sale of rough diamond production from Debswana, a 50:50 partnership between De Beers and Botswana. The deal also secures the renewal of Debswana’s mining licenses, which were previously set to expire in 2029.
“Until the execution of these new agreements, the terms of the existing agreements will continue to remain in effect,” the diamond producer said.
Currently, 75% of Debswana’s diamond output is sold to De Beers. In 2023, the two parties reached a provisional 10-year agreement under which Botswana’s share of production was set to gradually increase to 50%.
The accord also established that Botswana’s state-owned diamond trading company was expected to receive 30% of Debswana’s production.
The government would also secure 10 billion pula ($712 million) in development funding as part of the deal. However, the deal stalled under the leadership of former President Mokgweetsi Masisi.
In January, newly elected President Duma Boko announced that his administration had reached an agreement with De Beers. Botswana, the world’s largest producer of rough diamonds by value, depends on the industry for the majority of its national revenue.
This new agreement comes at a pivotal time for De Beers as parent company Anglo American plans to spin off the diamond business through either a sale or an initial public offering. Analysts have noted that current depressed diamond prices may complicate efforts to finalize such a transaction.
Botswana remains a cornerstone of De Beers’ operations, accounting for 70% of its annual rough diamond supply. The government also holds a 15% stake in De Beers, underscoring the importance of the long-standing partnership between the two parties.
Botswana’s president Duma Boko, who swept to power in October elections, said his government has reached a diamond extraction and sales agreement with De Beers that will bring certainty to the gem-dependent economy.
Terms were finalized by midnight on Jan. 24 and will be announced soon, Boko said in an interview on Tuesday. The southern African nation is the world’s biggest producer of rough diamonds by value and the industry generates the bulk of its income. Most of Botswana’s gems are mined by Debswana, a venture between Anglo American Plc’s De Beers unit and the government.
“The issue with De Beers has been settled,” Boko said in Dar es Salaam, Tanzania, where he is attending an energy conference. He indicated last week at the World Economic Forum in Davos, Switzerland, that an agreement was imminent, and said he had followed through on his commitment to conclude it.
During his election campaign, Boko was critical of his predecessor Mokgweetsi Masisi’s handling of talks with De Beers to renew the more than half century alliance between Botswana and the world’s largest diamond firm. Masisi had caused De Beers to consider walking away from the deal, Boko said, and he sought to reopen talks.
Boko’s Umbrella for Democratic Change coalition unseated Masisi’s Botswana Democratic Party, which had led the country since independence from the UK in 1966.
The new agreement had not resulted in “any major changes, just a little tweaking of things here and there,” he said.
Under the provisional terms of a 10-year accord announced by Botswana’s previous administration in July, the state-owned diamond trader was to get 30% of Debswana’s output, while the government would secure 10 billion pula ($720 million) in development funding.
De Beers didn’t immediately respond to a request for comment.
An arid, underdeveloped nation at independence, Botswana has leveraged the discovery of diamonds in 1967 to build itself into the richest country per capita on Africa’s mainland, according to the World Bank.
Lab threat Still, a prolonged slump in the global diamond market and a challenge from lab-grown gems has hurt its economy. Boko said the agreement will restore certainty and economic growth will follow.
The country will focus on promoting its gems as natural and charging a premium for their provenance, marking them to show they have been mined in the country and their sale promotes development, he said. Diamond revenues in some other parts of Africa have been used to finance conflict.
“We appreciate the threat posed by lab-grown diamonds. I don’t want to give them the privilege of calling them diamonds. Diamonds are natural,” he said. “We will then market our diamonds in terms of their provenance and of the story behind the diamond.”
Botswana and De Beers are reportedly on the brink of signing a critical and long-awaited sales agreement that was due for renewal back in June 2023.
Botswana’s new President Duma Boko told reporters last Thursday (23 January) he was hoping it would happen as early as Friday, although as of Sunday (26 January) there was still no confirmation.
Boko, speaking at the World Economic Forum’s annual meeting in Davos, Switzerland, said there was just some “tidying up” left, according to a Reuters report.
The deal, which would see Botswana’s share of diamonds from the Debswana joint venture increase from 25 per cent to 50 per cent over the next decade, was agreed in principle by Boko’s predecessor Mokgweetsi Masisi after he repeatedly threatened to walk away from it.
But the actual deal, with all the small print, was never signed. The deal also extends mining licenses until 2054 and commits De Beers to invest up to $825m over 10 years to help develop Botswana’s economy.
