Turning Point for Botswana and the World Diamond Industry?
November 07, 24
by Erez Jacob Rivlin, diamond market analyst and consultant. Served as an advisor to the Russian Government (Minister Bychkov), and to the late Angolan President dos Santos. Managing editor of www.diamondherald.com Contact erez@diamondherald.com
Botswana's historic change of power could become a breakthrough for Anglo American, and mark the light-at-the-end-of-the-tunnel for the entire diamond industry.
President Masisi was ousted in a general election last week that saw an end to the Botswana Democratic Party's uninterrupted rule since the country gained independence from Britain in 1966.
His successor, Duma Boko, of the Umbrella for Democratic Change (UDC) coalition, now has to handle an unprecedented plunge in government revenues.
The once-stable income from diamond exports - accounting for about 70% of the government budget - kept the rival BDP in power for six decades. To survive more than one term, the new president does not have much margin for error.
Boko, who was sworn in as president on Monday, referred to the long-term agreement with De Beers - still unsigned - as a "very dangerous position to be in as a country".
Both sides reached an advance draft named "heads of terms" that was signed in October 2023, but the deal itself in the form of a final agreement remains on the table.
So, what are the main issues the new president is facing over the blocked agreement? His challenge is the global diamond industry's challenge, namely increasing world demand for natural diamonds.
Increasing Botswana's share in De Beers - it currently owns 15 per cent - is a sensitive and potentially explosive consideration. Anglo's shareholders would undoubtedly resist any move to give away a chunk of their property for free.
After all, most of them just paid a fair amount of money in exchange for some shares in a mining company. After the sale of the Oppenheimer's share, no traces of colonial "residue" could be detected in the ownership of Anglo American and De Beers.
Selling Botswana's diamond production is another major issue. Over the past century, De Beers has developed a sophisticated sales system. With all due respect to the capacity of the government-owned Okavango Diamond Corporation (ODC), President Boko should keep his options open.
If ODC's sales are weak - and that includes the allocation that goes to its partner HB - it would be prudent to keep this channel open as an alternative.
In the past, Botswana's opposition criticized former President Masisi for the partnership with HB, a young company that lacks a proven long-term record. Polishing millions of carats efficiently is a major challenge. Selling them for a good price is even bigger.
But the new president must show he is at least trying to maintain the commitments made to HB by his predecessor. Any change to the agreement must be argued in an open and professional public debate.
The bottom line is that finalizing De Beers' agreement would support the sale of Anglo's share of De Beers (through a sale or an IPO). This sale would hopefully bring in what the diamond industry is currently lacking the most - big, focused, and passionate natural diamond marketing budget.
President Boko has no time to lose. What President Masisi failed to achieve during six years of non-productive negotiations, cannot be accomplished within a few weeks. But three to four months is a reasonable time frame to get the De Beers deal signed.
Anglo American would then need to adapt its sales projections and presentations accordingly. Its sale of De Beers - part of a move to focus on more profitable assets - could easily take 12 to 18 months. Even if the new president acts fast and decisively, and De Beers' new owner invests in a large and successful marketing campaign, it won't change things overnight.
Taking into consideration the expected slow global market recovery, it is highly probable that President Boko might have to wait for a positive move in his country's revenues for well over a year.
But he could bring about major change. Not only for his people, but for the entire diamond world. Fixing the damaging delays of President Masisi's never-ending negotiations with De Beers is a challenging but achievable mission. It could prove to be the start of an inspiring chain of events that would bring much-needed optimism to the struggling diamond industry worldwide.