De Beers and Botswana: The Long Delay

It's the announcement the diamond world had been eagerly awaiting.

"The Government of the Republic of Botswana and De Beers Group are pleased to announce they have reached an agreement in principle on a new 10-year Sales Agreement for Debswana's rough diamond production…"

But that wasn't it. What you've just read is the statement that both sides issued way back in June 2023.

It's taken another year and eight months for them to issue this week's follow-up announcement: "The Government of the Republic of Botswana ("GRB") and De Beers Group ("De Beers") are pleased to announce the successful conclusion of negotiations focused on establishing a new sales agreement for Debswana's rough diamond production…"

The world's biggest diamond deal is, of course, critical to Botswana, which relies on rough diamonds for 80 per cent of its export revenue, and which boasts the highest per capita GDP of any continental African nation.

It's also critical to De Beers, which relies on Botswana for around 70 per cent of its total rough supply.

Botswana gained independence from the UK in 1966 and discovered diamonds in 1967.

In 1969 it signed a deal with De Beers in 1969 that has been in place ever since.

The fledgling African state received just 10 per cent of the diamonds back then. It now gets 25 per cent, and under the new deal that figure will rise to 50 per cent over the coming decade.

So why was there such a long delay? Both sides clearly thought they were on the brink when they issued their "agreement in principle" statement in June 2023.

It's a big deal admittedly, but there can't be that much small print to discuss.

I asked De Beers why it had taken so long, and here's what they said: "While both parties agreed to the key terms of the agreement, codifying the agreement in a legal document required significant time and detailed work.

"The time to develop the longform agreements is consistent with what we have seen in previous instances of renewing our agreements, when considering the fact that we were not only renewing the Debswana Sales Agreement, but also the Debswana Mining Licences.

"Meanwhile, with the change of government in Botswana there has understandably been a need for the new administration to assess the terms of the agreement."

Hmmm. Both sides had been trying to thrash out a renewed agreement since 2019. Three months after the June 2023 announcement they signed Heads of Terms, which outlined basic terms of the partnership.

The building blocks were all in place and they had  more than a year of negotiating time before Botswana's general election in October. But still no agreement.

The election result was an historic defeat, ending 58 years of uninterrupted rule by the Botswana Democratic Party (BDP) which had suffered years of internal strife and which had failed to address the country's economic and unemployment challenges.

Duma Boko swept to power as the new president against all expectations. And lo and behold the deal was done three months later.

The negotiations have concluded, and it'll be later this month before both sides actually sign their name on the dotted line, but it's pretty clear that this time the deal has actually been sealed.

De Beers hasn't said as much, but it's not unthinkable that they found Boko easier to deal with than his predecessor Mokgweetsi Masisi.

Masisi repeatedly threatened to walk away from the deal altogether, unless he got what he wanted. And although he greeted the long-delayed deal with warmth, there was also a "but".

"We're very happy with the outcome," he said when the deal was announced (first time round).

"It could have been better but you know with a partnership you've always got to give as you take."

Only those who were in the negotiating room really know what went on during the many, many months of talks.

But I'm guessing there were big smiles on the De Beers side when they suddenly realized Botswana's 2.3m population had surprised them with the gift of a president they could do business with.

Have a fabulous weekend.