By Calistus Bosaletswe
Diamonds may be forever, but presumably not so the bond between Africa's largest producer of the precious stone and the world's leading diamond company.
Botswana has been trying to cut a gilt-edged deal in prolonged negotiations with De Beers to renew their 2011 marketing agreement but there are concerns that the company has been slow in budging.
The talks centre on Debswana, a 50:50 joint venture between the government and De Beers that lapsed in 2021.
The so-far fruitless negotiations were extended until June 30 this year after both parties cited the pandemic as the reason for not arriving at a mutually acceptable agreement.
President Mokgweetsi Masisi is leading the chorus for Botswana to get more out of its diamond output, a move that some experts view as posturing while others hope the outcome of the talks tilt in favour of Botswana.
Masisi has gone to the extent of threatening that Botswana may end its partnership with De Beers if a win-win situation wasn't reached between the two parties at the end of the negotiations.
But Roman Grynberg, a former senior research fellow at the Botswana Institute for Development Policy Analysis, believes that the country no longer holds bargaining power.
Grynberg, also a former economist with the government-aided think tank BIDPA, warns in a research paper he co-authored with two colleagues – Synthetic Gem Quality Diamonds and their Potential Impact on the Botswana Economy — that it does not require significant analysis to realise that Botswana is most vulnerable to any supply shock stemming from synthetic stones.
He fears that the avalanche of synthetic diamonds would bury the available market, leaving Botswana much weaker than a decade ago.
Stakes are high
Diamonds generate 80% of Botswana's foreign exchange earnings, and almost half of its government revenue. The country exported around US $4 billion worth of diamonds in 2020.
Debswana, in partnership with the government and De Beers, remains the largest private employer with more than 5,000 employees and as many contractors.
Under the 2011 agreement, De Beers would receive 90 per cent of the rough diamonds extracted in Botswana. In 2020, Botswana's share was increased to 25 per cent.
Speculation is rife that Botswana wants more than 25 per cent of the diamonds mined by Debswana and currently sold through state-owned Okavango Diamond Company.
President Masisi indicated recently that the 2011 agreement was not favourable to Botswana, arguing that the country deserved a larger share of its diamond resources.
The country's mineral resources and energy minister, Moagi Lefoko, would not be drawn into discussing the ongoing negotiations since the government and De Beers have released a joint statement indicating that no one will talk about the issue.
Obuseng Sennye, former senior economist at the United Nations Development Programme (UNDP), says Botswana is within her rights to "demand" the largest share of its diamond resources.
He also disagrees with the assertion that lab-grown precious stones and lack of interest among the youth in jewellery could spell doom for Botswana diamonds.
"Even if the shift is happening, it is nowhere close to catastrophic for diamonds. Income trends, especially among the youth, favour luxury consumer goods, and diamond jewellery is up there in so far as luxury consumption is concerned," he explains.
Sennye sees Gen-Z and millennials as not just more enterprising, but also possessing higher disposable incomes than older generations. "I expect demand for diamonds to grow because people tend to spend on luxury items as their incomes rise," he says.
More importantly, Sennye has "a gut feeling" that De Beers will concede, although not necessarily to the extent Botswana desires.
Titose Thipe, a former mining surveyor with Debswana, says Botswana is making a good move in demanding more value for diamonds mined in the country.
He argues that a 50:50 partnership means value for both parties, accompanied by a high level of honesty, trust and transparency.
According to Thipe, other African nations would do well to emulate Botswana and demand a better deal in terms of contracts with companies that tap their natural resources.
"African countries should stand up for what is theirs, whereby contracts should be negotiated in good faith by both parties."
Nature's bounty
Jwaneng mine, located in the southern part of the country, produces high-quality diamonds at an annual average in excess of 12 million carats. There is no illegal mining of diamonds in Botswana except in old gold mines in the northern region.
Katlego Mphoeng, a fourth-year student at the University of Botswana, says the country that owns the raw material should be the one to benefit the most of it.
"All that De Beers is bringing is the machinery, which we can easily get for ourselves," she says, convinced that now is the time for African countries to lay claim to what is rightfully theirs.
She sees Botswana having to wrangle a fair deal with De Beers as being no different from the plight of other African countries beset with exploitation and looting of resources while people wallow in poverty.
Mphoeng argues that the billions that Botswana is losing could be channelled towards development of road infrastructure and shortage of medication in hospitals.
Fellow Botswanan Bakang Khumoila says "every citizen" has the right to benefit from their country's diamond resources.
"These resources could be a panacea for problems bedevilling the country such as unemployment and poverty. Botswana has been exploited for way too long."
Another citizen, Dizzy Mpoloka, can't wait for the day when negotiations between the government and De Beers yields an outcome that translates into a 50:50 win in every sense.
