Multi-Faceted, Deeply Set

Botswana and De Beers are dependent on each other. For Botswana, diamonds generate over 80 percent of Botswana’s
June 30th, 2016
Botswana and De Beers are dependent on each other. For Botswana, diamonds generate over 80 percent of Botswana’s
foreign exchange earnings and almost half of its government revenue. According to De Beers, the diamond industry directly accounts for one in 20 jobs in the country. But the connections between De Beers and Botswana’s economy run even deeper. The relocation of a De Beers aggregation center from London to Gaborone, Botswana’s capital, in 2013 increased the liquidity of the Bank of Botswana since a great deal more money started to flow through it. The bank’s annual report discloses that while the revenue generated from the diamond sorting process is not substantive and “largely offsetting,” the net re-export of diamonds from the aggregation center “is important for balance of payment
surpluses.” That is, the money helps the bank but does not remain in the country. A former senior Bank of Botswana employee said, on the condition of anonymity, “De Beers is controlling the State of Botswana, because it’s [helping] guarantee the liquidity of its Central Bank.”
 
But by producing the bulk of De Beers’ diamonds, Botswana also has considerable leverage with its business partner. In 2013, for instance, De Beers recovered 31.1 million carats in Namibia, South Africa, Botswana, and Canada combined. Of that, Botswana accounted for about 22.7 million carats. By value, Botswana accounted for more than 70 percent, or $4.2 billion, of De Beers’ $5.9 billion in revenue. In short, De Beers needs Botswana even more than Botswana needs De Beers.
With this mutual dependence, it’s not surprising that Botswana would insist on a greater share of the spoils than is provided for in its normal gains in royalties and taxes and that De Beers would want to hold some political sway in Botswana. The form that this takes is unique: In 2004, Botswana’s government received a 15 percent share in De Beers in exchange for 25-year renewals on four mines, including the world’s largest diamond mine, Jwaneng, whose license had
been set to expire in 2017.

Contacts

  • 1 Hood Avenue/148 Jan Smuts; Rosebank, GP 2196; South Africa
  • T. +27 (0)11 587 5000
  • F. +27 (0)11 587 5099