Botswana Deal Will Keep De Beers on Top

De Beers is again in the driver’s seat in Botswana, the world’s largest diamond producer—which means the company will likely be the dominant force in the diamond industry for years to come.

De Beers and Botswana’s government just inked a deal that gives De Beers leases to the country’s main diamond mines for the next 25 years. Marketing was not covered in the press announcement, but De Beers spokeswoman Lynette Hori says the country’s diamonds will continue to be sold through the Diamond Trading Company.

Botswana produces an estimated 25% of the world’s diamonds by value and is seen as the backbone of De Beers’ empire, producing 70% of the company’s diamonds by volume.

Yet in a gesture that shows the increasing importance of African governments in the diamond industry, the government of Botswana also has gained a lot more control of De Beers.

Previously, Debswana, the joint De Beers-Botswana mining company, controlled 15% of DBI Investments, the holding company that owns De Beers. (The other two shareholders are Anglo-American and the family of De Beers chairman Nicky Oppenheimer.) With the new deal, Botswana now controls that 15% directly.

Three Botswana government officials also sit on the company’s board of directors.

The news ends speculation that Botswana had grown restless with De Beers, including reports of a “strategic review” and protracted negotiations over renewal of the lease to Jwaneng, one of the country’s biggest mines.

The press release did not mention any concrete plans for local “beneficiation” and establishing a domestic cutting industry, a hot issue in De Beers’ relations with African countries, but Hori says that will be mentioned at a later date.

“Local producers … have expressed desires to maximize the benefits of the minerals that their land is blessed with,” she noted.

“De Beers understands this desire and will seek to strike a balance between a national government’s objectives and expectations and the long-term sustainability of any business model that the company operates within the global diamond industry.”