Botswana loses in De Beers/Namibian deal

Single commodity dependent Botswana, risks losing some of its due benefits, that include sales taxes, following the signing of a historic deal between De Beers and Namibian government, Botswana Guardian has been told.

This week, mining giant, De Beers signed ten-year sales, sorting and valuing agreement with the Namibian government. Under the new agreement, Namibia will see a significant increase in rough diamonds made available for beneficiation, with $430million of rough diamonds being offered each year to a 50:50 Joint Venture between Namibia government and De Beers, called the Namibia Diamond Trading Company (NDTC). NDTC will be sorting diamonds on behalf of Namdeb Holdings, a company owned by the same shareholders.

According to persons familiar with diamond business, the De Beers/Namibian deal bear the same similarities with the deal, which Botswana signed with the same company some five years ago. For Botswana, the deal has all the hallmarks of reversing and affecting the gains made by the country since De Beers relocated its office from London to Botswana under a deal signed in September 2011. The agreement included the relocation of De Beers office to Botswana, where all sorting, valuing and selling of all De Beers mined diamonds, including those in Namibia, will be done in country.

It was not clear, at press time what prompted De Beers to sign a similar deal with Namibia. De Beers will, for the first time, allow 15 percent of Namdeb Holdings’ yearly run-of-mine production to be made available to a government-owned independent sales company called Namib Desert Diamonds.

On Wednesday, a source who is familiar with Botswana agreement with De Beers, said that the country stands to be affected. “If the deal is implemented as it has been stated, then Botswana’s sales will be affected as some of the produce it used to handle will now be diverted to Namibia,” said the source, who could not be named, as the opinion may put him in a collision course with the three parties (De Beers, Botswana and Namibia). In a response to Botswana Guardian questions, De Beers confirmed that ‘there will be a slight reduction in the value of rough diamonds imported into Botswana from Namibia for aggregation’. However, the unlisted company said Botswana will still retain the lion’s share in terms of diamonds sold annually. It added that the Namibian deal will not affect its agreement with Botswana. It is exciting times in Namibia. The Namibian minister for mines and energy, Obed Kandjoze is thrilled about the deal which will propel the country to international stardom in the diamond business, which for years Botswana was the only one enjoying in the region. 

“This new agreement cements Namibia’s position as an important international diamond player and will provide further stimulus to advance our downstream industry. De Beers and Namibia have a longstanding and successful partnership and I am pleased we will continue working together for the benefit of Namibia and the diamond industry,” he was quoted as saying by Mining Weekly online edition.  De Beers’ CEO Phillipe Melleir is also excited. “This sales agreement – the longest ever between Namibia and De Beers – not only secures long-term supply for De Beers, but also ensures that Namibia’s diamonds will continue to play a key role in national socioeconomic development long into the future,” he said in a statement. Botswana minister responsible for minerals, Kitso Mokaila could not be reached immediately for comment as he is currently in Angola on a working trip.

When the Botswana/De Beers deal was first hatched, the country was supposed to sell diamonds in excess of $6 billion annually from De Beers mines. Head of Research at Motswedi Securities, Garry Juma stopped short of saying it is still early days. “More information is still lacking such as current output that is coming from Namibia to Botswana for aggregation process. This can be used to measure the impact, if now more diamonds are being availed in the Namibia market under the latest deal.”