Gov't warned against increasing De Beers stake

Government’s determination to acquire a sizeable stake in De Beers has been reiterated by President Gideon Duma Boko. In an interview on the sidelines of the 80th session of the United Nations General Assembly in New York, this week, Boko has reaffirmed government’s appetite to buy more share in the global diamond giant, De Beers, by end of October despite reservation from economic analysts.“We are resolute now and we've communicated a firm intention to increase our stake in De Beers to a controlling state that is upwards of 50 percent,” said Boko. He highlighted his administration determination to have effective control of the diamond industry for the country targeting to move from a middle income economy to a high income status. “We want our voice to be heard. It's a matter of economic sovereignty for Botswana,” said Boko.The President further said it was imperative for Botswana to take a more active role and increase its stake. Quizzed where the cash strapped government due to low diamond sales and stagnant diversification efforts will finance the acquisition desires, Boko affirmatively indicated government’s preparedness. “We have lined up a number of potential collaborators with us, if I may put it that way. We have targeted funders,” said Boko, highlighting the country’s recently launched sovereign wealth fund will also be used. “So we are more than ready with the transaction and we've said the transaction must be concluded by the end of October.”Earlier this month, seasoned investment consultant, Mphoeng Mphoeng warned that natural diamonds’ glitter has plunged, citing that the fall is not what the globe witnessed in 2007 to 2008 and during the COVID-19 pandemic era. “But right now, what we're seeing is not a temporary blip that's being caused by demand. This is a structural change. “And I think the sooner as a country we realize that there's a structural change in the markets, which have happened in the last few years, the better. And this really boils down to the fight between land-grown diamonds and natural diamonds,” said Mphoeng. Mphoeng’s sentiments indicate buying De Beers will not improve the country’s endeavors to improve diamond sales or to have the commodity continue as the economic mainstay. He said the country should move away from the notion that De Beers is the one cause of this particular disruption and thinking owning it will make things work different. “We really need to understand this is not the De Beers from 10 years ago.This is not the De Beers from 10 years ago. In fact, just buying into that might be us just flocking a dead,” said Mphoeng. He said the nation should realise there has been a proper structural break in the market. “That is not to say the national diamond market is dead, but this is definitely not going to be the same national diamond market that we've had in the history of this country. “And the sooner that we come to terms with that as a country, the better. We are never going back to the kind of sales that we were seeing where we were able to do $3 to $4 billion worth of sales. It's just not going to be happening,” said Mphoeng.Currently Anglo America holds 85 percent stake in De Beers and the government holds 15 percent. “What we're doing, our mentality is nostalgic when it comes to De Beers. But the reality is that the market has changed,” said the analyst.

Explore

More

Business

Gov't warned against increasing De Beers stake