Botswana courts investors amid diamond slump

President Mokgweetsi Masisi made his pitch to delegates at a mining conference to invest in diamond mining and rare metals in Botswana after Covid-19 hammered one of the country’s most lucrative sectors.

The pandemic has pummeled global diamond output by around 20% last year, leading to slashed prices, shuttered mines and widespread job losses due to supply-chain disruptions in the diamond industry.

The sector accounts for around 20% of Botswana’s GDP and the global slump sent the country into an 8.9% contraction in 2020, one of the worst recessions in Africa.

“The diamond industry is one of the key economic sectors that has been seriously affected, with serious consequences for the development of diamond producing countries such as ours,” said Masisi on Wednesday at the 2021 Investing in African Mining Indaba.

In some cases, diamond mining shut down almost completely resulting in big losses for those working in the mining industry, he added.

There were also opportunities in copper, nickel, silver, soda ash, salt, coal and gold that could help the country to move away from an overreliance on diamonds, he said.

Botswana has developed a roadmap to exploit around 212bn tonnes of coal.

The government is also reviewing its legal frameworks in mines and minerals policy to encourage investment in limestone deposits and cement.

Rare earth metals and battery metals, which are in high demand due to the rise of electric cars, are found in abundance in Botswana.

Masisi praised Botswana’s regulatory environment, adding that the mining laws are in line with global best practice.

The government is developing a multi-commodity exchange which will provide investors with an easy platform for trade in various commodities beyond minerals.

It has also made efforts to digitise geological information for domestic and international investors to encourage mineral exploration.

De Beers diamond deal

However, uncertainty hangs over the renewal of a 10-year sales agreement with UK-based miner De Beers after the current deal expired at the end of 2020.

De Beers, which is part of UK-based Anglo American, provides the country with around two-thirds of its foreign exchange and a fifth of its GDP.

Around 70% of the miner’s diamonds and 90% of sales come from Botswana.

The original agreement was extended for a year in December while both parties said that logistical Covid-19 challenges meant that they needed more time to negotiate a new deal.

In August, De Beers, the world’s largest producer of diamonds, was forced to cut the price of larger stones by 10% in an effort to spur sales as jewelry stores were closed across the world.

Botswana’s finance minister said in October that the economy will rebound and grow by 7.7% in 2021 on the back of renewed confidence in the diamond sector.

Edahn Golan, a diamond expert, said: “Consumer demand is already back to pre-Covid levels. The manufacturers are back to near full activity and rough diamond sales by miners are in full swing.”