- Tsaone Segaetsho
In an interview with The Executive Botswana Magazine on Monday, local economist Dr Keith Jefferis cautioned that while the Government of Botswana may be able to acquire De Beers from Anglo American at a further discounted valuation, the commercial and fiscal risks associated with such a transaction remain exceptionally high under current market conditions.
The interview follows renewed discussion around the proposed sale of De Beers and Botswana’s interest in increasing its stake in the 85 per cent holding offered by Anglo American, which surfaced at the recently concluded Mining Indaba.
Botswana has indicated its ambition to become a majority shareholder in a company whose valuation has fallen sharply. De Beers was valued at US$4.1 billion, having been reduced by US$4.5 billion since 2023 amid sustained weakness in the global diamond market.
Earlier this month, Anglo American warned that it would write down the value of De Beers once again, for the third time in three years, when announcing its annual results on Friday. These impairments are among the key factors influencing the pace and structure of the divestment process.
Market analysts have suggested that, should the sale process drag on amid continued softness in diamond demand, the valuation of De Beers could decline to as low as US$1 billion, representing a substantial erosion of value for Anglo American. Against this backdrop, Dr Jefferis was asked whether Botswana might effectively secure a bargain purchase.
He emphasised, however, that price alone should not obscure the structural risks inherent in the business.
“The core issue is that this is a company operating in a deteriorating diamond market, facing significant external pressures, including competition from lab-grown diamonds,” he said, adding that such headwinds are compounded by Botswana’s constrained fiscal position, marked by persistent budget deficits.
Dr Jefferis told The Executive Botswana Magazine that the Government does not have the liquidity to fund such an acquisition outright and would therefore need to rely on debt financing.
“Buying De Beers is a risky undertaking. We do not have the money to buy De Beers. We would have to borrow and repay that debt, and that is highly risky given diamond market performance and our current fiscal position. Even if De Beers underperforms, we would still be obligated to service the debt. We would also have to use tax revenue to support the company, which would further constrain the national fiscus,” he said.
Deliberations at last week’s Mining Indaba also highlighted shifting regional positions. The Angolan government has reportedly tempered its earlier ambition of acquiring a majority stake, opting instead for a holding of less than 30 per cent, citing the risks associated with ownership of a cyclical commodity business.
Similarly, the Namibian government issued a statement distancing itself from reports that it was considering participation in a consortium bid, reiterating that it lacks the financial capacity to pursue such an acquisition amid continued volatility in the diamond market.
Botswana, however, appears resolute. Minister of Minerals and Energy Bogolo Kenewendo told The Executive Botswana Magazine that “the talks are ongoing”. When pressed further on the risks associated with the proposed transaction, she declined to comment.
In December last year, the International Monetary Fund (IMF) cautioned the Government of Botswana against increasing its stake in De Beers, noting “the fiscal situation and Botswana’s already high dependence on the diamond sector” as material risk factors.
