Agenda-setting intelligence, analysis and advice for the global fashion community.
Botswana is intent on increasing its share of De Beers, the world’s biggest diamond company, when Anglo American Plc divests, but hasn’t settled on a “magic number” for its preferred stake, according to the nation’s vice president.
“Whatever the number is, it is more than 15 percent,” which the government currently holds, Ndaba Gaolathe, who also serves as finance minister, said in an interview with Bloomberg TV in London on Friday. “As Botswana, we can no longer afford to throw money at anything even if we wanted to,” and while the diamond sector will remain key, the government won’t invest irresponsibly, he added.
The price of diamonds has plummeted over recent years due to pressure from cheaper lab-grown stones and weakening Chinese demand, prompting Anglo to put its 85 percent holding up for sale. The gems have underpinned Botswana’s economy since they were first discovered there in 1967, but the industry downturn has tipped the country into recession.
A group led by former De Beers chief executive officer Gareth Penny has been selected as the preferred bidder for the company. Anglo is discussing selling its stake for about $1 billion, a fraction of what it was once worth, people familiar with the situation told Bloomberg in July.
ADVERTISEMENT
“We are entering a new phase where the types of partnerships also need to evolve in order to navigate modern-type challenges that did not exist in the past,” Gaolathe said. “The way diamonds were sold in the past has to be very different to the way diamonds are sold now.”
The vice president sees the diamond market downturn adding impetus to efforts to diversify the economy, and make it more adaptable and resilient. The government is stepping up plans to make tax collection more effective, realigning spending in line with the revenue it collects, cutting wasteful expenditure and improving the management of infrastructure projects, he said.
Gaolathe projects a budget deficit of about 8 percent of gross domestic product for the current fiscal year, down from a previous forecast of 8.9 percent, and sees the gap narrowing to between 4 percent and 5 percent within two to three years.
By Mike Cohen and David Malingha
Learn more:
Inside De Beers London’s Plan to Rebrand Itself — and Diamonds
A cabochon-cut stone resembling a water droplet, recently introduced by De Beers London, is an unusual look for a diamond. CEO Emmanuelle Nodale sat down with BoF to explain how it fits into a sweeping rebranding strategy.
