Former Governor: Avoid majority De Beers stake

Reconsider
Former Central Bank Governor warns of financial risks amid Anglo American divestment.
Ogone Tlhage
  • 1 Month Ago

Former Bank of Botswana Governor Keith Jefferis has cautioned the Government of Botswana (GoB) against acquiring a majority stake in De Beers. He said his warning comes as the cash-strapped nation faces significant financial constraints and a volatile global diamond market.

This warning follows the announcement by Anglo American plc of its intent to divest its 85% shareholding in De Beers as part of a wider corporate restructuring. The move is seen as a response to the growing impact of lab-grown diamonds, which continue to depress prices for natural stones.

While the GoB currently holds a 15% stake, Jefferis said there is a lack of clarity regarding the government's ambitions. “The GoB has said its intention is to be a buyer, but it remains unclear if this means a marginal increase, a controlling stake of 35% plus one share, or a full 85% acquisition,” Jefferis said.


The fiscal risk

The International Monetary Fund (IMF) has already advised against increasing the stake, citing Botswana’s “precarious fiscal situation” and its existing over-reliance on the diamond sector. Jefferis said he shared these concerns and highlighted the lack of available capital.

“The GoB is financially constrained and is not in a position to make a significant share purchase from its own resources,” Jefferis said. “A leveraged buy-out - borrowing to fund the purchase - would be both difficult and risky given existing debt constraints.”

One of the most compelling points Jefferis said is that Botswana already enjoys the lion’s share of diamond revenues without needing further equity. Through its 50% direct stake in Debswana (the primary mining operation) and its 15% share in De Beers, the GoB already holds an effective 50% economic interest in the group.

Jefferis broke down the valuation of De Beers’ components to illustrate why further investment might yield diminishing returns:

  • Mining operations: 70–75% of revenue.
  • Element Six (Synthetic Diamonds): 15–20% of revenue.
  • Exploration & Trading: 5–10% each.

“Given these components, the question arises: how much more economic value would actually result from a larger shareholding?” he said.


A strategy for diversity

Jefferis said the primary challenge for Botswana remains economic diversification, rather than doubling down on a single industry. Instead of seeking control, he said the government should focus on building a “viable new ownership coalition” comprising producing countries, luxury marketing experts, and well-capitalised financiers.

“The GoB’s stake could plausibly be raised from 15% to 26%,” Jefferis said. “This would provide a blocking minority to protect national interests while avoiding the immense financial and business risks that a majority stake would entail.”

Reuters reported in November that Botswana is working on acquiring a majority stake in De Beers, President Duma Boko said at the time, after Angola announced a rival bid to control the giant diamond company.

Botswana, which owns 15% of De Beers and contributes 70% of its annual rough diamond production, considers the company a strategic national asset, despite a slump in global diamond prices that has hurt its economy.

Boko told lawmakers during a State of the Nation Address in Gaborone that while Botswana sought to diversify its mining sector, diamonds would remain a major contributor to growth.

"It is in this regard that concrete steps are underway towards the acquisition of Anglo American's shares in De Beers," Boko said without disclosing further details.


Standoff fears allayed

The mining ministers of Botswana and Angola held talks in Botswana's capital on 7 November amid fears that the two regional allies' quests to control De Beers could trigger a standoff.

Although Gaborone avoided addressing the rival bids in remarks after the meeting, Angola's mines ministry said in a statement that the two ministers discussed acquiring shares in De Beers but did not provide more details.

Meanwhile, Angola is pursuing a 20%-30% stake in Anglo American's diamond unit De Beers, a proposal being discussed with other diamond-producing African nations, a senior official from Angola's mining ministry told Reuters recently.

Angola submitted a bid for a majority stake in De Beers in October 2025, though it had initially sought a minority stake.

"Taking the majority stake within luxury commodities is dangerous because it depends on the market," Paulo Tanganha, Angola's national director of mineral resources, told Reuters on the sidelines of an African mining conference in Cape Town.

"So to de-risk that, we have to have a portion that is sustainable for our economy. And that range [is] between 20% and 30%, we are happy about that."


Closed-door talks

Angola's bid for a majority stake in De Beers had set the country up for a potential bidding war with Botswana, which owns 15% of De Beers and has said it was working on acquiring a majority stake in the company.

Tanganha said closed-door talks were continuing between Botswana, Angola, Namibia and South Africa to seek a common position on how each country would benefit from having a stake in De Beers, with no agreement yet reached.

"There is a saying: together we are stronger. That's the way we are doing it. And if my neighbour is suffering, I also suffer. So we have to be together and fight together as a team," Tanganha said.

For Angola, state-owned diamond miner Endiama and its national diamond trading company Sodiam would take up the stake in De Beers on behalf of the government, Tanganha said.

Tanganha did not disclose how Angola would fund the De Beers stake acquisition but said the country had many sources of funding.

Anglo American, which owns 85% of De Beers, is selling its entire stake to mainly focus on clean-energy metal copper. The global giant values De Beers at $4.9 billion. - Additional reporting by Reuters