06 Mar 2024

The Russia-Ukraine war has not significantly impacted the sale of diamonds by Botswana operations, but the industry was depressed in 2023 with prices falling throughout the year.

Minister of Minerals and Energy, Mr Lefoko Moagi said this when presenting his ministry’s 2024/25 budget proposal.

He said the year was even more severe when compared to the negative impact on the diamond industry during COVID-19.

He said the depressed market was due to too much inventory across the value chain from the 2021/22 buoyant period.

Further, the demand and prices for most diamonds dropped and did not recover because the US economy was not doing well while China diamond demand had not fully recovered, owing to prolonged COVID-19 closures,” he said.

Another major contributor to the poor performance of the diamond sector, Mr Moagi said was the growth and demand for lab grown diamonds. He added that his ministry was engaging with various organisations to establish how best to mitigate against the impact of such diamonds.

He also said the G7 countries had decided to impose sanctions on Russian diamonds and that from this year Russian diamonds were barred from entering G7 countries. 

He added that from March 1, diamonds of one carat polished or two carats rough and above would have to be G7 certified before selling to G7 countries, noting that from September 1, diamonds of 0.5 carat polished or one carat rough and above would have to be G7 certified before selling to the G7 countries.

The minister said the new arrangement would put a lot of pressure on Botswana and other diamond-producing countries as it would result in additional costs and a longer period to ship goods to customers, adding that it may have unintended consequences due to increased costs and time delays on non-Russian diamonds.

He said another concern was that the tracing and provenance technologies had some limitations and that the supply of sufficient machines globally to meet G7 timelines would probably not be possible.

Minister Moagi noted that Botswana hosted the G7 technical team and raised concern and showed them the local sophisticated, robust and well managed processes.

He also said Botswana had since written to the G7 to outline how the country could work effectively with the G7 to avert dire consequences to Botswana’s growing economy.

Still on diamond mining, Mr Moagi said government and De Beers had made significant progress in the Debswana sales agreement and the Jwaneng mining lease, adding that the signing of the agreements was imminent.

He said the new agreement would see, amongst other benefits, the allocation of diamonds to Okavango Diamond Company (ODC) increased from 25 to 50 per cent of Debswana production over 10 years. 

He noted that ODC was currently working on its organisation and optimisation review to prepare for the increased allocation. He also said they recently approved the transfer of the mining licence for the Lerala Diamond Mine, which had been under care and maintenance since 2017 to Maroon Capital.

He said the anticipated resumption of operations had the potential to benefit the local economy, create employment and contribute to the mining sector.

Regarding coal mining, he said Morupule Coal Mine’s recent performance had seen the company’s budget trailing due to low washed coal off-takes. 

He said efforts to review revenue to assist the mine concerning its working capital challenges and revised strategy implementation were ongoing.

Mr Moagi added that working capital challenges and the evacuation of coal to regional and international markets through the implementation of appropriate rail infrastructure remained key to implementing its five-year strategy alongside well-known coal market headwinds.

On other mining sector issues, he said the ministry was currently reviewing mining legislation in order to modernise it. 

He noted that they would also take into account current developments and emerging issues to ensure that mining laws were at par with what obtained in the international community.

He said of particular interest in the review was the inclusion of coal bed methane, critical minerals and radioactive metals regulations in the act.

He also said they would curb the illegal mining of sand and gravel, ring-fence closed mines and avail rehabilitation funds as well as empower citizens in the mining industry through the provision of goods and services. Ends