Covid-19 also turned the diamond trade upside down in 2020. That’s why De Beers and the state of Botswana are giving themselves another year to renegotiate their agreement to share the country’s diamond revenues for the next ten years.
Diamond giant De Beers and Botswana extend talks for another year to reach a new 10-year agreement. It is impossible to use a year as atypical as 2020 to redefine the relationship between the mining company and its host country in southern Africa. The first agreement between the diamond value leader and the authorities in Gaborone had taken years of negotiations. It led to the relocation of De Beers’ headquarters to the Botswana capital, and it was in Gaborone rather than London that buyers of rough stones convened ten times a year to see their diamonds. This was enough to enable Botswana to create jobs and earn more income from diamonds, which account for 20% of the country’s GDP and two-thirds of its currency today.
Worst sales of the decade
But with the closure of jewelers and diamond polishing plants around the world during the various lockdowns, demand for rough diamonds collapsed in the first half of the year to 2.7 billion dollars. For the De Beers company, it was the worst year of the decade. Even worse than in 2009, in the aftermath of the financial crisis. The Anglo-South African multinational and its major Russian competitor Alrosa have had to tighten the taps on the supply of rough stone to avoid flooding the market and support prices a little. But De Beers still had to lower its prices by 10% to keep some customers, and agree to sell diamonds elsewhere than in Gaborone: in Antwerp, Dubai or in Israel.
Restockage and afterwards?
The diamond trade has been recovering since October. With the festive season, Valentine’s Day and Chinese New Year being the peak period for gemstone sales, each of De Beers’ last three sales approached $450 million, compared to only $50 million in the second quarter. The polishing centres are rebuilding their inventory. But the effects of Covid-19 will still be felt in 2021, De Beers estimates. It is imperative to wait until next year to see more clearly and sign an agreement that will commit the company and Botswana for another ten years.