As De Beers bid deadline looms, Botswana pushes for control

Botswana is holding to its ambition of buying a controlling stake in De Beers from Anglo American Plc, potentially dampening interest from some private investors looking to acquire the diamond giant.

Anglo has set an April 16 deadline for bids, as the London-listed miner pushes ahead with exiting the business despite the diamond market languishing in one of its worst ever crises, according to three people familiar with the matter.

The government of Botswana – which owns 15% of the iconic diamond firm – still wants to boost that stake beyond 50%, according to people familiar who asked not to be identified discussing a confidential matter. President Duma Boko told Bloomberg TV the same thing during an interview in September. More than two-thirds of De Beers’s rough stones are mined in the southern African country.

Discussions in recent weeks between Botswana and other African diamond producing nations, Angola and Namibia, as well as with potential private buyers, had led to growing expectations that the government would be willing to settle for a minority stake in De Beers. That would open the way for the one-time diamond monopoly to remain in private ownership.

The continuing intention of Boko’s administration to pursue control is likely to hamper Anglo’s efforts to find private investors, some of the people said. The situation remains fluid and may change, they added.

While Botswana has pre-emptive rights over Anglo’s entire De Beers stake, securing control of the business isn’t guaranteed, said one of the people familiar with the government’s position. Rather, the size of the country’s shareholding will depend on various antitrust and regulatory considerations, as well as talks with private bidders, they said.

There are at least three private groups still interested in buying the business, led by former De Beers boss Gareth Penny, Australian mining veteran Michael O’Keeffe and diamond trader Nir Livnat.

Those groups thought Botswana had tempered its aspirations and was prepared to accept a larger minority interest, according to people familiar with their positions, who said different parts of the government may not be fully aligned on what level of ownership the state should seek. Should Botswana exercise its pre-emptive rights to gain control of De Beers, it would deter some of those investors.

Minerals and Energy Minister Bogolo Kenewendo and Boko’s press secretary, Emang Mutapati, declined to comment. A spokesperson for Finance Minister Ndaba Gaolathe didn’t respond to questions from Bloomberg.

Spokespeople for Anglo, Penny and O’Keeffe declined to comment. Livnat did not respond to a message seeking comment.

In February, Anglo took its third impairment on De Beers in just two years – slashing its book value by 75% to $2.3 billion. Despite those writedowns, there are also questions about how cash-strapped Botswana would fund the purchase of a majority stake.

While the company had set a deadline for next week for bids, that position may flex a little due to the ongoing crisis in the Middle East.

Diamond slump

The diamond industry is experiencing one of the deepest and longest downturns in history amid a pullback in Chinese luxury spending and the rising popularity of synthetic stones. De Beers vies with Russia’s Alrosa PJSC as the world’s largest diamond producer.

Anglo is selling its 85% shareholding in the diamond company as part of a radical restructuring announced almost two years ago, but the weak market is making an exit challenging.

The protracted slump is especially critical for Botswana as diamonds account for most of the country’s export sales and about a third of government revenue. Boko said last year that owning De Beers would provide greater sway over the entire international supply chain, allowing it to emphasize the superiority of natural gems.

The discovery of diamonds in 1967 — a year after Botswana became independent from Britain — transformed what was a rural backwater with only a few miles of tarred road into the second-richest nation per capita on the sub-Saharan African mainland. The largely arid country’s finances have now taken a downturn, with its investment grade credit rating under threat as it ramps up borrowing and its budget deficit widens.

Angola and Namibia have also expressed interest in investing in De Beers. Botswana would welcome their involvement as potential future shareholders in the company, the people familiar with the government’s stance said.

(By William Clowes, Thomas Biesheuvel, Mbongeni Mguni and Antony Sguazzin)