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Botswana’s state-owned Okavango Diamond Company (ODC) seeks a $300 million credit facility from local banks to support larger volumes of diamond purchases, Finance Minister Peggy Serame said on Thursday.
ODC, established in 2012 as an independent window for the government to sell diamonds outside of the De Beers channel, currently gets 25% of its production from Debswana, a joint venture between Botswana and Anglo American’s De Beers.
In June last year Botswana and De Beers agreed a new 10-year diamond sales agreement, which will see ODC’s share of Debswana output rise to 30% initially and then increase gradually to 50% by the end of the deal, as the country seeks to get more revenue from its resources.
Following the maturity of a $140 million working capital facility in 2023, Serame said ODC has appointed Standard Chartered Bank to structure and coordinate a new $300 million syndicated revolving working capital facility.
ODC is currently only able to afford purchases up to $70 million using its own cash reserves, Serame told lawmakers as she sought approval for a $175 million government guarantee for the new credit facility.
“The $175 million government guarantee will crucially support ODC’s increased entitlement of 30% to Debswana’s rough supply, as well as assist the company in negotiating favourable rates in the local market on a new working capital facility,” Serame said.
The diamond industry is currently going through a market downturn which has seen sales at Debswana fall 49% in the first half of the year.
In October last year, ODC temporarily halted its rough sales as part of an industry wide drive to reduce the glut of inventory in the cutting and polishing industry caused by weaker global demand for jewellery.
The diamond industry is expected to start recovering from the impact of weak global demand during the fourth quarter of 2024, Serame said, and availability of the credit facility would put ODC in position to benefit from the recovery.
(By Brian Benza; Editing by Nelson Banya and Susan Fenton)
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