Botswana's Okavango Diamond Company Seeks $300m to Boost Diamond Purchases

In an ambitious move to secure its position in the global diamond market, the Okavango Diamond Company (ODC) of Botswana is taking proactive measures amid industry downturns. The state-owned entity is in the process of securing a substantial $300-million credit facility from local banks, as disclosed by Finance Minister Peggy Serame last Thursday. This financial maneuver aims to bolster ODC's capacity to purchase larger diamond volumes, which is pivotal for its growth strategy and revenue generation for Botswana.

Established in 2012, ODC represents Botswana's strategic aspiration to leverage its diamond resources outside of the traditional De Beers marketing channels. With rights to acquire 25% of production from Debswana—a joint venture between the government of Botswana and Anglo American’s De Beers—ODC symbolizes the country's move toward greater control over its precious diamond output.

In a landmark deal in June of the preceding year, Botswana and De Beers penned a new decade-spanning sales agreement. A central aspect of this agreement is the incremental elevation of ODC's allotment from the current 25% to an eventual 50% by the termination of the contract, embodying Botswana's objective to extract heightened proceeds from its mineral wealth.

The quest for the $300-million credit facility is set against the background of a maturing $140-million working capital facility this year. For this financial strategy, ODC has tapped Standard Chartered Bank to orchestrate and synchronize the proposed credit mechanics as a syndicated revolving working capital facility.

However, ODC's purchasing capability is presently constrained to $70-million, limited by its own monetary resources. Finance Minister Serame, addressing parliamentarians, sought legislative endorsement for a $175-million state guarantee as a key enabler for the new credit. This underwriting by the government is designed to bolster ODC’s elevated access to Debswana's rough diamonds and also to secure favorable terms in the local lending market for the new working capital facility, thus giving it a stronger footing.

While the diamond industry is presently experiencing a slump—manifested by a stark 49% fall in Debswana's sales in the year's first half—strategy remains forward-focused. Last October, ODC joined industry peers in a temporary cessation of rough diamond sales to help alleviate the cutting and polishing segment's inventory surplus, a response to the softened global demand for luxury goods.

Finance Minister Serame provided a glimpse of optimism, forecasting that the diamond industry would embark upon a recovery from the subdued global demand by the fourth quarter of 2024. With the anticipated credit facility, ODC's strategic positioning will be favorable to take advantage of the market's rebounding fortunes.