IMF Warns Botswana Not to Buy De Beers

The International Monetary Fund (IMF) has warned the Botswana government against increasing its stake in De Beers, citing the country’s economic woes and dependence on diamonds.

The challenging situation in the diamond market creates considerable uncertainty for Botswana, the IMF said in a review of the African mining country’s fiscal situation, which it published on December 8.

“This risk is compounded by the fact that the government has expressed interest in increasing its 15% participation in De Beers,” stated the annual IMF report on its Article IV consultation, which the institution’s staff members write after visiting the country and assessing its economy.

“Staff also cautioned the authorities against increasing their stake in De Beers, given the fiscal situation and Botswana’s already high dependence on the diamond sector,” the report added.

Anglo American is in the process of selling its 85% share in De Beers. Botswana wants to expand its stake from its current level of 15% into a majority holding. Angola and Namibia have also expressed interest in participating in a deal.

Botswana is at a “critical juncture” because of weak demand for natural diamonds and the need to diversify its sources of economic growth, according to the document. The IMF expects the country’s economic activity to continue contracting this year, reflecting further decreases in diamond production as well as activities outside the mineral sector.

“The decline in demand for natural diamonds has been sharper — and is expected to be more persistent — than anticipated,” it continued. “It has contributed to a sharp economic contraction in 2024, to the persistence of high unemployment, particularly among the youth, and to sizable increases in the fiscal and current account deficits.”

IMF staff members concluded discussions with Botswana officials on September 26 and completed their report on November 4. The body’s executive board reviewed it on November 19, after which the IMF published it alongside other related documents.

Image: De Beers’ Jwaneng mine in Botswana. (Shutterstock)