ODC Aims to Bolster Purchases as Debswana Diamond Share Grows to 50% by 2032
Gaborone, Botswana — The Okavango Diamond Company (ODC), Botswana’s state-owned diamond trading entity, is seeking a $300-million credit facility from local banks to support increased diamond purchases. The move comes as ODC prepares to handle larger volumes from Debswana, a joint venture between the Botswana government and Anglo American’s De Beers, under a new ten-year diamond sales agreement.
Expansion of ODC’s Share of Debswana Output
Established in 2012, ODC was designed to give Botswana an independent sales channel outside of the De Beers system. The company currently receives 25% of its diamonds from Debswana but will see this share rise to 30% initially, eventually reaching 50% by the end of the decade. This strategic shift aligns with Botswana’s broader goal to secure more revenue from its natural resources.
In her address to lawmakers, Finance Minister Peggy Serame emphasized that the $175-million government guarantee for the new credit facility is essential. “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 stated.
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Navigating Financial Challenges in a Tough Market
The request for the new credit facility follows the maturity of a $140-million working capital facility in 2023. Standard Chartered Bank has been appointed to structure and coordinate the $300-million syndicated revolving working capital facility. Currently, ODC can only manage purchases of up to $70 million from its cash reserves, highlighting the need for additional financial support.
The diamond industry has faced significant headwinds, with Debswana’s sales falling 49% in the first half of the year due to a global downturn in the market. ODC temporarily halted its rough diamond sales in late 2023 as part of a broader industry strategy to reduce excess inventory caused by weakened global demand for jewelry.
Positioning for Recovery in 2024
Despite the current downturn, the diamond market is expected to recover during the fourth quarter of 2024. Finance Minister Serame noted that securing the credit facility would allow ODC to capitalize on this recovery phase, enhancing its purchasing capabilities and market position.
“This facility positions ODC to better navigate the challenging market conditions and leverage the anticipated industry recovery in late 2024,” Serame added.
The financial strategy underscores Botswana’s commitment to maximizing the value derived from its diamond resources while supporting ODC in its expanded role within the diamond supply chain. As ODC scales its operations with a higher share of Debswana’s output, the company is poised to play an increasingly pivotal role in Botswana’s economic landscape.
