Botswana’s state-owned Okavango Diamond Company (ODC) is seeking a $300 million credit facility from local banks to support increased diamond purchases, according to Finance Minister Peggy Serame.
The move comes as ODC aims to capitalize on its growing share of diamond production from Debswana, a joint venture between Botswana and Anglo American’s De Beers.
Established in 2012 as an independent sales channel for the government, ODC currently receives 25% of its diamonds from Debswana.
However, a new ten-year diamond sales agreement signed in June last year between Botswana and De Beers will gradually increase ODC’s share of Debswana’s output to 50% by the end of the deal, starting with an initial rise to 30%.
After a $140 million working capital facility matured in 2023, ODC appointed Standard Chartered Bank to structure and coordinate a new $300 million syndicated revolving working capital facility.
ODC currently has the capacity to finance up to $70 million in diamond purchases using its own cash reserves.
To bolster this capacity, Serame sought approval from lawmakers for a $175 million government guarantee to back the new credit facility.
“The $175 million government guarantee is essential for supporting ODC’s increased entitlement to 30% of Debswana’s rough diamond supply. It will also help the company secure favorable rates in the local market for the new working capital facility,” Serame explained.
The diamond industry has faced significant challenges, with Debswana’s sales dropping by 49% in the first half of the year due to a market downturn. In October last year, ODC temporarily halted rough diamond sales as part of a broader industry effort to reduce excess inventory in the cutting and polishing sectors caused by weaker global demand for jewelry.
However, Serame noted that the diamond market is expected to begin recovering in the fourth quarter of 2024. The availability of the new credit facility would position ODC to take advantage of this anticipated recovery.
