Though the diamond industry is a major contributor to the economy of Botswana through shareholding in Debswana Diamond Company, DTC Botswana and De Beers as the world’s premier diamond company. The Government of the Republic of Botswana (GRB) has made its decision not to take up its pre-emptive rights to acquire an additional shareholding in De Beers, following the receipt of a formal pre-emption offer from the Central Holdings Limited, CHL (the “CHL Transfer Notice”) dated 26 July 2012.
According to the Media release from the Office of the President, under the terms of the Shareholders’ Agreement between Anglo American, CHL (representing the Oppenheimer family interests) and the GRB had pre-emption rights in respect of CHL’s interest in De Beers, enabling it to increase its interest in De Beers, on a pro rata basis, to up to 25% at a cost of US $1.275 billion.
The $1.275 billion which is equivalent to about P9.8 billion represents about 10% of the Gross Domestic Product (GDP), a large cost for a country whose government budget is still in deficit, and is trying to bring the budget to balance within a year and a half.
However such a purchase would inevitably push back the restoration of balancing the budget, drain the country’s international reserves, and raise the government debt to GDP ratio thus precluding the Government from raising additional debt in the international markets for other projects.
In conclusion the Government of the Republic of Botswana is looking forward to building on the excellent relationship they have with Anglo American, both through their ownership of De Beers and through the Debswana joint venture, and to sharing in De Beers’ highly attractive long term prospects.
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