The state-owned Okavango Diamond Company (ODC) has reaffirmed that its planned citizen-only sales will go ahead as per the original schedule, dispelling rumors of a potential cancellation. In a statement released earlier today, ODC officials emphasized their commitment to ensuring local participation in Botswana’s diamond trade, a sector traditionally dominated by international buyers.
Reports indicate that the state run company has called off its second consecutive diamond sale amid weaknesses in diamond demand. It is understood that the rough viewing was scheduled for December 3 to 13 and the spot auction scheduled for December 16 is expected not to take place. It is understood that customers were informed about this decision via an email. ODC Managing Director, Mmetla Masire said that “Yes ODC has cancelled its scheduled sale for December 2024. There are three reasons; the current market is not conducive to large sales and ODC felt that it needs to contribute towards reducing overall inventory in the value chain so it cancelled both November and December sales.”
“The other reason is that given the sharp price drops, ODC would make large losses if it sold in November and December. The other reason is that in November and December sales activity are low nd this would be the best tie for ODC to move to its new facility,” said Masire.
On its website, ODC indicated that the company will confirm auction dates on a sale by sale bases due to among others things to current market conditions. This is not the first time that ODC took a decision to suspend diamond sales. Last year the company postponed diamond sales citing weak demands.
When presenting a request by ODC, Finance Minister Peggy Serame said in order to be in a position to purchase its entitlement of Debswana’s production, ODC had negotiated a 10 year revolving working capital facility with Standard Chartered with a capital limit of USD 140 million. The facility which was arranged in October 2013and has since matured back in October 2013 was secured by a USD 100 million guarantee from the Government of Botswana. That guarantee, Serame added, was however never called upon but was beneficial in supporting during negotiations with Standard Chartered Bank for the credit facility. Serame said failure to have the government guarantee approved by the winter meeting of Parliament would be detrimental to ODC’s operations for the following reasons; ODC is currently only able to afford purchases up to USD$175 million, using its own cash reserves. Serame said the proposed P4.1 billion credit facility backed by a USD$175 million government facility Government guarantee would support larger volumes of diamonds that ODC can purchase from Diamond Trading Company Botswana at each cycle. Failure to have a government guarantee may also have a negative impact on investor sentiment. Serame further stated that arrangement of the financing syndication has been launched with strict timelines and any deviations from these could create market uncertainty as well as possibly raise pricing for the transaction. Serame also indicated that projections indicate that if the guarantee was to be granted, to total public guarantee was to be granted, total public debt including guarantees, would consequently also increase to 15.3 percent of GDP by the end of 2024/2025 and also thereafter remains within the statutory limit over the medium term period.
