IMF Cautions Botswana: Don't Buy De Beers

(IDEX Online) - The IMF has cautioned Botswana's authorities against increasing the country's stake in De Beers.

It says the country's economy is struggling with weak diamond demand and fiscal pressures, and increasing its stake above the current 15 per cent would deepen its exposure to a sector that is facing significant uncertainty and could well increase public debt.

In a statement, the executive board of the Washington DC-based IMF (International Monetary Fund) said: "Botswana's economic outlook has deteriorated markedly over the last twelve months as the decline in the demand for natural diamonds has been sharper - and is expected to be more persistent - than anticipated."

Botswana's President Duma Boko has repeatedly spoken of his determination to acquire full control of De Beers, by acquiring the full 85 per cent stake currently held by Anglo American.

The IMF has no power to block Botswana from increasing its stake in De Beers, but its warning carries significant weight with investors, lenders and rating agencies, particularly as the government explores financing options for a multibillion-dollar acquisition.

Anglo values De Beers at $4.9bn but many in the industry believe its true worth is considerably less.

Boko views increasing control of De Beers as a matter of economic sovereignty and a strategic goal, consistent with wider policy goals.

So far, there is no clear official statement from his government explicitly responding to or rejecting the IMF warning.

Pic shows Botswana's President Duma Boko.