The U.S. government’s Overseas Private Investment Corporation (OPIC) signed a $125 million loan guaranty with Barclays Bank of Botswana, together with Lazare Kaplan International (LKI) acting through its subsidiary Botswana Finance LLC. The agreement will establish a revolving framework facility in which OPIC will share the credit risk.
Managing Director of Barclays Bank of Botswana Reinette Van Der Merwe said on Monday that it was imperative that Barclays finds a sustainable way to grow its lending capability to the sector.
“Diamonds have transformed Botswana’s economy from the poorest country in the world before independence to one of the fastest growing economies,” she said.
She stated that Barclays Bank of Botswana is the first lender under the broader $250 million loan guaranty program, and additional lenders may join the program in the future. She believes that this tripartite partnership reflects Barclays Bank of Botswana’s commitment to the local diamond industry alongside OPIC’s commitment to economic development and LKI’s longstanding record of investment in Botswana.
“This OPIC-supported loan makes it easier and more efficient for the local cutting and polishing facilities to borrow money locally, and add value to the supply chain in Botswana by creating employment opportunities and growth to this sector,” said Van Der Merwe.
The OPIC and the U.S. government’s development finance institution’s signing of the $125 million loan guaranty is expected to help Botswana develop its diamond industry in a sustainable manner that will promote local job creation and diversified economic growth. Previously, diamonds mined in Botswana and elsewhere would be sorted, marketed and manufactured in other countries. However bringing these value-adding functions into Botswana has been a priority of the country’s government, and the guaranty will help provide the finical underpinnings for this economic development strategy to succeed.
“The $125 million represents the first tranche of a broader $250 million OPIC loan guaranty program for these purposes,” said the bank.
OPIC Vice President of Small and Medium-sized Enterprise Finance, James Polan, is of the view that this project will provide critical support to an industry that is central to Botswana’s economy and a key source of job creation.
“Bringing the larger supply chain into Botswana will have a huge impact in local communities across the country,” he stated.
He further said that this project aims to facilitate further lending to diamond manufacturing and polishing companies with operations in Botswana. He added that it will support economic diversification by providing cutting and polishing companies in Botswana with access to long-term financing, as well as develop the country’s financial sector.
“Given the critical importance of the diamond industry to their economies, Botswana and other southern African countries have implemented local beneficiation policies that require additional economic benefits to be derived from their diamond resources,” said Polan.
