Botswana wants more bang for its bling

The world’s largest producer of diamonds wants more bang for its bling.

A company launched on Tuesday will market and sell about a third of Botswana’s diamonds to manufacturers who have set up cutting and polishing factories in the Southern African country. Very little diamond polishing and cutting, which increases a diamond’s value by 50%, has been based in Southern Africa.

The new Botswana operation will one day host the largest and most sophisticated rough diamond sorting and valuing operating in the world, handling in excess of 34-million carats a year, creating over 3 000 jobs and bringing in much needed foreign currency, diamond giant De Beers said.

De Beers and the Botswana government own the company together, part of a regional move to ensure mineral-rich countries benefit more from their natural resources.

“We think countries are right to aspire to use as much of their natural resources to generate more value,” said Sheila Khama, chief executive officer for De Beers Botswana, in which the Botswana government has a 15% share. “And it serves our business interest” to support such moves.

The new company is expected to sell $375-million in rough diamonds this year and $550-million by 2010.

In addition, all the sorting and valuing of diamonds produced in Botswana by Debswana, a joint venture between De Beers and Botswana’s government will be now done at the $83-million state-of-the-art plant in the capital, Gaborone.
By next year, all De Beers’s sorting and aggregating operations will be based in Botswana.

A similar diamond trading company was set up last year between the Namibian government and De Beers. Last month South Africa established the State Diamond Trader, which will acquire 10% of locally produced diamonds for resale on the local market.

Southern Africa accounts for more than 40% of the world’s rough diamond output—Botswana alone has 22% of the market, worth about $3-billion a year.

Yet Botswana, a country almost the size of France or Texas with a population of about 1,8-million, has an unemployment rate of about 20%. Nearly a quarter of the population lives on $1 a day and about a quarter of the population is HIV-positive, putting even more pressure on the economy.

Kabo Ramatludung, a 23-year-old training as a cutter in Gaborone, had been selling puppies to earn money. Diamonds offer a better future, said Ramatludung, who has a younger sister to look after, and no parents.

If he passes his six-month training period, he will be given a job.

Diamonds “are so bright and attractive. I always wanted a chance to work them,” Ramatludung said, the light glinting off his fake diamond earring.

Traditionally diamonds have been cut and polished in centers such as Antwerp and Tel Aviv. But increasingly less cutting is done in Europe, with lower cost centres opening up in India and China.

With high labour costs, Southern Africa was not seen as competitive and there was initial resistance by the diamond industry to regional governments’ calls to bring more of the diamond industry to the source.

However, governments have insisted. Two years ago, when it came time for De Beers to re-negotiate its mining licenses in Botswana, one of the conditions was to help develop local processing industries.

New technologies have made processing diamonds less labor intensive and made local operations more viable.

New York-based Martin Rapaport, whose Diamond.Net is a leading source on diamond trading and pricing, said the idea of sorting and processing in Botswana is excellent, “but the question is: Can Botswana cut diamonds cost effectively?”

Only diamonds larger than 1,5 carats will be processed in Botswana as it is still more viable for smaller stones to be cut and polished in India.

Keith Jefferis, an economic consultant based in Gaborone, said that the next few years will determine whether Botswana can get a foot in this lucrative market.

Kaushik Mehta’s company Eurostar Diamond Traders, whose clients include luxury jewelry store Tiffany’s, began cutting and polishing diamonds in Botswana a year ago. The company, which also employs about 10 000 people in India and China, has created about 500 jobs in Botswana and invested heavily in training and transferring skills.

“The government wants to take advantage of God’s gift to this land,” Mehta said. “And we benefit by expanding our business.” - Sapa-AP

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