Last week’s launch of the Diamond Trading Company (DTC) Botswana represents a dramatic change in beneficiation processes that come from the global diamond trade.
The 50:50 partnership between the Botswana government and De Beers will see Botswana become one of the most advanced sorting and valuing operations in the world, removing the focus of these value-adding operations from the northern hemisphere to a diamond-producing country on the African continent.
Sixteen of the world’s leading manufacturing companies have set up cutting and polishing factories at the DTC. These companies, or site holders such as these, will create about 3 000 jobs, according to De Beers, which translates to a 10% increase in the industrial workforce of the country.
Diamond mining has dominated Botswana’s economic growth since it began in the early 1970s. It makes up 80% of the country’s exports, 50% of government revenues and 33% of GDP. Traditionally, however, the gems have been sent to centres such as London and Antwerp and, increasingly, places like Mumbai, India, to be cut, polished and traded.
The country itself, however, has seen little beneficiation from its own natural resources. With the DTC’s establishment this is set to change.
Expertise in diamond sorting and valuation is moving from the United Kingdom to Botswana, with local Batswana people being trained in these highly skilled roles, according to De Beers.
Sheila Khama, chief executive officer of De Beers Botswana, says that establishment of DTC represents one of the most significant shifts of commercial activities in the world.
”The migration of activities from London to Botswana is one of the most significant shifts of trading activities from the North to the South,” Khama told the Mail & Guardian last Tuesday.
Apart from skills development, Botswana stands to gain a great deal from the DTC in terms of job creation and revenue, says Khama.
The 16 site holders will all establish Botswana-based branches, says Khama, and as De Beers sees it they are 16 examples of direct foreign investment in the country that ”would not have otherwise existed”.
While these companies are not local in the sense of ownership, skills transfer and development, job creation and opportunities to create support businesses around cutting and polishing will all benefit Botswana, says Khama.
”The DTC as a body corporate will be making a profit and will be paying tax to the Botswana regulator,” Khama also points out. She says the establishment of the site holders will see an increase in commercial and economic activity.
By 2009, she points out, up to $560-million worth of diamonds will be sold through the DTC for local manufacture. Debswana, another 50:50 partnership between De Beers and the government, runs the most lucrative mines in the country such as Orapa and Jwaneng. In 2005, Debswana accounted for 66% of De Beers’s output.
Ernest Blom, president of the World Federation of Diamond Bourses says the DTC Botswana is a leap forward for beneficiation on the continent. ”For decades precious metals and commodities left our shores and value was added overseas,” he says.
”There is no downside for Botswana,” he adds. ”The [country] will get maximum value for its product and the manufacturers there will have a constant supply of diamonds.”
South Africa is not likely to benefit directly from DTC Botswana, says Blom. But there is similar sentiment in countries such as South Africa and Namibia, which are working to promote greater beneficiation activities on home turf, he says.
Blom says South Africa promulgated amendments to the Diamond Act that came into effect in July last year. In terms of the Act 10% of all locally mined diamonds must be sold to the state diamond trader for cutting and polishing by local manufacturers. These provisions are being phased in, says Blom.
Although labour costs in countries such as Botswana are higher compared with countries such as India, companies have to ”go where supply is”, says Blom. ”And supply is in the producing countries of Africa.”
The price of diamonds is driven mainly by supply and demand. At present there is a shortage of certain qualities of rough diamond, but there is a good deal of exploration going on to ensure that the supply evens out in the coming years, Blom says.
”It’s very difficult to quantify the price increase between a rough diamond and the end product because diamonds [come in] different sizes, colours, variations of quality, which all impacts on the purchasing and selling price,” says Blom. ”But these processes [cutting, polishing, etc] do add value without a doubt.”
Tienie Barnes, the director of the Diamond Education College, one of only two accredited training institutions in South Africa, says that DTC is a ”fantastic” development for Botswana. He says the lack of skills development in South Africa’s industry is ”absolutely hampering our local industry” especially with regard to the cutting and polishing trade.
”We cannot accommodate all the people that need training,” he says.
Lack of commitment from government means that there is simply not enough money to train people, Barnes says. South African students have the aptitude, he says, but they need bursaries. In addition the training process involves working with real diamonds and cannot be done without funding.
