Gaborone slowly takes centre stage in global diamond world
Mbongeni Mguni | Monday November 7, 2022 10:00
According to official statistics from the Kimberley Process Certification Scheme, in 2021 Botswana was the world’s leading rough diamond producer by value, with output measured at $4.7 billion (P63 billion), comfortably ahead of rivals such as Russia, Canada, and Angola.
In terms of volume, however, Russia led the pack in 2021, producing 39.1 million carats, followed by 22.9 million for Botswana.
This picture has largely remained unchanged over the years, with Botswana’s larger stones helping beat the world on value, and Russia’s smaller stones beating the world on sheer quantity.
And yet, the Kimberley Process statistics also show an anomaly in the diamond industry that Botswana has been battling to correct for years.
The European Union, United Arab Emirates and India dominate the world when it comes to rough diamond exports and imports, whether by value or volume, even though none of these regions produces the precious stones.
While Africa houses the largest number of producing countries and as a continent is well ahead of the rest of the world, the actual centre of the diamond world, where values are highest, lies outside the continent where activities such as cutting and polishing and jewellery manufacturing are centred.
Botswana has fought for higher value from the diamond industry to be retained in the country by negotiating its agreements with De Beers to boost the establishment of the cutting and polishing industry.
However, the challenge of wresting away control of the industry from countries like India has been about competing in efficiencies such as labour costs, technology, access to bespoke funding, connectivity, and others.
Minerals and Energy minister, Lefoko Moagi believes considerable progress is being made in gaining ground on leaders of the global diamond industry. Government recently stepped up its incentives aimed at attracting more companies into the cutting and polishing sector and this year, expects the numbers to increase from 21 to 31, with a 36% increase in employment figures.
“If you look at the numbers, we had socio-economic and macro-economic issues here and across the globe and so we had to act as a government to look at the ease of doing business in Botswana where now we look at what was making it difficult for these factories to set up in Botswana,” he told Mmegi at the Natural Diamonds Summit on Monday.
“For example, we looked at the tax incentives and also at the technology that they bring here and what rebates we could bring to those factories.”
Government enhanced the training of artisans for the diamond factories, bringing in expertise to drill Batswana in the country so that the firms would find a ready talent pool to tap into. Office and factory space was also provided for the cutting and polishing firms, further incentivising their establishment in the country.
Government was able to take its suite of incentives and human resources to woo cutting and polishing factories around the world.
The clincher, however, was an arrangement government secured with De Beers to ensure that prospective firms settling in Botswana would receive higher allocations from the diamond giant. De Beers maintains an exclusive list of buyers for its rough diamond auctions and the promise is that those firms willing to relocate and establish in Botswana would have a larger piece of the pie.
“With our partnership with De Beers as government, we made sure that there’s a whole lot of relaxation of things that were making it difficult for these factories.
“We also went all out to actually incentivise them from where they were, be it India, United Arab Emirates, and everywhere.
“The allocations also are more because you need to have access to these rough diamonds to polish, so we made sure we increase whatever they were able to get as rough diamonds.”
De Beers’ CEO, Bruce Cleaver, confirmed the incentives offered and added that this was part of the group’s efforts to increase the value accruing to Botswana.
“We have worked with our sightholders who increasingly embrace the fact that the kinds of goods that are capable of being cut and polished in Botswana, De Beers will not sell to anyone who exports them,” he said.
“It’s an incentive and it says if you want those goods from us, you will have to cut and polish in Botswana. “It’s been a symbiotic relationship and we agree with government’s aspirations that as much value as possible, in a natural resource that ultimately will run out, must be kept in the host country.”
According to Cleaver, besides the numbers of factories setting up and the jobs being created, value can be read into the sales figures De Beers is recording.
“We expect to sell almost $1.1 billion into Botswana this year, which exceeds all our targets for 2022 and that figure is the amount of rough diamonds we will sell to people who have factories in Botswana to cut and polish them here,” Cleaver told Mmegi.
“It’s more than we had targeted.
“We don’t give out our targets because they are commercially sensitive, but as you can see from that, our aspirations and government’s are completely consistent which is that absolutely every diamond that is capable of being cut and polished in Botswana should be cut and polished in Botswana and there should be no export of that diamond.”
He added: “Factories have become better and better in Botswana and that $1.1 billion is a really good number that we are excited about.
“If you think where we came from 15 years ago, that number would have been probably $50 million and so it’s an enormous achievement.”
Extracting value from the entire diamond pipeline is government’s most immediate priority in incentivising more cutting and polishing activities and pushing for greater citizen empowerment in the ongoing De Beers sales deal talks. However, the over-arching goal is to ensure that the impact of diamonds in the country does not end when the mines run out of stones.
Part of this broader ambition could be realised today (Friday), should the Kimberley Process member states endorse the selection of Botswana as the host of the organisation’s secretariat. The global anti-conflict diamond organisation has 85 members ranging from diamond producers to major consumers and hosting its secretariat would physically place Botswana at the centre of the industry.
Hosting the Kimberley Process secretariat would also allow Botswana to ramp up its ‘diamonds for development’ campaign, an effort that is today more critical than ever as consumers become increasingly discerning about the sources of their diamond jewellery.
“We want to host the secretariat to demonstrate that diamonds are for development,” Moagi previously told Mmegi.
In its bid to host the secretariat, Botswana fought off challenges from four other nations including Austria and China, an endeavour which local leaders will read as further confirmation that the world’s largest producer of diamonds by value is ready to lead the industry.