De Beers plans local jewellery manufacturing plant

Mbongeni Mguni | Monday July 10, 2023 06:00

The development is part of the agreements in principle reached between De Beers and government last week as part of the new sales and mining deal.

The two parties sealed the agreement in principle late on Friday night, following tense negotiations dating back to 2019, which were due to elapse on midnight, June 30. The new arrangements, which will be finalised by lawyers and require shareholder approval, cover a suite of proposals, several of which revolve around greater diamond value chain development in Botswana and citizen empowerment.

On Tuesday, De Beers executive vice-president of Diamond Trading, Paul Rowley told BusinessWeek that the planned jewellery factory would have between 200 and 250 workers and would represent the first scaled jewellery manufacturing facility in the country.

“We are quite excited by the fact that we anticipate that, as there’s no scale jewellery manufacturing here in Botswana today, we are looking to establish that and utilise the skill sets that we believe the best partner can bring with us into the future,” he said, in a briefing with journalists. “We are looking at somewhere in the region of 200 to 250 people employed in a jewellery manufacturing operation here in Gaborone with a view to that being a state-of-the-art facility that will look to create jewellery from design to jewellery for the international market. “Those plans we will hear more about them as we go forward. “It’s De Beers that's investing, but government will have a shareholding in that, through its shareholding in De Beers.”

Jewellery manufacturing and retail from Botswana is one of government’s key demands for the diamond sector, as it represents a major leap into the value chain, as opposed to being limited to diamond mining alone.

The country currently has 48 diamond-cutting and polishing firms, up from 21 in 2020. Of these, 38 are De Beers’ clients, known as sightholders, who are under contract to participate in 10 auctions of rough diamonds a year held in Gaborone.

Last month, one of these sightholders, KGK Diamonds, celebrated a milestone with its first production line of jewellery being exported to the United States, the world’s largest market for diamond jewellery. The sales were made under the African Growth and Opportunities Act (AGOA), the preferential deal between the US and many African states, whose renewal is currently being renegotiated ahead of its expiry in 2025.

Earlier this year, Rowley told BusinessWeek that technology was playing a key role in balancing the scales in the industry’s midstream, the portion of the value chain occupied by cutting and polishing firms. The industry’s midstream is still dominated by Indian firms, where employment is estimated at more than a million, due to that country’s superior labour cost and historical strength in the sector.

“Technology that’s been developed during COVID in places such as India has enabled us to level the playing field,” Rowley said. “You have seen some of the factory openings where you see that technology in motion and that allows us to quicken the pace and become more sustainable in beneficiation which makes the cost more equal to where it is in cheaper centres like India. “In factories in India, we have seen consolidation as well in some of the bigger ones and those are the big manufacturers that we have encouraged and worked with over the past three or four years to come and set up in Botswana, as well as in Namibia and South Africa.”

Government, meanwhile, has also incentivised the establishment of cutting and polishing firms through initiatives around taxes and rebates around the technology being brought over for the factories. The state and De Beers have also partnered on providing incentives around rough diamond allocations for sightholders willing to set up in producer countries such as Botswana.