Control of diamond supply in jeopardy?

STRYKER MOTLALOSO
Staff Writer | Tuesday December 11, 2007 00:00

The situation arises due to the fact that DTC International will only establish in Botswana next year while, in the meantime, the local outfit, DTC Botswana, has started operations. The lack of clarity about roles raises questions about whether supply sight holders for services falls within the responsibility of international operation even before it has settled in-country, it is argued in some quarters.

The scenario plays itself out in the controversy relating to the relationship between DTC Botswana and DMB. At the centre of the problem lies DMB's concerns that DTC Botswana has given the sight holder supply shortfall for the forthcoming contract period at a slashed level of 70 percent compared to its current levels.

In a letter written to the Botswana government, DMB argues 'that DTC's decision is a matter of serious concern because it jeopardises the future of a company that represents a true local success story'.

DMB's shareholders include the Botswana government and the company says they have invested three million US dollars in new equipment, refurbishment, skills transfer and working capital making DMB 'technically, operationally and commercially' transformed.

DMB gives an outline of activities of potential growth based on the development of Botswana's branded distribution channels in areas such as 'country of origin, programmes, prestige retailers and developing new markets'.

It also argues that the supply offered by DTC endangers the three areas for the reason that it is demonstrably less than the current throughput of the factory, and that all of the diamonds sold through these programmes must be sourced from DTC and polished in Botswana by people of Botswana.

Thirdly, DMB accuses DTC of breaching past assurances regarding minimum supply levels. 'Without an increase in its total local supply, DMB will be unable to supply existing purchasers, let alone develop this new programme,' contends DMB in its letter.

DMB's letter seeks government's support to forestall what the company refers to as 'potential damage'.

'First, DMB wishes to forward purchase of 100 percent of its 2008-2009 supply allocation in Botswana in the first three months of the next supply contract,' reads the letter in part.

It further says the company needs to increase its level of local supply adding that a minimum of 35 million American dollars for 2008-2009 will allow DMB to meet its existing commitments.

Deputy permanent secretary in the Ministry of Minerals, Energy and Water Resources, Kago Moshashane confirmed to Mmegi that he was aware of the matter relating to DMB.

However, he referred further inquiries to DTC Botswana Managing Director, Brian Mcdonald saying McDonald would be competent to deal with operational aspects.

In a written statement dated December 06, 2007, McDonald, while acknowledging that the publication had been making observations concerning the level of supply allocated to DMB, one of the DTC Botswana's successful applicants during the forthcoming supply period, it is his company's policy not to comment on matters relating to its supply relationship with specific clients.

'DTC Botswana is duty-bound to abide by its obligations as to confidentiality between itself and its clients and, more generally, to act at all times with utmost integrity,' said the statement.

Other issues that McDonald further explained are that all supply arrangements with sight holders in Botswana are managed by DTC Botswana.

These include the basis on which supply is offered through a competitive assessment process, underpinned by objective criteria which emphasise the beneficiation of diamonds in Botswana.

'Applicants for supply from DTC Botswana are fairly and objectively assessed for their relative ability to achieve DTC Botswana's supply objectives, subject to DTC Botswana's need to carefully balance its commercial risk,' he further said.

He expressed regret that DTC Botswana is not able to satisfy all applications and it will prioritise the allocation of its finite goods to those applicants that compete more effectively against DTC Botswana's supply criteria. He added that competition is fierce and much greater than was the case prior to the formation of DTC.

McDonald was optimistic that DTC anticipates availability of goods in Botswana to increase over the next few years and that those businesses that demonstrate local beneficiation combined with efficient, demand-driven distribution are likely to benefit from the anticipated extra availability.