Diamond industry setback as ABN AMRO closes
Brian Benza | Thursday October 24, 2013 15:15
The Dutch bank, which opened its Gaborone branch in 2009 amid much enthusiasm and anticipation that it will greatly contribute to the growth of Botswana’s diamond cutting and polishing industry, has two licences - one for providing local banking services and another for international business transactions.
In a statement released Tuesday, the bank said the scale of the bank’s operations in the country in the context of its global platform is too limited to be sustainable.
The bank employed only four people in Botswana under its diamond-financing subsidiary, the International Diamond and Jewelry Group (ID&JG).
“The scale of our banking operations in Botswana is simply too limited, unlike our other locations. The closure process is likely to take several months, with final closure expected in the course of 2014.
“Clients are being informed. ABN AMRO is actively engaging in a dialogue with each client to find an optimal solution, related to the continuation of the business in the region from other locations,” said Erik Jens, CEO of ID&JG.
ABN AMRO is one of only three banks in Botswana that offer specialised diamond financing services along with the recently licensed Indian banks, Bank of India (BOI) and State Bank of India.
From November 11, De Beers will start holding its international sales in Gaborone, a move that will see around $6 billion worth of diamond transactions passing through Botswana’s banking system.
The number of licensed local cutting and polishing firms, which are ABN AMRO’s primary clients, has also increased to 27 from 16 in 2009. A diamond industry insider who spoke to Mmegi Business on condition of anonymity said it is quiet surprising why the bank would want to wind up Botswana operations at a time when the sector is heading for exciting changes.
“It is difficult to tell how many local companies are getting finance from ABN AMRO as each company keeps their financier as a bit of a secret in the industry
“I do know that they did not have a banking licence in South Africa so Botswana was their headquarters in Southern Africa.
“It is quite surprising to me as 2014 is the year for the banks in the diamond industry of Botswana,” said the industry executive.
In 2008, ABN Amro was, along with Lazare Kaplan International (LKI) and Overseas Private Investment Corporation (OPIC), roped in as the participating bank in a US$333 million financing facility for the country’s cutting and polishing industry.
ABN AMRO was supposed to provide up to $83 million in revolving credits as part of the total facility.
The deal fell through after relations soured among the partners leading to ABN AMRO falling out of the picture.
In an interview with Mmegi Business Gaborone in 2010, the then Chief Executive Officer of the International Diamond and Jewellery Group of ABN AMRO Bank Victor van der Kwast, expressed his disappointment at the lack of progress of the $333 million deal.
“It is frustrating .We have kept our end of the bargain and we are very eager to start rolling with this project and this is one of the reasons why we opened an office here in Botswana,” he told Mmegi Business then.