Monday, May 27, 2024

Analyst cautions Botswana on diamond auction

Chaim Even-Zohar, warned against a possible backlash in the proposed diamond exchange in Botswana saying the move, though welcome, might open a floodgate of price rigging, which government would not be able to control.

Botswana government has ambitions of establishing diamond exchange as part of its ambition of diamond beneficiation processÔÇöat the downstream level.

“I do agree on 10 percent window (or US $500 million worth of diamonds per annum) for independent marketing by Botswana,” Even ÔÇôZohar said.

Over the last two years, Botswana government — through the Diamond Hub ÔÇô has been putting down plans aimed at, among other things, having a diamond exchange in the country. Some other moves aimed at bolstering the beneficiation process, which have been put in place include the accreditation of 16 sightholders to DTC Botswana that are presently doing cutting and polishing in the country.

The move was expected to directly contribute to 3, 000 jobs, excluding the ancillary jobs in banking, security, insurance, restaurants, hotels and other supporting fields. The cutting and polishing has taken off although the industry is in dire needs of some cash injection to survive following the worst credit crisis since World War II.

The establishment of the DTC Botswana along the road to Sir Seretse Khama International Airport has been dubbed the largest north-south commercial transfer in history by De Beers and is hoisted as the world’s most sophisticated operation.

It specializes in sorting, valuation, marketing and is soon expected to embark on aggregation activities to replace London.

As of last year, government officials said they were working on the final details of the plan that included the vetting and agreeing to the actual number of traders to be accredited at the diamond exchange and volume of diamonds from Botswana that will be traded on the exchange.
The idea is, once complete, it will become the center for buyers and sellers of diamonds from all over Africa and establish itself as the commercial diamond center as Antwerp in Belgium and Ramat Gan in Israel.

“However, government must understand that it is not easy to sell everything. The way you sell it is quite important.

“This must not be done at the expense of other goods. They must understand that dealing is a profession and for government to be a dealer ÔÇô that is being stupid,” he said.
His remarks came in the wake of the establishment of state diamond traders in most of the producer countries but have failed to live up to the expectation.

“They should try to avoid what happened with Miba in Congo. The results of the auction were often rigged by buyers,” he cautioned. “The best way will be to have a set of appointed government dealers who will compete among themselves for the selling of goods.”


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