Saturday, April 13, 2024

Analyst urges Botswana to diversify away from diamonds

Analyst Shoaib Vayej says diamond beneficiation is not an easy endeavour, and has advised Botswana to rather diversify its economy away from diamonds.

When dissecting the diamond market outlook following its recent pronounced downturn, Vayej raised provocative views relating to diamond beneficiation last week Thursday during his engagement with the media at the Afena Press Club. Vayej pointed out that diamonds unlike other mineral substances such as iron ore are easily transported, such that they can easily be flown to another country for cutting and polishing. In other words the ease with which diamonds can be moved means that the process through which they are sorted and valued can be established elsewhere and not necessarily where the diamonds were mined. 

He also highlighted that diamond customers are not in Botswana and beneficiation makes sense when it’s done closer to the customers. Based on this, he suggested that Botswana’s focus should be on diversifying the economy. 

Diamond beneficiation is a subject that is very close to Botswana and it continues to draw interest particularly in these challenging times. Beneficiation is defined as the downstream processing of rough diamonds, which were previously exported rough and processed elsewhere. This process was authenticated in 2011 in what was hailed as a landmark development that would transform Botswana into a leading diamond trading and manufacturing hub. The government of Botswana and De Beers signed a 10 year sales agreement which culminated in the establishment of Diamond Trading Company Botswana (DTCB) two years later in 2013, a change that brought professionals, experience, technology and equipment into Botswana from London as part of the broader aim to develop robust downstream diamond activities. 

In his 2013 discussion paper, Professor Roman Grynberg, a former research associate at the Botswana Institute for Development Policy Analysis (BIDPA) said the diamond industry had created 3,200 industrial jobs and was the largest manufacturing sub-sector following establishment of DTCB. However, the diamond industry underwent rapid changes between 2013 and 2015 and shed a considerable number of jobs. One of the contentious reasons for diminished downstream diamond processing in Botswana was said to be the high costs associated with cutting and polishing activities. Grynberg however asked whether the cost of cutting and polishing was related to the choice of location given that diamond processing continued to take place in high cost destinations such as Antwerp, Tel Aviv and New York where production remained profitable. 

“The answer to this depends very much on the quality of the diamond in question,” he said. 

He highlighted places where costs are considerably lower such as India and China which demonstrate a robust cutting and polishing industry. It remains to be seen if going forward the government of Botswana will maintain the momentum it started with in 2011, by ensuring that beneficiation produces anticipated benefits such as growth in employment, enhancing capacity and expertise in processing activities among local skills and developing other related commercial activities. 


Read this week's paper