It has long been in the making since the 10-year sales agreement was penned between Botswana government and De Beers in 2011. Finally, the sales function of the world’s leading diamond company will move from the clean offices of London to ‘dusty’ Gaborone for the first time tomorrow.
At least, that is how the international media view the relocation of De Beers Global Sightholder Sales commonly known as DBGSS from the UK to Botswana. They describe it as unviable, risky business, but to proponents, it takes polishers and cutters close to the source.
Botswana is a home to the world best mines and to John Teeling, Executive Chairman of Botswana Diamonds (BOD), the country is the best address.
“Diamonds are unique and incredibly hard to find,” he says.
This view explains why De Beers bent to government demands and signed a sales agreement that brought changes to the diamond pipeline and came with the formation of Okavango Diamond Company (ODC), the rough diamond distribution company owned by Botswana government.
De Beers also spent large sums of money to build the state-of-the-art offices in Gaborone in the build-up to the relocation that culminated with migration from the U.K of aggregation function to the historic sight being conducted in Botswana’s capital.
“All we have to realise is change and (in) every change, there is reaction,” says Paul Rowley, De Beers’ Senior Vice President, Midstream Operations. “Change will come and people will do what they need to do.”
The first sight, which will see 82 Sightholders from New York, to Vancouver and Japan converge in Gaborone will be conducted on Monday in the more sophisticated facilities that can be mistaken for the ones in London.
Rowley says they are very much excited about it. “The readiness of the country to conduct the sight is there. There is no doubt about it.”
However, the industry is concerned that Botswana still has no airport of international standards with the over P500 million Sir Seretse Khama International Airport still not 100 percent complete and accommodation a major concern for sophisticated business travelers. There are also no direct flights, which means Sightholders from the U.S will find it hard as they will spend two days on the plane.
Gaborone also lacks glamorous entertainment centers like London, the night life is dull and hours of operation for bars and clubs is restricted since Ian Khama became the President in 2008.
De Beers conducts 10 sights every year with each generating an average of between US$ 500-600 million or US$ 5-6 billion annually. This means therefore from now, these large sums of money will be generated locally.
The move is a coup for Botswana as the country wants to derive value out of its mines, which has been key to De Beers’ success. Since the diamond beneficiation began, 3,000 jobs have been created.
Technology has also moved from around the world to here with skills expected to be developed and the ambition of people in government is to turn Gaborone into other diamond centres like Tel Aviv, Dubai or Antwerp.
“This is a big step forward for Botswana in trading large numbers (of stones) of other producers,” assures Varda Shine, the outgoing Executive Vice President of Global Sightholder Sales.
Shine says the model being used by De Beers on beneficiation could be copied by other producers in minerals like gold or copper.
“We are bringing best practice and transferring skills to Botswana,” reveals Shine about the relocation of skills from the U.S, China, Israel and other big players in the diamond pipeline.
“The potential is high, but it is how to take it to the next level. In the next five years, I want to see Botswana as a Diamond Centre”.
De Beers has been working on the project to transform Gaborone into a diamond centre through the multi-million dollar investment on new building that houses DTC Botswana and DBGSS. The new state of the art facilities have 20 showrooms where Sightholders will have the chance to discuss business.
However, despite diamonds now coming back home, the global cutting and polishing industry is still dominant in India, which accounts for 92 percent by volume and 76 percent by value and while Botswana cannot compete with India because of labour costs and productivity, De Beers says it wants to turn Botswana, the world’s largest producer of rough diamonds, ‘into a regional hub’.
ABN Amro and Varda Shine
Just on the verge of first sight in Gaborone, ABN Amro broke the bad news that it is closing office in Gaborone citing unsustainability of the business. A week later, De Beers announces that Shine will quit as the Executive Vice President of Global Sightholder Sales in January 2014.
At least, De Beers says it was engaged by the Dutch bank on what it means on the relocation.
“Whilst recognising the important and favourable position of Botswana within this sector, ‘the scale of the bank’s operations in the country in the context of its global platform is too limited to be sustainable,” reasons the bank.
Privately this has been a blow to Botswana’s attempts to be a diamond centre. Shine assumes the move could have been necessitated by rationalisation as everyone in the industry is ‘looking at costs” and want to work efficiently.
“It will continue to provide services to the Sightholders,” says Shine, adding “I will not rule them coming back in the future”.
Shine is seen as one of the central powerbrokers in the international diamond industry, having been credited with managing the relocation of DBGSS to Gaborone. It came as a shock that a month after the last sight of the year, she leaves the organisation.
Her explanation is that her decision though “painful” will not affect the relocation, saying that in good leadership, one can always step back and the business runs smoothly. “The business is not a Varda issue,” she tells Sunday Standard. “I am sad to leave, but it is a good time to leave. There is a great successor. Paul (Rowley) is groomed to be my successor”. Rowley has acted as the Chief Executive Officer of DTC Botswana.
DTC Botswana vs. Global Sightholder Sales
DTC Botswana employees are worried they are going to lose their jobs when De Beers has fully moved all the roles to Gaborone. It employs 400 people and Managing Director, Tabake Kobedi says nothing has been taken away from DTC Botswana as there are two teams.
Shine explains that GSS sorts and values rough diamonds from De Beers mines in Canada and sorts into De Beers’ assortment only while DTC Botswana sorts and values rough diamonds mined by Debswana and Sorts into both De Beers and ODC assortments.
DBGSS is 100 percent owned by De Beers while DTC Botswana is 50 percent owned by the Botswana government and 50 percent by De Beers.