De Beers is relocating its international sales function to Gaborone by the end of this year. SUNDAY STANDARD asked the company’s London-based Head of Beneficiation, Nigel Simson, about the five new Sightholders and De Beers’ commitment to Botswana’s beneficiation efforts.
Sunday Standard: Who are the five new De Beers Sightholders?
Nigel Simson: The new supply period begins on 31 March 2013 and in the meantime we will be finalising some standard due diligence with our new Sightholders to ensure full compliance of our Best Practice Principles. On the 31 March, we will have an updated Sightholder directory, which will include an introduction, contacts and key information on each of the new Sightholders.
SS: Why has De Beers increased the number of its sightholders?
NS: Under our new more dynamic distribution system, which we introduced at the start of the 2012-2015 supply contract period, De Beers is looking at the demand demonstrated for all its rough diamonds including those sold through the ITO’s to Sightholders and those sold through De Beers Auction Sales. Each year within the three year contract period we re-plan the ITO supply levels to our Sightholders. The re-planning is based on forecast availability for the following 10 Sight period and the levels of demand demonstrated by Sightholders during the previous ITO period. In the event that we have a surplus in our forecast availability, we will invite eligible De Beers Auction customers to apply for Sightholder status and term supply
SS: How are De Beers Sightholders selected?
NS: De Beers selects its Sightholders through the Sightholder selection process, which identifies those applicants that are best able to meet our core objectives of driving demand for, and adding value to, diamonds. Sadly, the competition for our limited supplies of rough diamonds is in some areas so intense that we often find ourselves with many more very good Contract Proposals than we can possibly supply. In these cases, there can be some excellent businesses that nevertheless do not secure a Sightholder Contract, purely because of the intensity of competition and the limited nature of our supply.
SS: How many current De Beers Sightholders are companies from Africa?
NS: De Beers supplies 21 Sightholders in Botswana through DTCB 12 Sightholders in Namibia through NDTC and 10 Sightholders in South Africa through DTCSA.
SS: What volume of rough diamonds and how much in US dollar terms has the De Beers sold to its Sightholders in the 2012-2015 Supplier of Choice contract?
NS: De Beers produced in the region of 28 million carats in 2012 and anticipates a similar volume to be produced in 2013. In terms of value, De Beers sales of rough diamonds in 2012 were US$5.5 billion.
SS: What volume of rough diamonds does De Beers anticipate to sell with the additional five new Sightholders?
NS: The five new Sightholders start on a minimum annual supply level of US $3 million, but through the dynamic re-planning system, and subject to forecast availability, they have the opportunity to increase their purchases from De Beers as the ITO period progresses.
SS: Botswana is in the process of formulating a Beneficiation Policy. What benefits can Botswana derive from the diamond industry?
NS: With De Beers and its multi-billion dollar international sales in Botswana, combined with the sales of the ODC and the potential for sales of rough diamonds from other producers, secondary trading activity is expected to grow significantly as will Botswana’s profile in the global diamond industry.
This provides a unique opportunity to realise Botswana’s vision and generate further economic diversification on the back of the diamond industry by creating an enabling environment for the development of other industries in Botswana.
SS: How committed is De Beers to the Botswana’s beneficiation efforts?
NS: De Beers is fully committed to beneficiation and has been delivering ground-breaking beneficiation activities in Botswana for many years. Whether it is through the establishment of in-country sorting and valuing several decades ago, through the establishment of DTCB in 2007, through the creation of the Shining Light Diamond Design Awards or the support for the 21 manufacturing facilities in Botswana through a sustainable supply of rough diamonds, De Beers has already played a major part in the provision of opportunities for diamond value addition in Botswana.
All in all, Botswana can expect, and has received, huge levels of support from De Beers with regards to beneficiation. It must be recognised, however, that the overall impact of this activity will be determined not just by De Beers, but by all stakeholders (including Government, Botswana-based businesses, the citizen population and other diamond industry operations) playing a full part in maximising the opportunity that is being presented. A sustainable platform for continued growth of the diamond sector requires commitment from all stakeholders if best use is to be made of the ten year period ahead.
SS: You have moved your offices from London to Gaborone. What other major activity can we expect from De Beers in the months ahead?
NS: As part of the 10 year sales agreement between the Government of the Republic of Botswana and De Beers that was signed in 2011, we will take our beneficiation activities in Botswana further than ever before. We have already moved our aggregation processes from London to Botswana and will, by the end of this year, have moved our international sales functions to Gaborone as well. In addition to the movement of our internal processes and sales functions we are also relocating many employees and their families to Gaborone as well as creating a number of citizen positions within the company.