Tuesday, April 23, 2024

Experts urge Botswana to maximize diamond auctions

The government has been advised to capitalize on the recent drop in prices of lab-grown diamonds by implementing a robust strategy to market natural diamonds effectively. This recommendation follows the resumption of diamond auctions by the country’s state diamond company, Okavango Diamond Company, last month after a two-month hiatus last year due to an industry-wide inventory glut.

The demand for mined diamonds has decreased due to various factors, including high interest rates in the United States, which accounts for 55 percent of global consumption, slow economic recovery in China following the pandemic, and competition from lab-grown diamonds.

Gomolemo Basele, an economist at First National Bank Botswana (FNBB), emphasized the importance of a rigorous marketing approach for natural diamonds worldwide. He also highlighted the significance of sustainability initiatives aimed at supporting communities in mining towns to boost revenue.

Basele also noted the importance of traceability in authenticating natural diamonds as a key factor in increasing sales. He mentioned that lab-grown diamond producers experienced a revenue decline in January this year for the first time since their emergence a few years ago.

Challenges faced by the industry, including import restrictions from India and economic headwinds for consumers, have contributed to significant price reductions in both natural and lab-grown diamonds.

Charles Siwawa, CEO of the Botswana Chamber of Mines, acknowledged that diamond sales did not meet expectations last year, but expressed optimism for the current year. While there have been suggestions that lab-grown diamonds may have impacted natural diamond sales, Siwawa noted the lack of thorough analysis to support this claim.

Despite the challenges, Botswana and De Beers agreed on a new ten-year diamond sales agreement last June, aiming to increase the share of output sold by the state-owned Okavango Diamond Company (ODC) from Debswana. However, both ODC and De Beers have experienced lower demand, with ODC canceling its November auction and De Beers allowing buyers to defer purchases.

In the nine months leading up to September, Debswana’s diamond sales amounted to $2.811 billion, down 21.4 percent compared to the same period last year. The decline in sales in pula terms was lower at 14.3 percent, reflecting a stronger U.S. dollar during that period.

RELATED STORIES

Read this week's paper