Thursday, June 4, 2020

Is Botswana ready to play in the big league of the diamond sector?

When the time comes for Botswana to close any one of its mines, which today is fast becoming an imminent reality, a budget of $200 billion will be needed to wind up. Jean-Marc Leiberherr, Chief Executive Officer (CEO) of the Diamond Producers Association revealed at the recent De Beers Diamond Conference that this is the amount needed to close a mine over a five year period.   

This is a significant amount of money that will go into shutting down a mine, and in a country where there are four of them currently operating under Debswana, a partnership between the government of Botswana and the De Beers Group, an estimated total of $800 billion will gobble into the country’s purse. This is a purse that may possibly shrink, considerably at that, post the mine-closures especially that diamond revenues have dominated the national economy for decades.

At the same conference, a representative from Botswana diamond hub said that Botswana is positioning itself to support the diamond business post its mining era. The diamond hub was established to coordinate economic activity in the Diamond Sector and to oversee beneficiation activities such as in the cutting and polishing industry, in jewellery manufacturing and secondary trading of rough and polished diamonds. The focus of this transition, according to the diamond hub, is to develop technology and innovation that will enable the country to run trade activities of the diamond sector. This includes such activities cutting and polishing diamonds from other diamond producing countries. The African continent is home to seven of the world’s top 10 diamond producing nations, this includes Botswana. This makes it possible for Botswana to tap into the richly resourced continent.

However, with Botswana readying itself to enter the diamond trading business, it faces cut throat competition with other diamond hubs such as in Dubai, where diamonds play a significant part of its trading. It is there that prominent jewellery manufacturers, retailers and traders support the diamond business. In terms of diamond mining, Botswana comes almost un-paralleled especially because one of its mines, Jwaneng mine, is the richest diamond mine in the world by value. It would be remiss for Botswana to blindly enter the diamond trading space, thinking that it can easily replicate its heritage of mining success facing established players such as Dubai.    

As it stands, the country currently has about 20 cutting and polishing plants established in the country, with a few of them with close to 20 years in the country,  diamond processing remains at the early stage of development. The closure of factory plants at the turn of economic turmoil between 2013 and 2015 also abated the development of the processing activities. If it is to be ranked in the same level, in terms of availing a firm framework for all aspects of diamond trading in line with the highest quality standards, Botswana needs to demonstrate prior to the mine closures its ability to support the diamond business.

Today Botswana’s mines are still in operation and based on De Beers’ ninth sales cycle of 2017, the one but last before year end, an improvement is indicated. “Following a seasonally quieter period for rough diamond sales, Cycle 9 saw an uptick in demand from our customers as retail orders increase ahead of the Christmas season,” commented Bruce Cleaver, Chief Executive Officer of De Beers. The ninth cycle registered sales amounting to $455 million from $376 million in the eighth cycle. This up-tick depicts a recovery in the diamond sector which since 2015 has been showing volatility and uncertainty.

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