Lazare Kaplan International, the wholesale and diamond manufacturing company, shrugged-off the blame in the delay in the USA government’s financial guarantee facility for Botswana diamontaires and put it squarely on the global economic crisis that greatly affected the world’s banking sector.
“The agreement that had been reached with OPIC (Overseas Private Investment Corporation) was an agreement in principle, entered into prior to the global financial disruptions of 2008 and 2009,” Lazare Kaplan recoiled through its Botswana operation.
In its response to a questionnaire put together by The Sunday Standard, Lazare Kaplan Botswana’s head, Alfred Dube, said on Tuesday that although it has taken long for the agreement to be translated into action, his parent company, Lazare Kaplan International based in New York, still “remains confident that the envisaged facility will indeed become reality in due course”.
The prospects of OPIC $ 250 million loan guarantee facility, in partnership with the Dutch ABN AMRO bank, offered by OPIC in an attempt to prop up the fledgling diamond cutting and polishing industry in Botswana came in doubt during the first quarter of the year when Lazare Kaplan International got embroiled in an open spat with its bankers over the dispute un-performing loans.
Further, the company is facing a possible delisting from the New York Stock Exchange if it fails to file complete earning reports for fiscal year 2009 by end of this month. The company said it is “unable to resolve a material uncertainty concerning the collectability and recovery of certain assets, and the company’s potential obligations under certain lines of credit and guarantee.”
As part of the move to recover the money, Lazare Kaplan filed a US $ 140 million law suit in diamond losses against a number of insurance companies in a New York court this week.
It said some of the diamonds, which were destined for Gulfdiam, could not be traced as got some lost, while another consignment that was allegedly destroyed or damaged in “cutting and polishing operations in the Namibia manufacturing facility, Rough Diamonds Trading China operations and the DTC Sight Operations”, according to court papers.
“LKI’s inability to complete audited financial statements has not had any impact on its polishing operations in Botswana,” the company said, adding that “as a major rough diamond producer, Botswana should be an important diamond center” and pledged support to Botswana government’s initiatives.
The US 250 million credit guarantee facility is seen by many in the cutting and polishing as part of the long term foundation to the success of the beneficiation process. Though it is not clear as to how many cutting and polishing firms would apply for the facility it could have come handy at a time when “credit is as scarce as diamonds”.
The facility would represent about half of the value of diamonds that are being sold to the 16 sightholders in Botswana per annum through DTC Botswana.
The cutting and polishing industry is the most squeezed stage out of the diamond pipeline and operates on credit lines of not more than 90 days. Although the sector is being credited for creating more jobs, it is faced with the lowest profit margins and buys rough diamonds cash from producers and sells to retail division on credit bases. The sector is largely dominated by family owned businesses and depends on the individual negotiating skills of operators against the banks.
The sector is planned to directly create 3000 jobs in Botswana, excluding other support services such as courier services, insurance, hotels, restaurants and transport, among others. It is complemented by the DTC Botswana offices that are key to transferring skills to Botswana in sorting, marketing and aggregation.
The move is also planned to place Botswana in the diamond ivy league of Antwerp, Mumbai and Ramat Gan.