Thursday, April 9, 2020

Leo Schachter’s loyalty to Botswana pays off

The Chairman of one of the world’s premier diamond cutting companies, Leo Schachter, likes to joke that he and his company do not like making grand announcements about their commercial plans.

He says their strategy is to deliberately shun attention seeking headlines caused by fanfare and pomp preferred by competitors.

Instead, his company prefers to quietly do what they think is right, and leave outsiders to be independent judges of their actions and strategies.
Blowing own trumpets or shouting over the top of their voices has never been a practice prized by Elliot Tannenbaum.

And it shows why.

When everyone else led by De Beers shouted over the rooftops that it was not possible to profitably run a diamond manufacturing business in Botswana, Tannenbaum and his Leo kept quiet and stayed put and quietly ran such a business in Molepolole.

He says it was hard but the firm kept going thanks to assistance from sister operations in India, China and Israel.

Now the De Beers and government policy has come full circle, and Leo is smiling all the way as their loyalty is beginning to pay off.

De Beers and the Botswana government have signed a cocktail of agreements that would see Botswana become a world diamond centre.

Through the agreements, a new company (DTC Botswana) has been set to provide Botswana-based cutters with rough.

Local firms will now have to go to London to access their rough.

As a result, there is currently a world rush with government inundated with applications for diamond cutting licenses.

Those companies lucky to have been given the licenses (there are currently only sixteen and government has imposed an indefinite moratorium on further issuance) have to contend with all the rigours and pains of setting up their operations from scratch.
But not so with Leo.

Because they did not run away when everybody else discounted and discredited the possibility of running a diamond manufacturing business from Botswana, Leo are far ahead of everyone else in the current rush to set up diamond cutting businesses in Botswana.

Not only is Leo’s plant in Molepolole churning out profits, Tannenbaum is talking of setting up another plant in Gaborone.

“I suspect we could be opening another plant in Botswana. But then again we don’t like making big announcements. It is not our way of things to announce our future plans because we hate to disappoint. But we certainly have a good lead,” Tannenbaum said this week.

From the look of things Tannenbaum and his Leo are clearly enjoying their well deserved lead and they are relishing every moment of it.

While everyone else is investing in setting up, for Leo the concern is rather to consolidate their lead position by continuing to furnish their plant with near to the edge world class technology so that by the time others open up it will not be easy to catch up with him.

“When everyone else said it was not possible we did not reply. We simply voted with our feet by staying here. I suppose our staying here convinced government because they could see from us what was possible.”

With Leo already turning up profits from Molepolole, Tannenbaum says the key challenge now facing government in the wake of a policy u-turn to make Botswana a world diamond centre is to continue a proper supply of stones.

It is only through a supply of proper sizes, quality and volumes of rough diamonds that large costs of setting up new manufacturing plants here could be defrayed and fears of “it can’t work” allayed.
“Proper supply of the stones is the key,” said Leo Chairman.

From his statement, it is clear that Leo is more than prepared for the commencement of the functioning of the Agreements signed by Botswana government and De Beers, due to get operational early next year.

With over 300 cutters, the Leo factory in Molepolole is by far Botswana’s largest diamond factory accounting for 35 percent of all carats consumed by Botswana factories.

This converts into 45 percent of all the country’s imported rough by value.

“The road to Molepolole has taken half a century and three generations. That’s even longer than it took our ancestors to wander through the desert and reach the Promised Land. But the lesson our fathers taught us should never be forgotten; reaching worthwhile goal calls for patience, hard work and an unshakeable belief,” said Tannenbaum.

Under the new Agreement, which marks a total departure from the past, Botswana-based factories will be allocated close to P3 billion worth of rough diamonds sold through De Beers.

This Agreement makes an official abandonment of a decade old arrangement under which it was held by De Beers with active support of Debswana and the Botswana government that no profitable diamond cutting could take place from Botswana.
Minister of Minerals, Ponatshego Kedikilwe, says government wants to use the new diamond regime to create employment and get more from the diamond production that has been the case over the years.

And as such, he says, it is in Botswana government’s interest to honour its side of the bargain, including by way of ensuring minimum disruptions that could be caused by staff poaching by competing firms.