Monday, June 24, 2024

Looming hurdles as Botswana attempts to become diamond center

When the government of Botswana and De Beers penned the new 10-year sales agreement, which came with the promise of the relocation of DTC London sorting role to Gaborone, the expectation was that the move would be smooth sailing.

But a few months since the colourful signing ceremony, citizens and the fledging diamond industry want clarity while the country’s infrastructure readiness has been questioned.

At a diamond beneficiation workshop held in Gaborone and organised by Afrimond Diamond & Jewellery Institution, participants raised concerns that Batswana are likely to be locked out of ownership of companies in the diamond business.

The Managing Director of Afrimond, Todd Majaye, said government has been talking about hotels and other services but not how citizens will benefit from diamond polishing.

“Not much has been said about cutting and polishing for citizens. Government is only talking about services like hotels,” the long time diamond beneficiation advocate said. “But we hope they (government) will do that.”

There are currently 16 sightholders in the country and many of them trace their roots in Belgium, Israel, U.S and other known diamond centres. Citizen participation has been minimal in these companies.

Additional four sightholders have been licensed locally to push the figure to 21 and Botswana expects to court other international players to come here.

There is no doubt that service providers in the country will benefit, but already there are concerns that foreign firms are in the forefront to service the diamond industry when the relocation happens next year.

Pundits have, however, warned that the diamond cutting and polishing industry itself is a capital intensive business and that you have to borrow to buy rough stones and expect the polished market to be strong enough in order to recoup the investment.

If there is no demand in the polished market, as it is currently, it would be difficult to service your debt to lenders. Already, there is a case where one polishing company had its parcel confiscated by a bank for failing to service a loan.

Establishing Gaborone as a top diamond centre is part of the sales agreement that was signed towards the end of last year, which will see Botswana moving from a rough diamond producer to participating fully in the pipeline.

Already, over 3000 jobs have been created since the formation of DTC Botswana that came with the setting up of cutting and polishing factories in the country.

All along, the country, through Debswana, a partnership between De Beers and government of Botswana has been mining and only recently it added cutting and polishing aspects as people became restless that the leading rough diamond producer was exporting jobs.

Botswana is now starting to go into the retail aspect of the diamond pipeline and wants to compete with leading centres that do not mine diamonds like U.S, Tel Aviv, Mumbai and Hong Kong.

Some of the industries in the chain that Botswana is advanced in include banking where ABN Amro has already set up; polished certification, Diamond Hub, diamond broking and Diamond Technology Park.
Acting Deputy Permanent Secretary at the Ministry of Minerals, Energy and Water Resources, Nchidzi Mmolawa, says there are still challenges ahead as Botswana tries to establish itself as a globally recognised diamond centre.

Botswana already has high production costs compared to China, India or Thailand.

“The diamond centres we are competing against have better infrastructure like airline connections, hotels; therefore there is a need to have a niche supported by our own environment,” said Mmolawa.
Sir Seretse Khama International Airport, which will be used by diamond sellers and buyers, is still not complete although it was meant to be handed as part of the 2010 FIFA World Cup in South Africa.
At some stage, Botswana was said to be wooing international airliners British Airways, Air Mauritius, Singapore Airlines and Qatar Airways to service the Botswana route, but some deals fell through.

The country also has less than three top hotels that will accommodate dealers as they take a break from their business.

Botswana will, however, be competitive in the sense that cutting and polishing companies will be near to the source of rough diamonds as most of the valuable global mines are found here.
“Our production is significant enough to attract other people here,” he added.

The ancillary industries that will need to work hard to make the diamond centre dream realised are tourism, aviation, road transport, property development, hotels and restaurants.


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