Wednesday, May 5, 2021

‘Govt still resolute to see beneficiation work’- Diamond Hub Coordinator

The Botswana Diamond Hub and government are resolute about diamond beneficiation and all that remains is the need to fine tune the project that led to the international cutting factory setting up in the country.

Speaking on a paper titled ‘Diamond Beneficiation: Botswana Experience’ Mmetla Masire, the Botswana Diamond Hub Coordinator told the annual Resource Sector conference in Gaborone that they remain ‘open minded’.

Masire told the conference that the Government, De Beers and SightholdersÔÇöthe key partners in the beneficiation project are liaising with each other.

“We have formed an Industry Lead Task Team to advise the minister on what changes are necessary to make the Diamond Industry profitable and sustainable in Botswana,” he said.

“Government is still resolute and determined to make beneficiation work and be sustainable,” he added.

The industry has been attracting wrong headlines recently on the back of uncertainties over its future with some experts saying Botswana got a raw deal in the current Sales Agreement between De Beers and Botswana government that gave birth to beneficiation.

In the 2014/ 15 period, two Cutting & polishing Companies closed while others reduced their staff compliments. In January, it was reported that MotiGanz and Leo Schachter had laid off 150 workers followed on the heels by the closure of Teemane Manufacturing Company owned by Diarough that came with the loss of close to 320 jobs in Serowe.

Masire said some companies are taking long shut downs, while some are not operating at 100 percent capacity, leaving De Beers with a big inventory.

He also highlighted that price margins between rough and polished remains low; Credit Facilities tight, reduced liquidity amongst other challenges.

“There is nothing to turn around, it is just a question of refinement. We need to just confirm our position,” Masire added, saying they have reviewed the situation and understand what we need to do.

Professor Roman Grynberg wrote in paper asking if government would let the polishing industry collapse and kill the diamond dream. He even went to ask if there was a possibility to renegotiate the 2004 and 2011 agreement with De Beers.

“What has happened to the diamond cutting industry is what economists call ‘regulatory failure’. The closure of the factories in Botswana would probably never have occurred if our agreement with De Beers had said that firms that do not beneficiate a portion of their sites in Southern Africa cannot have access to southern African diamonds … full stop,” argued Grynberg.

“But instead we have created a complex marketing formula which made the cost of exiting Botswana in the current bear market very low indeed. The firms that closed their doors will continue to have access to Botswana’s diamonds,” he said.

“Thus in a sense the situation where De Beers was claimed to have ‘subsidized rough with rough’ has now been reversed … Botswana provides rough for Indian industry at the cost of our evaporating polished diamond industry. If we had an arrangements which said that only those firms operating plants in Botswana, Namibia and South Africa can have access to De Beers African diamonds the plant in Serowe would probably be open today.”

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