Wednesday, June 3, 2020

Okavango Diamond Company should be strengthened

Botswana Government must aim to get the maximum benefits out Botswana’s relationship with De Beers.

Days of extolling a unique public-private partnership when the benefits to Botswana are not what they should be are over.

There is no doubt relocating De beers operations to Botswana was overly hyped.

As a country we have not seen the kind of benefits that were promised at the time.

More worrying however is the fact that cutting and polishing factories that had set shop in Botswana in anticipation of the relocation have since closed shop.

For Botswana diamonds are more than just a commodity from which we make money.

It is a national asset that we use to meet various challenges facing us as a country.

And unemployment is one such challenge.

Hence the valid and legitimate expectation was that the cutting and polishing factories were going to alleviate the unemployment problem.

Given the current economic circumstances in our country, we have as a nation set our sights on new possibilities.

The current setup, which is as much a result of Botswana Government’s weak negotiation skills as is about De Beers’s aggression and chicanery, is no longer tenable.

Strengthening Okavango Diamond Company is one such possibility.

The current Agreement between Botswana Government and De beers limits ODC to a purchase of only 15 percent of Debswana rough production. The 85 percent goes to De Beers.

That was an oversight. And it should change.

For Botswana Government the starting point should be recapitalizing ODC, before strengthening the company’s technical proficiency across the various key departments ÔÇô sales, legal, valuation and customer relations.

After that Botswana Government should seriously consider increasing a percentage of rough that ODC can buy from Debswana from the current 15 percent to an excess of 50 percent.

An ideal percentage ratio would be to make a direct reversal of the status quo; giving ODC 85 percent and De Beers 15 percent.

There is no reason why this could be implemented immediately ÔÇô but could happen incremental based on a clearly set out time line that is strictly enforced.

Reliance on De Beers Technology, and also on their Intellectual Property should be reduced.

It is an exposure that has far outlived its benefit to Botswana.

In mind here we have the chemicals used to clean the diamonds.

Botswana should work at finding alternatives and making comparisons to determine if Botswana is getting value for money, especially in the light of the fact that De Beers seems to be cleaning its diamonds at least twice after purchase from DTCB (Diamond Trading Company).

The only reason why De beers would be cleaning its diamond after the same has been done can only be explained by the fact that such subsequent cleaning, which ODC does not benefit from, further enhances quality.

ODC should also enjoy the benefits derived from therein.

Another aspect that Botswana Government should consider is to give ODC a preferential treatment when it comes to the purchase of big stones.

By any other name, large stones are the holy grail of the diamond trading.

If Botswana is going to make sufficient returns from this dwindling resource the Agreement that will be negotiated should be explicit that ODC will be the one purchasing these stones.

This is important not only for clarity but also for business purposes.

The current situation where De Beers is able to hog all exceptional stones can no longer be tolerated.

Most cutting and polishing factories are saying based on the economic and labour dynamics in Botswana, only an access to larger stones can enhance their viability.

De Beers’ prowess of the diamond industry is irrefutable.

But it is no longer in the company’s long term interest to continue to deploy its harder-edged negotiation skills against Botswana.

That strategy has gotten worse since Botswana Government called for relocation to Gaborone.

Since then De Beers has been at best behaving like a wronged party and at west a jilted lover.

De Beers and Botswana sill need each other.

But too often the relationship seems to be tilted to one side.

Too much has been made of the Botswana/De Beers partnership.

Also a lot has been said about the looming negotiations.

But looked against the current Agreement with regards to what is happening on the ground De Beers actions often smack of unilateralism.

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