Botswana to become a new home for diamond trading

Gaborone’s first gem sales will bolster the negotiating power of African governments in the natural resource sector. In a significant early victory in the battle for local countries benefiting from their own natural resources, De Beers held its first diamond sale on November 11th in Gaborone, Botswana, after ending the sales operations of its London-based Diamond Trading Company.

Known as ‘sights,’ these sales are held 10 times a year in which each sale brings more than 80 sight holders (authorized buyers) to Botswana to sift through gems in the offices of the Diamond Trading Company of Botswana (DTCB), which underwent a $120 million renovation and expansion.

Anglo American owns 85 percent of the De Beers Group, while the government of Botswana owns the remaining 15 percent.
While Anglo American is in the midst of a round of cutting cost, the outgoing executive vice-president for global sightholder sales at De Beers, Varda Shine, indicated that the cost factor was never the real issue for the move.

Shine explained that the fundamental goal was securing supplies. As part of the deal to bring its sales to Gaborone, De Beers signed a 10-year sales contract with the government in September 2011. Currently, De Beers sells an average of $500-$600 million worth of diamonds per sight. From next year, the DTCB will also incorporate sales from the local cutting and polishing industry – worth a few hundred million dollars per year – into its sights, which Shine says should push annual sales to close to $6 billion.

Once open, the Botswana operation will employ 170 people in which 60 of them local. However, there have been rumblings of discontent among sight holders at the distance they will have to travel. As there are few direct flights to Gaborone, most will have to travel via Johannesburg.

“The sort of infrastructure needed to fully capitalize on the sort of high-income diamantaires who will be coming for sights does not yet exist in Botswana,” says Roman Grynberg, a research fellow at the Botswana Institute for Development Policy Analysis.

He also indicated, “We probably have at least two decades of supply where Botswana will be one of the world’s biggest suppliers of diamonds.” He also concluded by saying, “Diamond beneficiation has been an important policy objective of the government for at least a decade. It is not a stop gap.”

Source: The Africa Report