Pin-striped diamond merchants from Antwerp, Tel Aviv, India, and New York will soon have to come to Gaborone in Botswana to bid for some of the world’s best diamonds, after the country struck a landmark deal with De Beers that makes it a power player in the global diamond industry.
The deal with the world’s largest diamond producer announced last Friday marks a recognition that Botswana does not want to stay on the rocks-and-dirt side of the diamond business forever. Botswana has renewed De Beers’ license to sell Botswanan diamonds for another 10 years. But in return, De Beers will move most of its rough-diamond sales business from London to Gaborone, the capital of a country of 2m people.
The complex business of sorting, aggregating, and distributing much of the world’s diamond supply will now happen in a large new office building that borders Gaborone airport (which makes it easier to get the diamonds safely on to planes). The company will transfer about 100 jobs from its London offices in Charterhouse Street.
It is little appreciated just how important the desert country is to diamond supply. Last year the Botswanan mines of Debswana, the 50:50 joint venture with De Beers, produced two-thirds of De Beers’ total 33m carats of diamonds. Long before gemstones are fastened on to jewellery and placed in shop windows, they originate in dirty “kimberlite” rock, a large portion from two crucial mines – called Jwaneng and Orapa – in Botswana.
De Beers discovered Botswana’s diamond deposits in the late 1960s. The first stones were found within a year of Bechuanaland, a former backwater protectorate, gaining its independence from Britain. Botswana remained dependent on the technical and commercial expertise of one company, and so started one of the most important public-private partnerships in the natural resources industries.
Diamonds are a case study in “value addition,” or the process of products becoming more valuable as ever-more-skilled workers in the supply chain transform it from a rock to something sparkly worth thousands. Botswana wants to claim some of the more value-adding parts of the diamond industry for itself.
This process is called beneficiation, and is a long-standing goal of the Botswana government. Akoleng Tombale, the former minister of mines and energy, made it clear to the Financial Times on a 2008 visit to Gaborone that the country wanted a future beyond rough diamond-mining. By enforcing diamond manufacturing in Botswana, local workers could start to gain skills and build a wider manufacturing economy.
Tombale described a natural tension De Beers and Botswana as they tried to agree a beneficiation programme. But they had already made visible progress before last week’s agreement. De Beers successfully encouraged its favoured clients – or “sight holders” – to set up diamond-cutting factories in Gaborone. The company’s global aggregation business – which involves combining diamonds from its Canadian, South African, and Botswanan mines – was moved to the new facility by the Gaborone airport. But then the financial crisis struck, and wider plans for beneficiation were put on hold.
The new agreement grants Botswana the right to market independently 10 per cent of the output of Debswana. Botswana can entirely bypass De Beers’ complex and rigidly enforced sales channels. This clause alone makes Botswana a large player in the global diamond business.
Not only will De Beers’ clients now be beating a path to Gaborone. A state diamond-marketing company may well challenge the older centres of the diamond industry. It will make its own deals and gain its own wisdom about the global flow of diamonds, many of which get their start in pits on the Kalahari desert.
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