It's our responsibility to capture the imagination of future generations towards diamonds

As CEO of Beverly Hills-based Grand Metropolitan - a privately-held luxury goods holding company with a 130-brand portfolio - Vin Lee carries the burden rather lightly on his shoulders. Having migrated from Canada as a baby, it did not take long for...


‘Non-diamond producing countries shouldn’t lead KP’

Non-diamond producing countries should not lead the Kimberley Process (KP) as was the case last year with the United Arab Emirates (UAE), according to the African Diamond Council and African Diamond Producers Association chairperson...

04 december 2017

Jewellers’ Guild of Russia sees its mission in creating highly developed national jewellery market

In recent years, the Jewellers’ Guild of Russia has noticeably stepped up its activities. Eduard Utkin, General Manager of this Association told Rough & Polished about what is happening in the country’s jewellery sector, the tasks facing the community...

27 november 2017

Any color diamond is a great investment

Bruno Scarselli belongs to the 3rd generation of the Scarselli family, which has for the last half-century been producing and selling some of the world’s highest quality yellow, blue and pink diamonds available on the market. Bruno heads the company...

20 november 2017

It’s crucial everybody feels confident that their suppliers use the System of Warranties - Stephane Fischler

The System of Warranties (SoW) in the diamond industry dates back to 2002, when the World Diamond Council (WDC) in team with the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers Association...

13 november 2017

Botswana Discovers That Beneficiation Process Not So Easy

19 june 2017

By Abraham Dayan

When the Diamond Trading Company decided to move the bulk of its services to the Botswana capital of Gaborone in 2011, it was due to mark the start of a new chapter in the diamond industry. Instead of transferring the country's rough diamonds out of the country shortly after they had been mined, as had been the case for dozens of years, basing the DTC’s operations in Botswana was seen as providing a huge boost for the country’s beneficiation campaign. Although the concept of beneficiation really began in South Africa under former President Thabo Mbeki, ironically that country has been left behind while other diamond producing states in southern African have moved ahead, particularly Botswana and, to a lesser extent, Namibia.

The Botswana government and diamond industry officials have repeatedly stated that their aim is to create polished goods and even diamond-set jewelry at home and then export them. That would mean not just badly needed work in a country which suffers from high unemployment, but also a skills transfer and the creation of many thousands of extra jobs in associated services.

However, the reality of establishing diamond cutting and polishing plants in Botswana and manufacturing diamonds profitably has been very different from the original plan. Hundreds of workers have been laid off at cutting and polishing factories in the country over the last few years, as the southwest African country has discovered that the path to beneficiation is far from easy. High rough prices in recent years, together with static and declining polished prices, has slashed profitability. At its peak, in around 2012, manufacturing plants in the country employed close to 4,000 workers, however a wave of dismissals brought that number down rapidly.

Of all the southern African countries that have started along the path to beneficiation, it is Botswana that has made the most progress. Given that it has long been the world's largest diamond producer in value terms, this was hardly a surprise. Its diamond-producing power clearly gives it a great deal of muscle when it comes to negotiating with De Beers.

And since diamonds alone constitute around a third of its gross domestic product, it is obvious that the country is aiming to provide as much added value as possible to one of its few natural resources. The Botswana government and De Beers jointly own the national mining company, Debswana.

                                                            Jwaneng Mine

The sides agreed to establish a sorting plant in the Botswana capital of Gaborone at a cost to the diamond mining giant of $83 million where aggregation of its goods takes place. Botswana DTC, which the sides created in 2006, is responsible for the sorting of goods rather than having them sent to the DTC's main global office in London as happened in the past. The move aimed to create more than 3,000 jobs.

Beneficiation is regarded by the Botswana government as a critical part of its economic strategy due to the large role that diamonds play in the national economy. But the administration is also aware that the country has to develop other resources as diamonds will run out in the coming decades and has set out on a path of economic diversification.

Some estimates suggest that diamonds could run out by 2050, and that has given officials reason to promote beneficiation strongly in the hope that after the diamonds run out it will have become an acknowledged diamond cutting and polishing center as well as having a jewelry-making infrastructure.

There are 20 DTC Botswana sightholders, which under the terms of their receipt of rough diamonds, had to set up polishing facilities in the country. Although polishing in Botswana was initially not seen as commercially viable due to the high labor costs in the country compared to China and India, foreign diamond firms introduced state-of-the-art technology which aided in reducing the cost of production.

The De Beers’ sightholders in Botswana, are: A. Dalumi Diamonds Ltd, Arjav Diamonds NV, Blue Star Diamonds Pvt Ltd, Diacor International Ltd, Eurostar Diamonds Traders NV, Exelco NV, IGC Group NV, Julius Klein Diamonds LLC, KGK Diamonds (I) Pvt Ltd, Kiran Exports Bvba, Laurelton Diamonds Belgium BVBA, Leo Schachter International Ltd, M Suresh Company Private Ltd, Motiganz Diamond Group, Pluczenik Diamond Company NV, Safdico International Ltd, Signet Direct Diamond Sourcing Ltd, Taché NV, Trau Bros NV, Yerushalmi Bros Diamonds Ltd.

For Western diamond manufacturers, establishing factories in producer states enables them to achieve two aims. Firstly, it ensures a steady supply of the type of goods they need. Secondly, it allows them to show solid support for the beneficiation efforts of African states. In addition, with strong government support for their diamond industries and efforts made to show transparency in business and official policy, the governments of South Africa, Botswana and Namibia have given encouragement to overseas investors to open manufacturing plants.

But the difficulty of manufacturing in Botswana soon became apparent. Relatively high salaries have created an environment where it is cheaper to have the diamonds polished in India.

                                                       Jwaneng workers

Ironically, following the first moves to beneficiation, the process was largely halted due to the global financial crisis which struck in late 2008 and the recession which hit most Western states for most of 2009. With slumping global demand for diamonds, among the hardest-hit elements of the global diamond pipeline were the African producer states, whose reliance on gem production and exports is that much larger than other producers, who are able to rely on a wider range of exports for economic sustenance.

An innovation in the diamond mining agreement between De Beers and Botswana – and one which was copied by Namibia in a similar deal signed with the mining giant last year – was the creation of the Okavango Diamond Company as the Botswana government’s way of selling local production independently of De Beers. The company is now entitled to 15 percent of diamond production recovered by Debswana. The government's aim is for Okavango's sales to help the country gain better rough price discovery information and also to help boost state revenue.

The government has launched a raft of generous incentives to attract firms to operate Botswana, including tax breaks and relocated workers. Under the terms of the agreement, those firms creating a base in Botswana receive a higher allocation of diamonds from De Beers. Aimed at boosting beneficiation, the agreement does not actually call, however, for the companies to commit to adding value within the country.

In other words, when times take a turn for the worst, companies may not feel particularly keen on retaining expensive operations, and have relatively little compunction about cutting their losses and leaving.

Creating value-addition around depleting mining operations is loaded with danger. Static demand for polished stones at best and a glut of inventory and diamond jewelry led to rough diamond prices plummeting by up to one-third from 2014 to 2015. That, in turn, led many companies in the country to close down their operations and axe staff. As long as the government fails to address the issues of productivity and costs – particularly labor costs – then beneficiation of diamonds is unlikely to truly succeed.

Creating a critical mass is vital. Unfortunately for the African diamond producers, that critical mass already exists – in India. With close to 1,000,000 diamond industry employees and several decades of experience in cutting and polishing and marketing diamonds, India is by far the world's leading manufacturing center. And that raises the uncomfortable question as to whether it's even worth the while of attempting to create such centers in southern African countries?


Only registered users can add comments (Register, Login)