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Botswana reaps rewards of De Beers move

14 may 2012

The move of the De Beers Diamond Trading Company from London to Gaborone in Botswana is one of the biggest ever transfers of economic activity in the history of Africa, www.miningmx.com says.

The first auction for sightholders will only be held at the end of the year as a test run for the $6bn-a-year business, but in January 2013 the first full-scale auction will be begin.

“We believe it will be a great catalyst for Botswana and southern Africa – much bigger than anything that has ever happened before in Africa,” said Varda Shine, CEO of the diamond trading company in Botswana.

“It will lead to a massive inflow of expertise, technology, people and business sense. Some of the world’s top experts from China, India, Europe and Israel will be coming here, because it will become an extremely important hub,” she said.

De Beers has already made great progress with the building operations and the transport of equipment from London to Botswana. At the same time, the financial services sectors associated with the diamond industry have started establishing themselves in Botswana.

Two major European banks, ABN and ABB, which have in the past been the most important role players in sightholder auctions, have already opened offices in Gaborone. Two large Indian banks also recently obtained licences to start business in Gaborone.

Several other banks from Israel and India are expected to make an appearance soon too – an indication that other financial services, like insurers and security companies, will open up there soon too.

However, the move is something of a gamble for which there is no precedent. “But we believe this is the right time for this step, especially since it looks as if there is a downturn in the supply from diamond producers, which could continue for another two to three years,” Shine said.

The diamond giant has lost top expertise from its approximately 270 staff members in London who are not prepared to move to Botswana. About 85 staff members have already agreed to make the move.

De Beers is assisting the Botswana government to ensure that the country will be ready to receive the world’s top role players in the industry. The most urgent need is easy access to work permits and Internet and Wi-Fi infrastructure.

De Beers has a group of 75 sightholders – wholesale buyers of uncut diamonds – which are the company’s primary channel for supplying diamonds to just under 40% of the world market.

“This is a group of international business people who will visit the region 10 times a year in future. They will naturally travel through South Africa, though there will presumably be direct flights to Botswana in due course.

“But they will not only visit Botswana. They will also call on the other diamond producers in the region – in South Africa, Namibia and Angola – to explore business opportunities,” Shine said.

Tiffany & Co, one of De Beers’ biggest customers and probably the world’s best-known producer of diamond jewellery, opened a diamond polishing factory, Laurelton Diamonds, in Gaborone four years ago, but it has now also started making preparations to double its production capacity in the country.

Other diamond-jewellery producers will probably follow Tiffany’s example.

“This opens the door for a whole host of opportunities – for example hotels and restaurants – not only for Botswana but for the entire region. As far as financial services are concerned, there’s much more involved than only banks,” Shine said.

“This is going to give tourism a boost, also shipping and security services, and then of course also office services like accounting services, human resources, information technology, and don’t forget recreation.”