BOTSWANA, the world’s leading producer of diamonds, is set to also become the largest seller of rough diamonds after a new 10- year agreement with De Beers that was announced on Friday.
The deal will see De Beers move its rough diamond sorting and trading division from London to Gaborone by the end of 2013.
Botswana’s government expects th e move will see the value
of its diamond trading reach $6bn, all of which will go through its
banks. It expects the number of businesses set up by diamond cutting and
polishing firms to rise and it is pushing for jewellery makers to come
to the country too.
The new deal with De Beers also sees the Botswana
government securing 10% of the annual output of its diamond mining joint
venture, Debswana, rising to 15% over five years.
The Botswana government wants to increase the value of rough diamonds to the local industry to $800m from $550m.
There are 16 cutting and polishing companies operating in
Botswana and the government wants to grow that number, boosting
employment and government coffers.
Botswana’s Minerals, Energy and Water Resources Minister
Ponatshego Kedikilwe said the reason for this was to give the state an
independent price and market verification system. Mr Kedikilwe said that
the days when De Beers determined the direction of prices by
stockpiling production were over and the state wanted to have its own
understanding of market conditions.
Mr Kedikilwe said this was no reflection of the
government’s confidence in De Beers as a partner. The government holds a
15% stake in De Beers along with Anglo American, which owns 45% and the Oppenheimer family, which has a 40% holding.
Under the new agreement, diamonds produced by Debswana will
be aggregated in Gaborone with those from De Beers’ mines in SA,
Namibia and Canada to be sold to the company’s 70 clients, or
sightholders, as they are known in the industry.
"This agreement, and the tangible outcomes it will
deliver, will enable Botswana to achieve its aspirations to be a major
diamond centre engaged in all aspects of the business," Mr Kedikilwe
In the past, Debswana’s diamonds were sold to De Beers’
Diamond Trading Company, which mixed them with stones from its other
operations and sold them at sights in London.
Nicky Oppenheimer, chairman of De Beers, said: "We welcome
this. Anything that helps give confidence in the prices paid is
something that De Beers is completely in favour of and it’s something we
as partners, we need to work at closely together."
De Beers normally had five- year sales agreements with the
Botswana government to buy Debswana’s production and sell it on to
carefully selected clients.
Achieving a 10-year sales agreement with the government was
important enough to De Beers for it to agree to shift its London
operation to Gaborone.
"We were prepared to move here in exchange for a 10-year
agreement," said Bruce Cleaver, executive director for strategy and
business development at De Beers, who was the chief negotiator for the
company. "It’s a bit disruptive to your business to do this every five
"We’ve got an arrangement where we’ve got what we want and the Botswana government has what it wants," he said.
De Beers produced 33-million carats last year and lowered
its forecast for this year to 35-million carats from 38-million. At full
capacity, De Beers is capable of producing 45-million carats.