March 22nd, 2008
By Charles Wyndham.
The hullabaloo that has been swept up in a sea of self congratulatory joy with the opening of the new DTCB building in Gaborone is leaving me a bit cold.
I had thought of saying ‘spaced out’ but that would imply that certain chemicals were adding to my celebration of life, beyond my normal addictions of caffeine and much more importantly wine.
When saying that the opening leaves me ‘cold’, what I am referring to is not the actual opening (to which unsurprisingly I was not present), or the building (in which I have not been) but to the sickening self congratulatory splurge emanating from De Beers about the significance of the event.
I now know thanks to some particularly boring German scientists from Gottingen University that as I have been known to allow the odd glass of wine to pass my lips that my hippocampus is probably 10% smaller than it should be and my memory adversely affected.
The good news, that is apart from drinking, is that at last I have a reason for knowing why I forget, but clearly I do not forget enough.
I have not forgotten that it was only being dragged kicking and screaming that the De Beers / DTC ended up moving its London operations to Gaborone.
Dressing this move up as justifiable ‘resource nationalism’ as Gareth Penny did in the latest FT interview is odd.
This move is simply the culmination of dissatisfaction not any resource nationalism, now another of the ghastly tag lines so beloved by the DTC.
DTC fought tooth and nail not to move and also not to have local cutting, once that goal of none was unachievable they resorted to trying to impose their management.
This was promptly rejected when government issued its own six licences following DTC’s own selection of ten.
The fact of the matter is that Gareth has an appalling hand of cards from which to play.
That it was he himself who dealt the pack with the failed Supplier of Choice policy is beside the point, we are now de facto in a position where producers are calling the shots and none more so and, generally, more rationally than Botswana.
Gareth has no option but to focus on side issues.
In Tel Aviv it was mine safety, now it seems to have moved onto Aids.
Both important subjects in the right context but not the actual issues at hand in this case.
The key statement to me from Gareth’s interview in the FT was “Our old business model simply wasn’t commercial anymore.”
He was not correct.
It was commercial but firstly was it sustainable and what were the litigation and other risks, substantial to say the least, though the new model, taking the $295 million American settlement, seems to be paying for the sins of the father.
The issue was not even was it sustainable but was it desirable in that was it the most profitable option.
That De Beers had to change I do not disagree with, though it would have been plausible if uncomfortable to have clung to the previous model.
The new model devised by Bain consultants and endorsed specifically by Gareth, has fallen between all stools and above all has failed on the key commercial criteria of De Beers own profits, they have slumped to comparative oblivion.
What happens to De Beers profits as a private company is relatively insignificant to all but the shareholders, of whom Botswana is one, and its employees.
What is key is how this mismanagement is affecting the industry.
This opening in Gaborone is a paean to the success of a government wrestling itself free from the grasp of an imbedded system of control headed by a company which for over a century had managed to dictate the diamond business on its own terms but which has now just become incompetent.
As the glasses are lifted in bouts of self congratulatory applause, the significance is that it marks formally the end of this company’s domination.
All ‘ends’ carry risks or more importantly unknowns which unsettle markets.
Rather than knowing just how much this behemoth of a building in Gaborone cost, or what the contribution to Aids is being paid, or how much the mine safety record has improved, I think, we all want to know, as Botswana changes its President, is just how responsibly and how ‘liberally’ it is going to manage the industry.
This opening marks the formal ending of De Beers as we have known it as it continues to sink into irrelevance.
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