Market NewsComment Silly Season

Silly Season

August is upon us and traditionally August is the ‘silly season’ for the media, a time when the Loch Ness monster story stands a good chance of being resurrected, yet again, to fill the gap of no news as everyone lolls about on some beach or whatever.

In our industry we have had our own excursion into this silly fantasy world, but a few weeks early.

Recently it was announced in Gaborone that the Overseas Private Investment Corporation (OPIC) was going to fulfill a pledge made in 2008 to help foster a local cutting industry in Botswana.

The tidy sum of $250 million has been set aside as the US Government takes 75% of the risk on loans for diamond purchases for local cutting.

Apparently, Barclays Bank has been the first off the mark to claim $125 million of this facility.

The reason that the deal was aborted in 2008 was, unsurprisingly, because of the financial melt down in all markets at that time, so 8 years later it has been pulled out and the cobwebs brushed off.

Since 2008 the one incontrovertible fact that has been rammed down everyone’s throat is that cutting or ‘beneficiating’ diamonds in Botswana has been a total failure.

I was vaguely non plussed to see the smiling face of Maurice Templesman on the podium with the good and great for this scheme as his company LKI is acting as the mandatory US private party.

Whilst I presume that as such this must have some financial advantages for LKI, it does strike me as a touch ironic as it is my understanding that LKI’s local cutting factory closed down sometime ago.

Several other factories have changed hands as the hope for leverage to get rough never ceases to draw the flies to the flame, but there is no reason in logic why the new owners of these factories should have any more chance of success at cutting than the previous owners.

Practice to date as far as I am aware has followed the logic.

Cutting in South Africa, which has a much longer history has all but petered out dismally.

‘Beneficiation’ is a made up word describing a make believe world, that even a Harry Potter would not be rushing to visit.

Getting top dollar for their resource and letting diamonds flow to the most efficient places to be maximised is where countries can get the most benefit, assuming that they handle the resultant revenues prudently to maximum the advantage locally.

The pipe dream of having thousands of people cutting diamonds in Botswana simply because it produces diamonds has been proven to have failed.

Therefore, however laudable it might be to keep promises, to do so when the premise upon which they were made have been proven to be false, seems about as silly as you can get and leaves me with the simple question, who is going to benefit.

I hope that some of the stories about supposed recipients are incorrect, having a quarter of a million dollars melt away from the American Government will not do the industry any favours, even the Loch Ness monster might be preferable.




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