October 27th, 2005
In a historic turn for the diamond industry, the world’s largest diamond producer by value has broken De Beers control over the distribution of 50% of the world’s diamonds by bringing its diamonds back home.
In a move that marks the end of an era where African diamonds sold to De Beers were marketed in London through a complex sightholder system of privileged clients, the Botswana government signalled on Thursday that De Beers’ supplies would move to Botswana.
An official in the capital Gaborone told PolishedPrices that De Beers had agreed under the new sales contract that resulted in the renewal last year of the lease for Jwaneng and Orapa mines, to move the aggregation of diamonds from London to Botswana.
Although supplies from Canada and Russia and several other producers were not yet part of the agreement, the official said that the effective move of diamonds from southern Africa could happen “per immediate”.
“We have not completed the total mix, but southern Africa is the basis for the aggregation. We hope Angola and DRC will agree as members of SADEC (South African Development Corporation). Assuming all countries agree as soon as possible, the DTC should start moving some of their activities such as training and developing security.”
A new building for DTC in Botswana is expected to be completed by 2007.
The Botswana official’s comments came after President Festus Mogae yesterday called on South Africa to allow the aggregation of its rough diamonds at its Diamond Trading Corporation in Gaberone instead of in London.
He was delivering an address at a joint session of the South African Parliament.
DTC’s move could help bring in foreign investment and boost tourism. Botswana depends heavily on diamond revenues for its economy and has had limited success in diversifying so far.
Recently, the government awarded a licence to South African diamond company Safdico for the construction of a Diamond Technology Park.
Another reason for the move was the cost of aggregation in London, the official said.
“We, the producers are not getting enough back in terms of revenues and part of it is investment. If they aggregate everything, you are migrating say $5.9 billion worth of diamonds to a country. That would have a positive impact on the economy and that of SADEC countries.”
The move should also help improve employment opportunities. Several sightholders with cutting factories in Southern Africa have received sights or allocations by setting up manufacturing plants under a series of new guidelines designed by De Beers to meet local demands for beneficiation.
But these guidelines can also expect modification due to the pressures applied on De Beers by producer countries, declining market share and ongoing anti-trust scrutiny.
Although nobody knows precisely where the pendulum will swing, DTC’s sightholders outside Africa will remain their sightholders.
“South Africa will still have their own sightholders, but they will take the diamonds that are aggregated in Botswana, the same for Namibia,” the Botwana official said
“There will be a company in Botswana (DTC Botswana) that will be dealing with diamonds mined in Botswana. The same in South Africa and Namibia. These diamond trading companies would go to Botswana and not to London,” he said.
He said advertising and sales for those sightholders who wish to continue buying their rough boxes or allocations in London will continue.
“But we are encouraging DTC sightholders to come to Gaborone, it will have a positive spin on tourism,” the official said.
De Beers said the details were still under discussion and could not comment further.
By Emma Muller.