Botswana As Global Diamond Centre?

It could be argued that Gaborone has failed in its aim of diversifying the national economy. Far from moving away from its dependence on diamonds and mining, recent investment successes have focused precisely on these two areas. Yet, ensuring that the country retains more of the financial benefits of the diamond industry and widening the country’s mining base to include other commodities are surely the best places to begin.

The government’s diamond sector strategy received a huge boost with a recent announcement by diamond firm De Beers, which is 15% owned by the government of Botswana. The company has agreed to move its Diamond Trading Company (DTC) subsidiary, from London to Gaborone by the end of 2013, on the back of a 10-year sales deal with the government of Botswana.

The DTC sorts and trades rough diamonds and the government hopes that its new location will attract cutting and polishing companies to Botswana, adding to its existing 16 firms. Vijay Kalyanaraman, the president of the Botswana Institute of Chartered Accountants, said: “The future relocation of DTC to Botswana has already created a lot of excitement in the market, despite cautious outlook on the diamond sector.”

The Botswana operations will handle diamonds mined in Namibia, South Africa and Canada, as well as those produced in Botswana itself. The Minister of Minerals, Energy and Water Resources, Ponatshego Kedikilwe said: “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.”

Bruce Cleaver, De Beers’ executive director for strategy and business development added: “We were prepared to move here in exchange for a 10-year agreement. It’s a bit disruptive to your business to do this every five years. We’ve got an arrangement where we’ve got what we want and the Botswana government has what it wants.”

Gaborone is keen to ensure that many local people gain training and employment in the new diamond processing businesses. Botswana’s stake aside, the remaining ownership of De Beers is set to change. Anglo American, which already owns 45% of the business, has agreed to buy the 40% stake held by the Oppenheimer family for $5.1bn (See African Business, January 2012). The deal is scheduled to be completed by the end of this year, although it must also be sanctioned by Gaborone, which may seek to exercise its right to take part of the offered stake.