2006-03-02Staff Report 2 "By Wezi Tjaronda WINDHOEK The move of De Beers, the world's top diamond producer, to establish a sales and marketing division in Botswana may be realised in the next three years. Currently, the Diamond Trading Company (DTC), the sales and marketing division of De Beers is in discussions with the Botswana government and other producing partners concerning the establishment of a new joint venture, that will sort and value the diamonds from Debswana's diamond mines. Debswana is a joint venture mining company that currently mines all Botswana's diamond production. The new joint venture, to be established in 2009 depending on feasibility studies and support from all De Beers partners, will be called DTC Botswana. It is envisaged that DTC Botswana would make diamonds available to local cutting factories as they have been purchasing gems from De Beers' DTC in London, which markets the entire Botswana production. Daniel Kali, De Beers Namibia Managing Director told New Era yesterday a combination of factors have necessitated the move to establish a sales and trading arm in southern Africa. Kali said his company was responsive to the aspirations of its diamond-producing partners who have been calling for increased diamond related activities in the region. Additionally, he said, recent changes in the global diamond industry pipeline have made the economics of cutting and polishing diamonds in higher cost centers, like southern Africa, more viable. ""That is to say that there exists an opportunity to cut and polish certain categories of diamonds in southern Africa, if skills and productivity levels can be achieved,"" he added. Aside from the division, the DTC is also in discussions with the Botswana government and other producer partners about relocating some of its activities, more specifically the aggregation of diamonds, which currently takes place in London, to Botswana. He noted that the skills level for valuations and sorting have also improved quite substantially in producing countries - which will make it more cost effective and shorten the pipeline - when diamonds are sorted and aggregated in the region where most are produced. The choice of Botswana and not other diamond producing countries in southern Africa is because Botswana is by far the biggest diamond producing country in the region as it produces over 30 million carats per year compared to Namibia, which produces 1.9 million carats per annum. ""The volumes just make it so much more practical to have this activity in Bo-tswana,"" said Kali. DTC Botswana will also make some sales of the DTC's aggregated diamond mix to local diamond cutting factories that are being established. Kali could however not say what percentage of the diamonds would be marketed in Botswana because local sales levels would be determined by the economic viability of the cutting factories operating in Botswana. ""Both the Government of Botswana and De Beers are sensitive to the fact that increasing local sales will, if not sold to truly competitive companies, add additional cost to the cutting process. ""This in turn will affect diamond price growth which is not in the interest of either shareholder in the partnership. Therefore, local sales levels will be determined by the effectiveness, sustainability and viability of the cutting factories,"" the De Beers Namibia MD said. However, the purchasing power of consumers in Botswana, like the rest of southern Africa, and the current level of expenditure on luxury items, suggests that local diamond jewellery sales would be limited. Although this is the case, Kali was optimistic that there should be some opportunity such as tourism which Botswana, like the rest of southern Africa, attracts. Apart from Botswana and Namibia, the other biggest diamond producing countries in southern Africa are South Africa and Angola." 2006-03-02Staff Report 2
