Would a �cartel-lite� or ODEC for Diamonds work?

Diamonds
Diamonds

If HE President Khama’s recent state of the Nation address is anywhere near correct then diamond production in Botswana will continue at globally significant levels until at least 2050. Industry sources suggest that Botswana’s production at the main mines at Jwaneng and Orapa could, in theory, continue at similar levels to 2050 but this ultimately will depend on prices and the costs of extraction.

Given the P25 billion in expansion announced by Debswana in Maun last week costs of extraction will no doubt rise and while production may continue government revenues will surely decline. The obvious question is whether there is another  way that Botswana  and other diamond producing countries can delay the decline in revenue for at least a few more years.

According to the estimates presented by Dr Rob Davies from Zimbabwe recently at a conference in Gaborone there is scope for Botswana to  have a ‘gentleman’s agreement’ with other major producers to  slow production of diamonds even further than has been the case. With diamonds as with other commodities the only problem in the market is to find a gentleman with whom you can have an agreement.  In what is probably the first public estimates ever it was found that a 1 percent increase in price of rough diamonds will only result in 0.45 percent decrease in demand for rough diamonds. Unsurprisingly Dr Davies results show  that the demand for rough diamonds is what economists call ‘inelastic’ i.e. unresponsive to changes in price. This means that it is possible to decrease production and simultaneously increase profits and government revenue at the same time because consumers will not stop buying. Dr Davies estimated that 25% decrease in production would eventually yield a 16% increase in government revenues. 

Editor's Comment
Congratulations Anicia Gaothuse!

The contest had 10 beautiful young girls as finalists and unfortunately only one could wear the crown.The judges picked Anicia Gaothuse. To all those who feel their contestant should have won ahead of Anicia for whatever reason, hardly; the judges found Anicia to be the best among the best, so desist from disrespecting our newly crowned queen on social media or anywhere else, for that matter! Each of the 10 beautiful young women had supporters...

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