One of the country’s oldest diamond cutting and polishing companies, Teemane Manufacturing Company (TMC) will close its factory at the end of this month, throwing close to 400 workers on to the streets.
The Serowe based company, which started operations in Botswana over 20 years ago, is the first local casualty of liquidity and profitability pressures facing diamond polishing companies globally. The affected workers include 320 Batswana and 64 expatriates.
“The closure of the factory is as a result of commercial pressures faced by the operation.
“It’s not just a local Botswana problem - there is a global feeling that prices of polished diamonds are too low for the current high rough prices,” said TMC General Manager Mervin Lifshitz.
Due to depressed polished prices set against high rough prices, cutting and polishing companies globally are currently facing difficulties, with the 20 local manufacturers’ situation exacerbated by the comparatively higher labour costs. High labour costs in Botswana’s fledging diamond cutting and polishing industry have always been perceived as a possible threat to the beneficiation efforts, as it renders local polished diamonds uncompetitive on the global market.
It is estimated that diamond cutting costs $12(P114) to $25 per carat in India, $20 to $30 in China while in Botswana it costs between $60 and $65 per carat.
The 20 local cutting and polishing firms, buy rough diamonds from De Beers before cutting and polishing them for sale on the global market where polished diamond prices are said to be ‘very low’ compared to the high prices of rough charged by De Beers.
The combination of high rough prices and market-induced strain on the cutting and polishing business in Botswana has recently triggered severe cutbacks in an industry that employs around 3,700 people. TMC’s closure brings the number of local redundancies in the past three months to over 500, dealing a blow to the beneficiation efforts.
“The local cutting and polishing business is uncompetitive on the global market. Some of the companies operating in Botswana are making losses but continue to operate here because they need to secure supply for themselves and their parent companies abroad.
“De Beers under the Oppeinheimers, at least tried to alleviate the situation by supplying us with the larger stones, which are more profitable to cut. “But things have since changed under the new dispensation which seems not to care,” an industry insider told Mmegi.
Journalist and industry analyst Chaim Even-Zohar says that the redundancies “should be viewed as a red flag to the Botswana government. “At the end of the day, companies vote with their feet. “The mis-pricing of the boxes gives De Beers and Botswana an immediate short-term cash gain – but it could hurt long term beneficiation prospects.” The Botswana Diamond Manufacturers Association (BDMA) says while the local industry is faced with challenges, there is still a future for the local sightholders operating in Botswana as negotiations are on going to find a solution.
“While there are many challenges facing the industry in Botswana we firmly believe in the future of the industry. “We continue to meet with both Government and De Beers to address challenges that Sightholders have,” BDMA executive director Pauline Paledi-Mokou said.
According to Rapaport, De Beers reduced rough prices by about four percent in the January sight as the company embarks upon a gradual rough price correction to ensure market stability.