The second diamond revolution will see the Botswana government develop a separate diamond marketing process outside the De Beers system. Tombale, who is the Coordinator of the Diamond Hub, said in an exclusive interview with Business Week that if the BDC was implemented properly, it would contribute to the industrialisation of Botswana.

Government plans to finally implement the strategy decided on in 2002 that the country should shift from being a diamond producer to a world diamond centre by facilitating the development of downstream industries, commonly known as beneficiation. The creation of the diamond centre is geared towards transforming Botswana to be on a par with - if not better than - Antwerp, Israel and Dubai.

"I don't see why Dubai can create a successful market when they don't have a diamond mine while we are the world's leading diamond producer (and we can't create a market)," Tombale observes. "I know government has been criticised for not doing this earlier, and the Magang (David Magang's autobiography) book hasn't helped the situation. But one has to understand how the market was then and how it is now." Botswana has been marketing its diamonds through the De Beers single channel system, the reason for which Tombale ascribes to the fact until recently, De Beers controlled 80 percent of the world diamond market.

"Things have changed now," he notes. "De Beers now controls less than 50 percent of the world market and diamond prices are determined by the market." Perhaps a more cogent aspect of this is that the government wants a separate diamond market because De Beers' efforts to comply with the European Union's and the United States' trade competition rules also mean that increasingly, diamond prices will be determined by the market. Government has also realised that the country's main mines have been producing for over 30 years and revenues will reduce drastically, going forward. It was thus about time that government created the Botswana Diamond Centre to create a viable and sustainable market that will survive beyond the lifespans of Jwaneng and Orapa Mines.

The latest development that illustrates Government's seriousness about developing a separate market is its desire for diamonds from the proposed AK6 Mine (currently the subject of a legal tussle between JV partners De Beers and African Diamonds) to be auctioned in Gaborone as part of conditions for the granting of a mining licence.
De Beers has already made major concessions over the past two years during which it established the Diamond Trading Company Botswana (DTC Botswana) and agreed to the aggregation of its entire international diamond production being done in Botswana.  Government chose this stance despite the fact that it is already heavily involved with De Beers in DTC Botswana and holds a 15-percent stake in De Beers. Tombale recognises this in this manner: "Botswana has benefited from a lot of companies which have also benefited from Botswana. This is not meant to disadvantage anyone. We are just trying to fulfil the aspirations of the country."

The highly-respected former Permanent Secretary in the Ministry of Minerals, Energy and Water Resources and Debswana Board Chairman says the diamond centre should also benefit De Beers, especially with small diamond deposits like the AK6.   He says there are to be four core activities forming the key features of the diamond centre, namely, a rough and polished trading centre, a cutting and polishing centre, a jewellery manufacturing centre, and a retail and diamond ancillary business.

The first core activity will create a trading facility as a market for diamonds mined by a number small independent companies in Botswana. The facility will also deal in diamonds from other countries. Companies such as Gem Diamonds (Gope Mine), Firestone (BK 11) and Diamonex (Lerala) will benefit from the facility that will have a trading floor operating like a stock exchange. Government intends to partner with international commodity and derivatives operators like MCX Africa to run the facility. Tombale says negotiations to that end are already underway. MCX Africa, which has an average daily volume of trade exceeding US$ 3 billion in India, has already applied for a licence to operate a pan-African derivatives exchange based in Botswana through the Botswana IFSC. The Botswana Diamond Centre will also help facilitate the growth of licensed cutting and polishing companies in Botswana. Sixteen such sightholders are already in operation. An example of such facilitation is how Government intends to look at incentives to make the sightholders more productive because it recognises that it currently costs more to cut and polish diamonds in Botswana than it does in India and China, for instance.

For their part of the bargain, Tombale says the sightholders could be required to relocate their headquarters to Botswana and to mentor smaller, locally owned cutting and polishing companies. "We want to have a viable industry that will sustain itself after the Jwaneng and Orapa Mines are depleted," he points out.

By this, Botswana will be following a free market approach to the sale of diamonds to local cutters and polishers, unlike the policy used by De Beers at present. The diamonds will be sold to the highest bidder rather than by contract.

Tombale says the government of Botswana also intends creating diamond jewellery manufacturing industries and retail outlets. As an early step towards that goal, the Diamond Hub last week organised a jewellery workshop in Gaborone to deliberate on what will be needed to create such a viable jewellery industry. But in addition to other factors, the jewellery business will have to be unique to Botswana to work, and it is proposed that it will be set up in all major tourist destinations in the country.  "We can negotiate with, for example, Monti Gaz who specialise in cubic diamonds to set up a jewellery facility at Jwaneng to make unique cube diamonds," Tombale explains. "You will then have tourists coming to visit both the mine and the jewellery stores."

Through the diamond ancillary business, the Diamond Hub will help develop supporting activities like banking, insurance and IT services. "We need to attract financial institutions that specialise in diamond processes like the Antwerp Diamond Bank and ABM-AMRO," says Tombale. The Diamond Hub plans to work with the Innovation Hub to develop technologies used in diamond processing. But in the end, the success of all the core activities of the Botswana Diamond Centre will depend on a successful trading facility with enough volume to support downstream industries.   The Diamond Hub will have a state-of-the-art security facility at the airport to protect all the diamonds that will be coming into and going out of the country.  It has been allocated a piece of land on which to construct the Botswana Diamond Centre next to the Innovation Hub along the Airport Road in Gaborone  In the meantime, from the end of September, Tombale and his team will be billeted at the nearly completed Diamond Park behind DTC Botswana.