One% diamond business for Botswana in 40 years

MONKAGEDI GAOTLHOBOGWE
Staff Writer | Friday January 22, 2010 00:00

Until they entered into a new and revolutionary agreement with De Beers diamond company around 2006, Botswana's diamond returns were equivalent to just one percent of the world diamond trade valued at US 67 billion.

The founding coordinator of Botswana Diamond Hub, Dr Akolang Tombale, reflecting on his legacy as both the founding coordinator of the diamond hub, and the Permanent Secretaryin the Ministry of Minerals, Energy and Water Affairs, told Mmegi in a wide ranging interview yesterday that Botswana used to get only  $3bn from the world diamond industry.

' It was in fact less than one percent. That is why there was that feeling that we had to go into down streaming activities of the diamond industry. It was high time as we are the leading diamond supplier in the world', reflects Dr Tombale.

According to Tombale, estimation showed that all things being equal Botswana should now generate $500 million from the down stream activities this year, compared to the $30 million Botswana made in 2007.

Dr Tombale's contract, as the coordinator of the Diamond hub, ended last year, having been appointed to found the ambitious sector upon retiring as the permanent secretary in the ministry. ' I have always been passionate about diamonds. In Antwerp they even called me the face of Botswana diamonds. So when I retired, I was asked to establish the Diamond hub', Tombale shares with Mmegi.

The revolutionary changes that tilted the diamond scales in favour of Botswana were introduced in 2006 following the signing of a new lease agreement with De Beers.

But Dr Tombale is the first to admit the negotiations with De Beers were long and difficult, although in this interview, he was not willing to divulge much about the agreement that was finally reached.

' De Beers indeed wanted things to remain as they were in the beginning, arguing that it worked for both parties. But we had a history, we had the facts. We had an international consultancy company which  helped us re-negotiate the conditions, it was difficult, but we had the support of our president Festus Mogae, as well as the then minister for Minerals, Boometswe Mokgothu, and the then attorney General, Ian Kirby, and my deputy at the time, Kago Moshashane, and former PS in the Ministry, Blackie Marole, now the MD at Debswana. I was not alone. They had passion for a new dawn for Botswana,' enthuses Dr Tombale.

Dr Tombale says the negotiations for the new leases resulted in Botswana government's share from Debswana mines rising to 80.9 per cent, a figure that also include taxes, dividends, and royalties.  The negotiations also saw Botswana completely stopping its 40 years of contribution to advertising and promotions, although Dr Tombale would not disclose how much Botswana was contributing towards this advertising and promotions fund. ' It was a lot of money but we said De Beers should do the marketing of diamonds on its own'.

Dr Tombale feels the negotiations came at the opportune time for Botswana.  De Beers was at the same time fighting tooth and nail to penetrate the US market where it was not allowed to operate because it was seen as a cartel. In Europe De beers was being accused of monopolising the diamond trade. At the same time de Beers was also under-going transformation, transforming itself from a public listed company to a private company.

'The biggest part of the negotiations with De Beers was introducing the down stream activities. Botswana as a leading producer of diamond in the world, was not deriving much of the benefits it could derive.'

'There was that desire that we should participate in downstream activities, for instance by 2007 Botswana's share from the diamonds exports was $3 billion.  On the other hand Botswana contributed 26 percent of the total world value of rough diamonds', Tombale points out.

Through the negotiations we increased the returns from our cutting and polishing industry to $500 million a year, and increased the cutting and polishing companies from only four to 16', he enthuses.

'As an aspiring world diamond centre, we went around the world to learn how other world diamond centres were running. One of the important lessons we learnt is that we must have an independent diamond trading facility in Botswana, something parallel to what we have with De Beers in the form of Diamond Trading Company Botswana (DTCB)'.

' We realized that we could use our current status as the number one world producer of diamonds to assert ourselves and become a world diamond centre even when we no longer have diamond mines in Botswana. Countries like Mauritius, Belgium, Israel, India, China, do not mine diamonds but make more money from diamonds than us, for instance'.

' We could use our diamond resources to attract diamonds from other parts of the world to come and sell here'.

Dr Tombale however admits this arrangement of coming up with a parallel diamond trading company has not gone well with De Beers. ' Naturally they opposed it, they wanted to remain the only diamond marketing and selling company in Botswana, they feared it would take diamonds from their mines, but this is our vision, our plan', Tombale explains.

The parallel diamond trading company however has not taken off yet, although India and China recently showed interest in becoming direct clients of Botswana. ' I hope it will materialize. The plan has gone to the highest office and has been approved, it is now a question of when, and not whether it will happen or not', the founding Diamond Hub coordinator explains.

' The vision is to create diamond traffic so that people will be coming from all over the world to Botswana to buy diamonds.  This step could have spin-offs on local tourism, it could also result in us having a direct flight overseas,' Tombale says.

' We are also looking at the jewellery industry. South Africa has diamond jewellery shops at their mines; we thought we could follow the same example, but the consumption of jewellery in Africa is low'.

' However studies show that African economies are growing, there is emergence of a middle class, disposable income will be there, wars are coming to an end. Even in the USA, there is a growing number of African-Americans expanding into the middle class, so we could come up with designs targeted at the African middle class population', Tombale enthuses.

In fact Tombale says already three diamond cutting and polishing companies based in Gaborone are now exporting their new look Botswana brands of jewellery overseas.