Sparkling independence as diamonds come full circle

MBONGENI MGUNI
Staff Writer | Wednesday October 3, 2012 00:00

 

Created specifically to celebrate 46 years of independence, the Botswana-flag shaped lapel pins are expected to hit the market next week 'making the memories of the 2012 Independence an item for posterity,' the company, Shrenuj Botswana said.

'The lapel pins are being done with national pride in mind and under the Brand Botswana initiative,' said Kim Lanny, general manager at Shrenuj Botswana, a global company in both polishing diamonds and manufacturing jewellery.

Most of the production at Shrenuj's jewellery factory along Airport Road in Gaborone is meant for export, as the current size of the local market is unsupportive of commercial production.

'We however decided to produce some for independence and came up with a prototype and then manufactured more out of pride,' Lanny said.

'It's a unique product and I feel very proud to wear it. Each pin is inscribed '1966-2012' and a serial number showing that it is one of the 46.'

For Botswana, the 46 individually handmade pins mark the achievement of a dream many critics dismissed as delusional in decades past: Batswana polishing, designing and making diamond jewellery for sale in Botswana.

With next week's sale of the lapel pins, the diamond industry will have come full circle marking the development of the entire diamond value chain from mine, to polishing, jewellery design and retail, ensuring optimal wealth extraction for Botswana.

Another missing link in the value chain was filled last week when a state-of-the-art building housing a diamond exchange centre was completed, enabling the trade of rough stones from both within and outside Botswana, as well as the all important element of price discovery.

'This will make Botswana a vibrant market for diamonds,' Diamond Technology Park CEO Rutang Moses said at a media briefing last week.

'We are just providing the facility and are hands off in terms of its operation, which will be done by the producers and their stakeholders.

'We have established this facility as turnkey and we are talking to different companies in terms of using that tender platform.'

The latest developments in the evolution of the diamond sector follow the recent growth in the numbers of licensed cutting and polishing firms from 16 to 21, translating into greater wealth creation in Botswana.

In addition, the relocation of diamond aggregation from London to Gaborone will see P45 billion worth of diamonds passing through Botswana annually from next year, together with the attendant jobs and growth in downstream sectors.

The launch of the lapel pins to coincide with the independence anniversary is thus symbolic of the diamond sector's metamorphosis, a process that has unleashed the full value of a stone found in July 1966 in the sands around Orapa.

From that time, the wealth created by diamonds has powered Botswana into an upper middle-income country, with enviable per capita wealth and a sound bedrock of modern infrastructural, institutional and social achievements.A Statistics Botswana report serendipitously published in independence week, underlines the immense strides made in transforming revenue from diamonds into sustainable growth and the development of safety nets for future generations.

From six kilometres of paved roads at independence, the report indicates that bitumen roads had grown to 5,662 kilometres by 2000 and 6,780 by 2010, while the amount of registered vehicles grew from 150,574 in 2000 to 344,719 in 2012.

Commercial air passenger volumes rose from negligible figures during the botched Botswana National Airways/Botswana Airways Corporation era, to 482,804 in 2000, 774,771 in 2010 and 788,461 last year, powered in part by rising incomes, which then supported the introduction of new routes and flights.

Through prudent governance, revenues from diamonds not only provided infrastructure, uplifted communities and created economy-wide employment, they importantly kick-started the wealth cycle associated with the financial services sector.

The wealth cycle at its simplest is bank deposits transforming into loans, into interest on deposits with all factors leading to the wealth growth and consumer spending power needed by companies to thrive and innovate.

Diamond revenues from the early 1970s sparked the wealth cycle, attracting international mega-banks and leading to today's sophisticated financial services sector featuring insurers, asset managers, the Botswana Stock Exchange, its brokers and other players.

By 2002, commercial bank deposits were measured at P8.9 billion with P2.5 billion attributable to households and P4.9 billion to Botswana-based businesses. In June 2012, the Bank of Botswana measured deposits at P45.2 billion, with households contributing P9.4 billion and local businesses P27.4 billion.

Over the same period, pension fund assets - the safety net for pensioners - rose from P9.2 billion in 2002 to P44.2 billion by June 2012, suggesting increases in employment, higher employee incomes and greater investment returns on assets invested.

Government's safety net, the Pula Fund, has ballooned over the years trending over the P50 billion level, apart from the recession period of 2009-2010 when government used part of the funds to support the local economy.

The Pula Fund, a long-term fund established to preserve part of the income from diamond exports for future generations, represents the transformation of diamond revenues into tangible sovereign savings and investment.

However, the 46th independence anniversary is also a reminder of the flip-side of the diamond success story as the economy's dependence on the precious stones has exposed Botswana to the vicissitudes of global economics.

This over-exposure came to the fore in 2009 when diamond revenues plunged 60 percent, as key markets caved in to pressure from a financial crisis that began in the US. Fiscal authorities have spent 2012 on high alert against the possibility of another depression, as the Euro zone, the US and other developed markets struggle with stress.

On Sunday, however, focus will be on how a small shiny stone first spotted in the Motloutse River built a formidable economy that 46 years later, holds the promise of even greater prosperity and stability for all its citizens.