DE BEERS on Tuesday began aggregating diamonds in Botswana from all its mines as part of a process to shift $6bn-worth of business to the capital, Gaborone, from London by the end of next year — a move from which Botswana’s government hopes to gain fresh revenue streams.
Aggregation is the blending of diamonds with similar qualities into packages for clients.
South Africa, Namibia and Angola are expected to benefit from the move, De Beers CEO Philippe Mellier said.
The Diamond Trading Company (DTC), a De Beers subsidiary, expects consumer demand growth of 3%-5% this year, from 10% last year.
"We believe next year is going to be slightly better than this year," said Varda Shine, CEO of DTC.
Retail diamond jewellery sales are expected to pick up in the fourth quarter of this year, cutting into inventories held by diamantaires.
De Beers expects delegations of up to 150 people — representing 72 clients that buy gem-quality diamonds and four that purchase industrial-grade stones — to travel to Gaborone 10 times a year, Ms Shine said.
Based on the experiences of its sales, or sights, in London, other sales and auctions of diamonds are likely to occur in the region around these sales, she said.
Of those sightholders, 21 already have cutting and polishing factories in Botswana, employing 3,400 people. Two Indian jewellery makers have set up small businesses as a trial.
ABN Amro is among the banks that have secured a licence, and opened an office in Botswana. Two Indian banks have also been granted licences, and plan to open diamond-funding offices in Gaborone.
Standard Chartered’s diamond-funding unit will become more involved in Botswana, Ms Shine said.
Botswana’s government recently declined to raise its stake in De Beers from 15% to 25% by partaking in the purchase of the Oppenheimer family’s share in the world’s largest diamond business.
This has allowed Anglo American to take up the full 45% Oppenheimer stake for $5.1bn, giving it 85% of the business.
The government could not afford the price tag of 9.8bn pula (R10.4bn), and had a long list of other priorities it would rather address, Ponatshego Kedikilwe, vice-president and minister of minerals, energy and water resources, said on Tuesday.
"Currently we don’t have the budget for that. It was a fiscal consideration…. Could we afford it? Clearly we couldn’t," he said.
Botswana was expecting a "small budget surplus" this financial year and the state wanted to spend money on projects that people wanted, he said. "We would rather spend any cash available on development of the country."
Looking at what the government would gain from such expenditure, it would remain a minority shareholder in the group. It has a 50% stake in Debswana, the single largest diamond-producing unit within De Beers.
The government draws most of its revenue from foreign exchange earnings on diamond sales.
"We are so dependent on this product, and the question was, how many more of our eggs could we put into this basket, and in return for what?" Mr Kedikilwe said.
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