The diamond industry is undergoing major changes and a many of those changes focus on Botswana. For many years, Botswana has been the host country for the world’s largest, most profitable and longest-life diamond mines. It is the world’s largest diamond producing country by value with production in 2006 valued at $3.38 billion. This production represents about a fourth of the world’s total diamond production by value.
The ties between Botswana and De Beers run very deep. De Beers is owned 45 percent by mining group Anglo American Plc, 40 percent by the Oppenheimer family and 15 percent by the Botswana government. Debswana Diamond Company, an equal partnership between De Beers and Botswana, develops mineral resources including the Jwaneng Mine, the largest diamond producer by value in the world. The company operates four mines: Jwaneng, Orapa, Letlhakane, and Damtshaa. Today Debswana produces over 70% of Botswana’s exports, 30% of gross domestic product (GDP) and half of the government’s revenue.
What is changing in Botswana is what happens to the diamond once they are mined. Historically, the rough diamonds were shipped to London where De Beers sorted the rough diamonds and then distributed them to their exclusive list of sightholders. The sightholders then cut the diamonds or sold them to other cutters. As a result, the country of Botswana did not benefit from any part of the diamond pipeline except for their compensation for the mining operations. Most of the value added part of the diamond pipeline occurred outside the Botswana border and few of the profit dollars stayed in the country.
Because of a recent agreement between De Beers and Botswana, more of the value added cutting and distribution dollars would stay within Botswana. Construction is continuing at numerous locations including the new Diamond Trading Company (DTC) Botswana, the new Debswana building, and six or more new diamond factories. The construction is gearing up for 2008 when Botswana will begin offering rough diamonds directly to sightholders. This will be first time that sightholders will have the choice to get their diamond allocations in London or in Gaborone, capital of Botswana.
In 2006, there were five factories operating in Botswana transforming the rough diamonds from the mines into polished diamonds ready to sale to jewelry manufacturers and retailers around the world. By 2009, sixteen or more factories will be operating in Botswana and will receive at least $500 million worth of rough diamonds annually. Moving the sorting, sightholder distributions and cutting operations to Botswana will mean that more of the diamond pipeline dollars will stay in Botswana.
These changes in the diamond distribution process will provide more stability and financial resources for Botswana. These changes will also have ripple effect through out the entire diamond industry as the marketing of rough diamonds becomes less centralized. This will create new and shifting business relationships between the many players in the diamond industry.