De Beers to Move Diamond Sorting, Sales From London to Botswana

Botswana aims to transform itself into an international hub of the world diamond industry, boosted by a deal in which the De Beers mining and sales empire will transfer the sorting, valuing and selling of rough diamonds from London to Gaborone by the end of 2013.

The agreement also provides for Botswana to sell 10 percent of its diamonds independently of De Beers, rising to 15 percent in five years’ time.

Announcing the deal on September 16, the Minister of Minerals, Energy and Water Resources, Ponatshego Kedikilwe, said it would enable the country to achieve its ambition “to be a major diamond centre engaged in all aspects of the diamond business”. Botswana is already the world’s biggest producer of rough diamonds by value.

Kedikilwe said the agreement would bring more jobs, but gave no indication of how many. The announcement said De Beers’s Diamond Trading Company (DTC) would relocate its “sights and sales operations – including professionals, skills, equipment and technology – from London”.

Sights are the selling periods during which selected customers – called “sightholders” – physically inspect rough diamonds on sale. Gaborone’s Mmegi newspaper reported Tuesday that all 66 of De Beers’ sightholders from around the world are expected to travel to Gaborone at least ten times a year.

Africa’s failure to add value to resources within their countries of production has long been identified as a major hindrance to the continent’s growth. Nicholas Oppenheimer, the chairman of De Beers and grandson of its founder, alluded to the issue when he spoke at the signing of the sale agreement, saying that “together, we will mesh beneficiation into the fabric of the Botswana diamond industry”.

The announcement also said DTC will boost the number of stones it makes available to the domestic diamond manufacturing industry in Botswana, and will continue to support the cutting and polishing of diamonds in Botswana.

Both Kedikilwe and Oppenheimer used the language of a “win-win” deal. Trumpeting his government’s relationship with De Beers as “one of the most successful public/private partnerships in the world”, Kedikilwe said the agreement “gives us direct access to market, which will be helpful for the successful development of the downstream diamond industry in Botswana”.

Oppenheimer said Botswana had “enhanced a highly successful route to market, focused on maximising the value of her natural resource, and De Beers has secured long-term and uninterrupted access to the largest supply of diamonds in the world”. By 2015, he added, De Beers expects demand for diamonds in China, India and the Gulf to match that in the United States.

The 10-year agreement replaces a three-year agreement which expired at the end of last year, in terms of which all Botswana’s diamonds were sold through the DTC. Mmegi puts the average value of Botswana’s own rough diamond production at U.S.$3 billion a year, suggesting that $300 to $350 million’s worth of diamonds could be sold independently.

The industry website, diamondintelligence.com, suggested earlier this month that the signing of a new marketing agreement was delayed because of the stance of the Anglo American Corporation, which owns 45 percent of De Beers. The Oppenheimer family holds 40 percent and the Government of Botswana the remaining 15 percent of De Beers.