GABORONE (miningweekly.com) – The transfer of diamond company De Beers’ diamond trading activities to Botswana is timed perfectly to fill the current supply-demand gap in the diamond industry, De Beers diamond trading global head Varda Shine said this week.
She stated at a media briefing at the DTCB complex, outside Gaborone, that the move would offer clients security of rough diamond supply going forward.
De Beers and the Botswana government signed a ten-year agreement last year to move the London DTC to Botswana. The process is expected to take 18 months and reach completion by the end of 2013. The first group of London expatriates would arrive later this year.
Shine indicated that current world diamond production was 120-million carats a year, 20% down from 150-million carats a year in 2007. “And we do not anticipate it going back up to 150-million carats a year for another two to three years.”
However, over the past two years consumer demand has grown about 15%, fuelled mostly by increasing demand from China (22% growth last year), India and the US.
“This widened the gap between supply and demand, therefore we are confident that our clients (sightholders) will follow our move to ensure continued supply security of rough diamonds,” Shine said.
De Beers executive director of beneficiation Tim Dabson told Mining Weekly Online that this growth had led to the recovery of diamond prices in 2010 and 2011 after the global recession.
“As demand continues to grow, we expect diamond prices to pick up significantly in the coming years,” he noted.
Shine also expects healthy growth in global diamond demand over the next ten years, which she sees as the “diamond decade”.
She stated that the future looked bright for the diamond industry, despite stagnant supply. “A big part of the supply-demand gap will be filled by price.”
Globally De Beers was producing and selling 31-million carats a year and its overall sales were currently standing at $6.5-billion a year, with some $500-million sold in Botswana, $600-million sold in South Africa, $300-million sold in Namibia and about $5.1-billion sold in the UK.
The migration from London to Gaborone would thus see about $5.5-billion in diamonds being sold in Botswana. South Africa and Namibia would continue selling locally produced diamonds, while Canada’s output would be sold in Botswana.
“It is a ground-breaking business move that will change the history of Southern Africa, it will bring international sales, as well as aggregation and supply chain functions, to Botswana by the end of 2013.
“This will result in an influx of skills and technology to the country,” Shine said.
De Beers’ research and development department would remain in Maidenhead, outside London.
Shine added that about 75 international diamantaire would come to Botswana ten times a year for sights. The first sight was set to take place in the fourth quarter of 2014.
“With such international business people constantly in the country, various other business opportunities could be identified in Botswana and the rest of Southern Africa,” Shine enthused.
While the transcontinental shift would be more tax-efficient for De Beers in terms of exporting diamonds to countries such as the US, Shine said it would also assist the Botswana government by serving as a major catalyst for meeting economic objectives and delivering its vision of becoming a global diamond centre.
“We hope to establish Botswana as the diamond hub of the twenty-first century,” Shine stated.
To accommodate additional staff and technology, a comprehensive site project plan that included four phases of build work has been set in motion.
A 120-million pula modification and extension project was currently being carried out at the DTCB.
The DTCB building would be extended to include a new three-storey division that would comprise an aggregation and processing area, a showroom for customers, as well as human resources, security and information technology (IT) departments.
Phase 1 of the building work, which includes the aggregation facility, was complete ahead of schedule.
The second phase was currently in progress and the entire construction project was expected to be completed by the end of 2013.
Further, consultation with affected UK employees had been completed, and to date, 92 staff have signed to relocate.
By August, the new De Beers DTC in Botswana will have 64 employees based in Gaborone, comprising equally of Botswana nationals and expats from London. By the end of 2013, it will employ 170 people, a third of which will be citizens. However, this would increase over the next three to five years.
Shine said that although the move would lead to the loss of capable employees currently based in London, the company was optimistic that it would be able to fill the skills gap by sourcing from the DTCs in South Africa, Namibia and Botswana.
In addition to direct employment and skills transfer, the relocation of trading activities from London would create various opportunities in the hospitality, financial, tourism, security, office services, IT and entertainment spheres.
Shine said financial services would be brought to Botswana, as two Indian banks, including ADM, had acquired licences to open shop in Botswana, while others were exploring possibilities in the country.