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Botswana: African Diamond Giant

Botswana: African Diamond Giant

The first diamonds in Botswana were found in 1959, but it was only eight years later, in 1967, that De Beers found the first kimberlite pipe in the country. That site is known until this day as BK-1. Within weeks, a massive resource, the Orapa pipe, was found. This find changed Botswana’s history forever.

Over the years, nearly 400 kimberlite pipes have been discovered in Botswana, a few of them viable enough to provide the country with the financial resources to develop infrastructure, establish a modern healthcare system, and provide stable ground for a democratic system.

Botswana is the leading diamond-producing country in terms of value, and the second largest in terms of volume. It is the home base of De Beers and the source of most of De Beers’ production today. 

From producer to fully integrated diamond center

One of the most important decisions the government of Botswana made in regard to its diamond resources was to become an important stakeholder in De Beers, which mines most of the diamonds in the country. Being a 15% stakeholder of the diamond giant gave the government additional income as well as influence in important decisions that have the potential to greatly benefit the country.

More importantly, it transformed Botswana from one of the poorest countries in the world to the middle-income economy of today with one of the largest gross domestic products (GDP) in Africa. 

Like Russia, Botswana succeeded in transforming itself from a producing country into a fully integrated diamond center. It formed a 50/50 partnership with De Beers to form the Debswana Diamond Mining Company. It then convinced De Beers to allocate some of the locally mined diamonds to local manufacturing. 

Independent diamond nation

In 2006, a local marketing firm, DTC Botswana (DTCB), was formed – another 50/50 joint venture between Botswana and De Beers. It sells and markets rough diamonds to 21 government-licensed cutting and polishing companies.

Two years later, DTCB HQ was built, the largest rough diamond sorting and valuation facility in the world. By 2011, the Botswana government set to independently sell 10% of the Debswana run-of-mine production, increasing by 1% each year to 15% in 2016. For this purpose, Okavango Diamond Company (ODC) was established. That gave the country full control of its diamonds – sorting, valuation, price, client selection and sales. This firm, Okavango Diamond Company (ODC) is today an important source of diamonds for the global market, bringing additional foreign currency into the local economy.

By 2011, Botswana was source of 27% of the world’s diamond production, valued at $14.4 billion. It was a dramatic year for Botswana for another reason. Following long negotiations with De Beers over its marketing contract with Botswana, the company agreed to relocate Diamond Trading Company International (DTCI) from London to Gaborone by the end of 2013. This shifted one of the world’s most important rough diamond centers from London to Botswana. 

With all of De Beers’ international clients coming to Botswana to buy rough, the move brought $6-7 billion in diamond sales annually to the country.

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A true diamond-fueled economy

Revenues from diamond mining have contributed to more than 30% of Botswana’s gross domestic product and more than 60% of total government revenue. Government revenue from diamonds has increased from 6.27 billion pula in 1998 to 30.3 billion pula in 2011, an average annual increase of 6%. 

Total export earnings in 2011 increased by 24.8 % to BWP 39,998.1 million from exports in 2010, with diamond exports accounting for 75.6%.

Due to current market conditions and the narrowing margins between the rough purchase prices and polished diamond sell prices, many local manufacturers have taken defense measures such as liquidation, downsizing and retrenchment. In his speech at the 13th Botswana Resource Sector Conference, Mr. Mmetla Masire, an executive of the Diamond Hub of Botswana, said that it seems Botswana has not fully appreciated the complexities of beneficiation. He added that the country will have to become more flexible in order to ensure not only that diamonds are processed in Botswana, but also that processing diamonds in Botswana will be a profitable industry.

Mines: The African country has seven mines. The two most important are Orapa and Jwaneng – two of the most prolific diamond mines in the world. Both mines are operated by De Beers, which also operates Letlhakane and Damtshaa. Lucara operates the Karowe mine, Kimberly Diamonds operates Lerala, and Gem Diamonds runs Ghaghoo.

Diamond Characteristics: Botswana’s resources produce the full range of diamonds, in all sizes, colors and clarities. Most of Botswana’s diamond production is gem quality, nicely shaped dodecahedral stones in medium and high colors, often with a greenish skin.

Rough Production:

2013: 23.2 million carats at $3.63 billion. 

2014: 24.5 million carats $3.65 billion (estimate).

Polished exports:

2013: $788.6 million.

2014: $821.3 million.

The views expressed here are solely those of the author in his private capacity. None of the information made available here shall constitute in any manner an offer, invitation, or promotion to buy or to sell diamonds. No one should act upon any opinion or information on this website (including with respect to diamonds values) without consulting a professional, qualified adviser. 

 

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