African diamond producing countries had been pushing for the beneficiation of their rough diamonds to boost earnings from the precious stones.
Botswana, which is no doubt the leading diamond producer in the world in value terms, had been leading its peers in Africa on beneficiation.
It established what it called the Diamond Hub to promote diamond beneficiation.
This move was also boosted when the country signed a deal with De Beers that saw it receiving 10 percent of Debswana’s production in 2011, rising to 15 percent in 2016.
It also established the Okavango Diamond Trading Company to market and sell the diamonds gained through this agreement.
Furthermore, the country indicated some few years ago that it intended to amend its Diamond Cutting Act and Precious & Semi-Precious Stones Act to facilitate local beneficiation.
However, things haven’t been moving in the right direction as Gaborone had anticipated.
Diamond cutter Teemane manufacturing indicated last February that it was planning to close its 20 year operations in Botswana due to low prices for polished stones.
General manager Mervin Lifshitz told Bloomberg at the time that prices for polished diamonds were too low for the current rough prices, which dovetails with what Mokaila said.
Diamond cutting and polishing companies in the country were also grappling with high operational costs.
This, they said, had been hampering the progress of their business.
Botswana’s 20 remaining cutting-and-polishing factories were processing $1-billion worth of diamonds a year.
The country’s Ministry of minerals, energy and water resources minister Onkokame Kitso Mokaila told delegates at the annual Botswana Resource Sector Conference that took place in Gaborone a few weeks ago that the current mismatch in rough and polished diamond prices had resulted in weak demand for rough gems.
Diamond Hub executive Mmetla Masire also told the same conference that the rough and polished diamond prices mismatch had resulted in large diamond inventory.
“We’ve had a situation where the margin has diminished and it has become very tough for cutters and polishers to make any money,” he said.
No compromise
The Diamond Hub coordinator Jacob Thamage was quoted earlier in the year by Rapaport as saying that Botswana was not willing to compromise government revenue from rough diamond sales to support local manufacturers currently hit by low demand.
"We are not willing to forego profits from diamond mining activities [to support polished diamond manufacturing]," he said.
Thamage said that Gaborone needs to maintain current levels of diamond mining revenue to fulfill its financing obligations as a shareholder of Debswana, the mining joint venture between the government and De Beers.
With such a declaration, there was no doubt that the country’s dream of raking in more revenue from its diamonds through beneficiation had suffered a setback, albeit temporarily, hopefully.
The beneficiation of diamonds was seen by many as one certain way of boosting revenues as the country struggles to find an alternative source of revenue to rough diamonds.
Diamond mining had been historically the largest economic sector contributing about 30 percent of the country’s Gross Domestic Product (GDP).
Diamonds also accounted for 77 percent of Botswana’s exports last year.
At some point coal was touted as a possible replacement.
Botswana’s coal reserves estimated at 212 billion tonnes.
However, a celebrated economist in Botswana said that diamonds would continue to dominate the country’s mining sector.
Econsult’s Keith Jefferis shot down suggestions that coal would be likely a future replacement of diamonds in Botswana.
“Even with ‘high coal’, diamond exports still dominate as margins are much lower with coal,” Jefferies said.
He said diamonds would, nonetheless, not provide economic growth as production was expected to plateau.
Botswana’s leading diamond company, Debswana, which produced a high of 34 million carats of diamonds in 2007, was expected to produce between 23 million and 26 million carats a year in the medium to short term.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
