Botswana’s rise as world diamond centre – Stanchart “money laundering” woes slow P1.8bn OPIC financing
A large centre of the world’s diamond trade is moving to Botswana, the world’s top diamond producer. De Beers’ Diamond Trading Corporation (DTC) has successfully moved from London to Gaborone in August and De Beers estimates that some 32 million carats of diamonds worth US$6 billion – about 40% of world diamond sales – will be aggregated in Botswana each year. The “sights” by which De Beers sells packets of diamonds to selected buyers ten times a year, will also move to Gaborone from London.
The US Overseas Private Investment Corporation (www.opic.gov) has been trying to join the action, with a BWP1.8bn ($234m) deal to finance the 21 diamond manufacturing companies operating in Botswana, according to this report on Mmegi Online. OPIC is aiming to work with US diamond and jewellery company Lazare Kaplan Botswana. Finalization has slowed since relations between Standard Chartered bank and the US after allegations of money-laundering schemes worth $250m of Iranian funds. The deal was initially set up with ABN Amro bank, which established a Gaborone office as part of the first deal, but the stakeholders reportedly fell out.
The diamond trade switch will have a huge effect on the fast-growing Botswana economy and comes after tough negotiations between De Beers and the Botswana Government. Production from all of De Beers mines across Namibia, Botswana, Canada and South Africa will be sent to Gaborone and mixed and sorted into various categories before the “sightboxes” are sent to London for distribution to 66 London and two Canadian sightholders. Boxes will go to Johannesburg for 10 South African sightholders and to Windhoek for 13 DTC Namibia sightholders.
The first of 85 diamond sorters, who mix the sightboxes, have already gone to Gaborone. De Beers said the move of the aggregation operation, after nearly 80 years in London, was two months ahead of schedule, although three years since the initial deadline passed after tough and prolonged negotiations with the Government of Botswana before a 10-year supply agreement was agreed in 2011.
By the end of 2013, the 10 “London sights” a year will move to Gaborone and sightholders will travel. De Beers says US$22m will be invested to get DTCB Building ready for the first sight. Banks which lend to sightholders, such as ABN Amro, Bank of India and another Indian bank, are setting up and Stanchart is expanding its diamond financing division. A division of jeweller Tiffany & Co. already has cutting and polishing operations in Gaborone.
The Botswana Government has set up Okavango Diamond Company (ODC) and this will also start selling diamonds in 2013, with the right to buy 12% allocated supply from Debswana in 2013, rising to 15% by 2016. Debswana produced 22.9m carats in 2011, so ODC would get 2.7m – 3.4m carats (US$300m – US$583m a year) to sell, rising as Debswana production climbs. It is be first time full revenue on some Debswana production will be channelled entirely to the Botswana Government and not shared with De Beers. Industry expert Martin Rapaport says ODC will be among the world’s top 6 or 7 diamond suppliers and will be able to brand “Botswana diamonds”, attracting a stream of tourists and buyers. It recently appointed diamond veteran Tony Frears as Managing Director. The sales will also provide the Government with market intelligence. ODC may eventually start trading polished diamonds. Firestone Diamonds and Lucara Diamonds have also sold rough diamonds.
OPIC’s financing is to help diamond-manufacturing companies in Botswana to finance purchase of rough for processing and help a financial sector support development of the cutting and polishing sector. According to Mmegi, there are 21 Botswana sightholders and the amount allocated will rise from the current $550m to $800m.
Philippe Mellier, De Beers chief executive, said: “As De Beers shifts more and more of its sales operations to Botswana over the next year, we will solidify the long-term future of the partnership and work to transform Botswana into one of the world’s leading diamond trading and manufacturing hubs.” He added that it should not affect South Africa and Namibia’s activities “There is no risk. In fact, we believe there will be an overflow effect on South Africa’s industry and in Namibia as well.”