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Botswana Reaches Out to Jewelers for Further Diversification

Botswana Reaches Out to Jewelers for Further Diversification

Jun 17, 2014 10:00 AM   By Rapaport
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Botswana’s Minister of Minerals, Energy and Water Resources, Onkokame Kitso Mokaila, described the country's  mission to diversify during a recent trip to the U.S.: to lure jewelers to invest in Botswana.

“We want people to go as far down the value chain as possible and that’s why we want to  start a new conversation about how can we help bring jewelers to Botswana,” Mokaila said at the recent Rapaport Breakfast at the JCK Las Vegas show. “How can we have a relationship that can be meaningful to them? We will listen and do what is necessary to ensure that we diversify our economy.”

For Botswana, economic diversification is vital as the country remains highly reliant upon the diamond industry and, more specifically, diamond mining. Through its partnerships with De Beers, royalties and taxes, approximately 80 percent of royalties from diamonds mined in Botswana go to the government. Mokaila reports that about 30 percent of the country’s budget and about 80 percent of its export revenue comes from diamonds.

Still, the diamond mining has its limits, even if Mokaila assured that the country’s diamond mining resource will extend to around 2050, well beyond the initial 2030 projection. Debswana, which is an equal partnership between De Beers and the Botswana government, has the bulk of production yielding about 22 million carats a year from its four mines – Orapa, Letlhakane, Damtshaa and Jwaneng. The Ghaghoo development, the country’s fifth mine, is being readied for production by Gem Diamonds later this year.

Therefore, while the country’s diamond resource is celebrated, the government is also acutely aware of the need to diversify. The country has come a long way to move downstream in a short time.

In the past year and a half, De Beers shifted its sorting and sales operations from London to Gaborone, and the state-owned Okavango Diamond Company launched its own rough sales. In addition, a number of new diamond manufacturing companies have begun operations, bringing the number of DTC Botswana sightholders to 20. Significantly, a number of auxiliary services such as brokers, banks, shipping companies and grading laboratories have set up shop in Gaborone.

Mokaila sees the next step as bringing jewelers to the country and expanding Okavango’s role. During his trip to the U.S. he visited Tiffany & Co. to understand what is required to be involved in the retail side of the business. “We want to understand what the value proposition is,” he told Martin Rapaport, the chairman of the Rapaport Group, during a video interview. “I know that [jewelers] won’t come for nothing and that they have to stay in business. We don’t expect them to come to Botswana out of charity. It has to be sustainable.”

Similarly, the government is cautious to ensure that Okavango’s operations are sustainable. The company currently has access to 14 percent of Debswana production – approximately 3 million carats – which it sells via auction. Mokaila stressed that he wants to make Okavango a major competitor on the global market, which he hints might include introducing rough contract sales, polished tenders and gaining access to a greater chunk of Debswana production.

As a result, Okavango, along with the Diamond Hub – which has overseen the project from the start, is central to the government’s diversification program.

The further down the value chain that these bodies are able to drive the industry,  the more the government can reinvest to develop other areas of the economy. Slowly, other sectors are growing, most notably tourism. Mokaila explained that the government’s budget is generally channeled toward developments such as water, electricity and infrastructure projects “to ensure that as more people come to Botswana, they can do good business,” and for recurrent projects to improve education and health services that benefit the local population.

The government’s largely diamond-funded budget has enabled virtually free education for Botswana’s population of 2 million and many young Botswanans are granted scholarships to study abroad. However, for a relatively well-educated population, Mokaila notes that there aren’t enough jobs. He hopes that establishing jewelry manufacturing and other diamond support industries will create opportunities in the same way that diamonds did.

“I look at myself sitting here [in Las Vegas]. I come from a settlement of about 50 people according to the last census,” he explained. “What chance does anybody from such a settlement have of sitting here as a minister, who has been schooled from start to finish by diamonds? That’s how attached we are to them, and that’s what diamonds mean to Botswana.”

“Diamonds are a lifeline for Botswana. They are the catalyst for the entire economy,” Mokaila added.

Written by Avi Krawitz

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Tags: Botswana, diamonds, Jewelry, Martin Rapaport, mining, onkokame kitso mokaila, Rapaport
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