Tag Archives: Botswana diamonds

Botswana diamond mine mothballed by Gem because if weak demand

Reuters

Gem Diamonds Ltd (GEMD.L) said it would place its Ghaghoo mine in Botswana under care and maintenance with immediate effect due to a fall in diamond prices.
The company, which mines diamonds from the Letseng mine in Lesotho and the Ghaghoo mine, said the move would result in an annualised care and maintenance cost of $3 million, post settlement expenses.
(Reporting by Sanjeeban Sarkar in Bengaluru; Editing by Amrutha Gayathri)

Botswana – midlife crisis at 50? Is the success story over?

The Conversation


President of Botswana Ian Khama. He leads a country that’s lost the shine created by his father Seretse Khama. EPA/Alejandro Ernesto

It is 50 years since Botswana attained independence from British rule. Over the decades, the small landlocked country has been regarded as a role model for success in Africa. It has achieved political stability, democratic government, and remarkable economic growth.

The attraction of Botswana and its history is newly reinforced in the film ‘A United Kingdom’, to be released shortly. The story begins over 15 years before independence when the territory was known as the Bechuanaland Protectorate. The plot follows the marriage of Seretse Khama, a royal African prince, to Ruth Williams, a white British woman.

The apartheid regime was outraged and exerted political pressure on the British, who held important mining interests in South Africa. To ease tensions, the British forced Seretse into exile in England from 1950 to 1956. He was only allowed to return to Botswana after abdicating his claim to the chiefdom.

Seretse would later enter party politics in the early 1960s, leading the then Bechuanaland Democratic Party to victory in 1965 and independence the following year.

For a global audience, the movie provides a topical account of race relations. The love story is also likely to revitalise the popular perceptionof Botswana as a national success story.

A United Kingdom (2016), directed by Amma Asante, and starring David Oyelowo and Rosamund Pike.

It is now a time for celebration. But it is also a time to reflect on the historical context for this imagery and question whether it has relevance for modern-day Botswana.

The building of a tiny country

Geopolitically and economically Botswana was one of the weakest countries to ever gain freedom from colonial rule. Its landlocked positionwas ominous. It bordered white minority regimes in South Africa, South-West Africa (Namibia), and Rhodesia (Zimbabwe). South Africa, occupying the main trading route, could readily intimidate Botswana with crippling sanctions and violent incursions.

Diplomacy was difficult. To the south, relations with the apartheid regime required a tightrope walk between economic cooperation and political distance. To the north, Botswana’s post-colonial leadership was slow to build wider credibility within the Organisation of African Unity. Overly reliant on British aid, the country was in desperate need of economic partners and diplomatic connections further abroad.

External onlookers doubted Botswana’s viability and its capacity to resist South African pressure. In defiance, Seretse upheld a vision of security and prosperity under a non-racial democracy.

He insisted all individuals were entitled to political freedoms and individual protections, without racial discrimination. These values appeared ambitious to uphold in a young developing state. But they soon proved to be a vital asset.

Seretse Khama, video interview by Adrian Porter, Independent Television News (ITN) reports, 17 March 1965

Regarded as noble and sincere, Seretse thrived in multilateral forums and bilateral meetings. His country had qualities that appeared exceptional and therefore worthy of assistance. There was even a convincing proposal that Botswana could encourage a wider transformation throughout Southern Africa.

Seretse’s winning strategy

Seretse’s argument was simple. Apartheid relied on the notion that multi-racialism could not work in southern Africa. To challenge this, peacefully, Botswana needed to present a thriving alternative.

The more aid Botswana received, the more of a success it could become. And the more it could be seen as a success, the more it would undermine the ideology of apartheid. This was not purely a form of wishful idealism. Instead, it proved to be a practical response for a country that upheld the integrity of its principles.

The approach had its greatest appeal in the US. It inspired diplomats, politicians, scholars, and anti-apartheid activists. In the following decade, Botswana became one of the highest recipients of US foreign aid per capita.

Effective leadership and policymaking were also crucial. This was best demonstrated in Botswana’s effective management of a rich mining boom in diamonds.

Despite Botswana’s apparent achievements, the territory’s external security could not be guaranteed for many decades. Botswana accepted refugees provided they did not use its territory as a base to advance liberation struggles. But without an army until 1977, it was powerless to stop deadly incursions by South African and Rhodesian security forces chasing suspected freedom fighters.

Yet Botswana’s great sympathy, especially in North America and Western Europe, proved to be its own form of defence. Botswana could rely on almost universal diplomatic protests toward any act of provocation.

The nation would outlive the neighbouring powers that once posed a threat to its existence.

Seretse, who died in 1980, ultimately proved that multi-racialism was possible in the region.

Botswana today

With these white minority regimes now long gone, Botswana has lost its claim to exceptionalism. Today, there are valid reasons to questionBotswana’s “success”. The Botswana Democratic Party has remained in power since independence and President Ian Khama, Seretse’s son, showsincreasing signs of authoritarianism.

Homosexuality is illegal and the San, an indigenous hunter-gatherer population, face appalling levels of discrimination.

Growth is slowing in an economy that has failed to diversify away from diamonds. More worrying, Botswana’s supply is expected to run out within the next two decades.

As the nation reaches 50, the historical context of Botswana’s “success” reveals it to be an outstanding example of image-building in circumstances where survival was tied to international visibility.

Botswana may be reasonably depicted as a “United Kingdom” that triumphed because of its inspiring message of interracial unity. Nonetheless, the portrait of success is outdated. It is unlikely to be revived for future anniversaries without substantial improvements in economic progress, human rights, and social justice.

Botswana – Lesedi la Rona diamond to be sold at auction

BBC

The world’s largest uncut diamond is expected to be sold for more than £52m in an unprecedented auction in London.

The Lesedi la Rona, almost the size of a tennis ball, was unearthed in Botswana in November.

The rough diamond is 1,109 carats and believed to be more than 2.5 billion years old.

The Mayfair auction, which is the first time a rough diamond of such a size has gone on public sale, takes place at Sotheby’s later.

The Lesedi la Rona, which means ‘our light’ in the Tswana language spoken in Botswana, was discovered by Lucara Diamond Corp’s Karowe mine.

David Bennett, worldwide chairman of Sotheby’s jewellery division, said the diamond’s discovery is “the find of a lifetime”.

“Every aspect of this auction is unprecedented. Not only is the rough superlative in size and quality, but no rough even remotely of this scale has ever been offered before at public auction,” he said.

The Lesedi la RonaImage SOTHEBY’S
Image captionThe diamond is thought to be more than 2.5 billion years old

According to a study by the Gemological Institute of America, the rough diamond’s colour and transparency “exemplify” type IIA diamonds.

Stones in this group are “the most chemically pure and often show extraordinary optical transparency”.

line break

What are IIA diamonds?

IIA is the most chemically-pure type of diamond

Less than 2% of all gem diamonds are classed as IIA

They were first identified as originating from the famed Golconda region of India

Type IIA diamonds are now recovered in all major diamond producing regions

Famous examples of Type IIA diamonds are the Cullinan I and the Koh-i-Noor, both part of the British Crown Jewels.

line break

Nothing of the size and quality of Lesedi La Rona – which measures measures 6.64 x 5.5 x 4.2cm (2.6 x 2.1 x 1.6in) – has been found in more than 100 years.

In terms of its size the rough is exceeded only by the Cullinan Diamond, mined in South Africa in 1905 and presented to King Edward VII.

The 3,106-carat diamond was cut into nine separate stones, many of which are in the British Crown Jewels, including the Great Star of Africa – currently the largest top-quality polished diamond in existence.

Botswana’s diamonds – the dubious benefits of benefication and value-added

Institute for Security Studies

The dubious benefits of beneficiation

‘Beneficiation’ and ‘value-added’ are the buzzwords in the vocabulary of African economic development.

On a continent replete with minerals and other natural resources, almost all of which are exported raw to the North or the East to be made into high-value manufactured goods, this seems self-evident.

And maybe it is… Or maybe it isn’t. In an ideal world it should be. The idea of turning Africa’s cocoa into fine chocolate before export, its cattle into quality shoes, or its rough diamonds into fantastic jewellery, seems irresistibly obvious.

And so beneficiation is, not surprisingly, the foundation of government policy – or at least the dream – of Africa’s resource-rich countries, which is almost all of them. It is also official policy at continental level. Certainly it is at the heart of the institutional economic relationship between Africa and China, as articulated through the Forum for China-Africa Cooperation (FOCAC).

Next week, FOCAC will hold its sixth conference, the second at summit level, in Johannesburg. Beneficiation and value added will be much on the lips of the African leaders, especially as they interact with Chinese President Xi Jinping and his delegation.

And South African officials say the summit will announce some beneficiation projects. The economic relationship between Africa and China seems an obvious candidate for beneficiation. Africa exports to China are almost entirely raw materials; and its imports from China are almost entirely manufactured goods.

Botswana’s success has been a case of ‘good luck, well managed’
TWEET THIS

South Africa has been in the vanguard of trying to persuade China to invest in the processing of minerals. It registered some success last year when South Africa’s Industrial Development Corporation and China’s Hebei Iron and Steel Group struck a deal for Hebei to build a steel mill in the northeast town of Phalaborwa. This should boost manufacture and create jobs in South Africa, instead of just exporting raw iron ore.

Botswana’s diamond industry is often cited as perhaps the greatest success story of beneficiation – as indeed it has undoubtedly been Africa’s greatest success in developing a natural resource for the benefit of the whole country. Debswana, the joint venture between the diamond corporation De Beers and the Botswana government, has lifted the country from poverty to middle-income status in half a century.

In 2013, the Botswana government took a step further by persuading (some analysts say arm-twisting) De Beers to move De Beers Global Sightholder Sales – its international sales division – from London to Gaborone. In turn the ‘sightholders’ – the diamantaires – were offered an incentive in the form of guaranteed diamond supply, to establish cutting and polishing works in Botswana. About a quarter of them did this. At the height, around 21 companies were processing rough diamonds in the country.

But a few have already closed their operations in Botswana since then, because of ‘challenges in the diamond industry’s midstream sector during 2015,’ as De Beers puts it in a report just published titled Turning finite resources into enduring opportunity.

Botswana still depends on diamonds for 85% of export revenue
TWEET THIS

It adds that the challenge now facing the country is how to generate greater value from the beneficiation. It urges all stakeholders ‘to work together to help deliver sustainable solutions that will ensure the long-term viability of these operations.’

Training and skills development in all areas of the diamond value chain should be the focus, it says.

This week Keith Jefferis, former deputy governor of the Bank of Botswana, tackled the problem of the sustainability of the diamond beneficiation project at a conference in Gaborone organised by De Beers, London’s Chatham House and the Botswana government. The conference discussed the beneficiation of the diamond industry, but also focused more broadly on the problem of how to diversify Botswana’s economy away from diamonds. Diamond production is about to peak, and the country has been battling to find something to replace them with.

As Jefferis said, Botswana’s success has been a case of ‘good luck, well managed.’ The next big challenge was how to shape the country for a non-diamond future.

It had been easy to establish the diamond-processing plants, he suggested. The problem was how to make them productive and competitive and therefore sustainable. He agreed with De Beers that training was the key and noted that where local diamond cutters and polishers had been sent to India for training, they had returned with skills comparable to those of the Indians, who are a large part of the reason the Botswana operations are struggling to compete.

But Jefferis also focused attention on the wider business environment in Botswana, and how it could be improved not only for more sustainable beneficiation, but also for more sustainable businesses of any kind. In other words, to stimulate diversification.

Botswana diamonds are probably the best-case scenario for beneficiation, because together, the Botswana government and De Beers have such control of the industry that they can ensure it happens. So if beneficiation is challenging even for Botswana diamonds, it must be more so for other industries and other countries.

To diversify its economy, Botswana must cut through metres of red tape
TWEET THIS

Which raises the pertinent question of whether governments should be picking winners and mentoring them to greater success, or just creating an environment conducive to all businesses to prosper.

Jefferis suggests the latter course is the one Botswana – and by implication, others – should be following. This is the key not only to beneficiation, but also to the diversification of the economies of resource-rich countries, or any countries.

He noted that Botswana had been relatively successful in diversifying its economy as the contribution of diamonds to gross domestic product (GDP) had dropped from about 50% in 2002 to just over 30% last year. But the country still depends on diamonds for 85% of export revenue and the bulk of taxation.

Yet Botswana remains unattractive to investors wanting to establish export-oriented businesses, he said. He catalogued a long list of things that the Botswana government should be doing to make it more attractive. They key would be to improve transport infrastructure.

He noted that even the main border post between Botswana and South Africa closed at night. ‘So at 6am … you can see a queue of trucks two kilometres long, waiting to enter Botswana.’ That added to transport costs. Opening such border posts around the clock would be an easy first step for the government to take towards diversification. A second would be to establish one-stop border posts.

The government should also open up the air transport market, Jefferis said, to bring down transport costs. He noted that Air Botswana faced no competition in the domestic market. It was also ‘crazy,’ he said, that companies struggled so hard to acquire land for their operations in such an extremely low-population density country.

‘And the immigration system is dysfunctional. It’s not easy for companies to bring in skilled labour from outside the country,’ he said, adding: ‘These are all public goods which are firmly the responsibility of government to make it easier for companies to set up profitable export production.’

He also warned, more broadly, that Botswana was jeopardising its economic expansion by failing to manage its very scarce water resources sustainably. Foreign participants in the conference saw the problem for themselves as taps in their hotels ran dry.

Jefferis said neither De Beers nor the country’s farmers were paying for water – mostly from underground aquifers. And so the country was in effect mining this non-renewable commodity, rather than charging royalties for it, in the way it charged royalties for its diamonds.

And Jefferis said Botswana should be focusing on exporting services, for example by taking advantage of its well-educated, English-speaking people to establish call centres and back offices to international companies.

When you look through a magnifying glass at a stunning, 57-facet, round, brilliant Tiffany diamond that has just been cut and polished by Batswana hands at the company’s subsidiary, Laurenton Diamonds, in Gaborone, the allure of beneficiation can be irresistible. But there is a wider highway for the governments of Africa’s resource-rich countries to take towards successful beneficiation and ending their dependence on single commodities. It is a much more mundane one that entails letting trucks cross the borders at night, and cutting through metres of red tape, as Jefferis suggests.

‘Beneficiation’ is all very well but not when it focuses the mind exclusively on ‘what can we do with all this stuff we have,’ rather than ‘I have this brilliant idea which the market will love. Where do I get the stuff to make it happen?’ African governments should instead be focusing on liberating the entrepreneurial spirit of their people.

Peter Fabricius, ISS Consultant

World’s second-largest diamond discovered in Botswana

BBC

The 1,111 carat stone recovered from Lucara's Karowe mineLucian Coman/Lucara The stone measures 65mm x 56mm x 40mm in size

The world’s second-largest gem quality diamond has been discovered in Botswana, the Lucara Diamond firm says.

The 1,111-carat stone was recovered from its Karowe mine, about 500km (300 miles) north of the capital, Gaborone.

It is the biggest diamond to be discovered in Botswana and the largest find in more than a century.

The 3,106-carat Cullinan diamond was found in South Africa in 1905 and cut into nine separate stones, many of which are in the British Crown Jewels.

“The significance of the recovery of a gem quality stone larger than 1,000 carats, the largest for more than a century… cannot be overstated,” William Lamb, the CEO of Lucara Diamond, a Canadian diamond producer, said in a statement.

Lucara says two other “exceptional” white diamonds – an 813-carat stone and a 374-carat stone – were also found at the Karowe mine.

“I am truly at a loss for words. This has been an amazing week for Lucara with the recovery of the second largest and also the sixth largest gem quality diamonds ever mined,” Mr Lamb said.

Botswana is the world’s largest producer of diamonds and the trade has transformed it into a middle-income nation.

Botswana to auction own diamonds in country

BBC
Botswana auctions diamonds at home

Last year, De Beers moved its rough stone sorting operation to Botswana
Continue reading the main story
Related Stories

De Beers in key move to Botswana
Botswana profile
Are commodities a blessing?
Botswana, the world’s largest diamond producer, has started to auction its own diamonds for the first time instead of selling them in Europe.

The auction is by the government-owned Okavango Diamond Company.

Later in the year, diamond giant De Beers, which owns the country’s main mining firm with the government, will also move its sales to Gaborone.

Botswana has long campaigned for its diamonds to be processed, sorted, marketed and sold from the country.

Last year, De Beers moved its rough stone sorting operation, which had been based in London for nearly 80 years, to Botswana.

Analysis

Rob Young
BBC World Service, Gaborone
The auction is going to be small, but its symbolism is huge. It should earn more money for Botswana than the previous system. The diamonds which are being sold were mined in Botswana and are being sold by Botswana. For decades, the auctions have taken place in Europe.

Staff from diamond giant DeBeers in London are also relocating to Gaborone, and locals are being trained and employed. Soon, DeBeers will sell about $6bn worth of the precious stones annually in Gaborone; that is the equivalent of a third of the size of the economy.

It has seen by those in power as the beginning of “bringing the diamonds home”. There is excitement among many here, especially the business community which hopes to benefit from a related economic boom. The plan is a long-term one – to set up a diamond hub similar to Antwerp and Tel Aviv that will continue once the diamond mines close.

‘Big-scale move’
The BBC’s Rob Young in the capital, Gaborone, says about a dozen diamond buyers from around the world are in the city for the auction, which lasts for two weeks as they inspect the diamonds first and then bid for them in several rounds.

The government hopes diamond sales operations will bring more value-added jobs to the diamond sector, including clerical and jewellery-making work, our reporter says.

Its long-term plan is to set up a diamond hub similar to Antwerp and Tel Aviv that will continue once the diamond mines close, he says.

When De Beers relocates its sales operation later in the year, it will be selling about $6bn (£4bn) worth of diamonds a year in Gaborone.

Philippe Mellier, chief executive of De Beers, told the BBC that moving diamond sales was part of a deal agreed with the government of Botswana. Together they own Debswana, the country’s main mining company.

It would turn Botswana into a major diamond hub, as it was already the biggest centre for diamond production, Mr Mellier said.

“It’s a global movement of big scale for the diamond business,” he told the BBC’s Newsday programme.

“If you migrate $500m-$600m per month of sales of diamonds – that’s a big move and at the scale of Botswana that’s a very big move and certainly a move of significant scale for southern Africa.”
http://www.bbc.co.uk/news/world-africa-23066036

20130626-172150.jpg

Can Botswana find a future without diamonds?

Think Africa Press

With its diamond reserves predicted to run out in 20 years, diversification is crucial if Botswana is to continue to be an ‘African success story’.

Diamonds in the rough: a diamond mine in Jwaneng, Botswana. Photograph by Esther Dyson.    

“Even in the absence of the global economic downturn, we would be living through challenging times as we wean ourselves away from overdependence on raw diamond revenues”, proclaimed Botswana’s President Ian Khama in his State of the Nation address this November. “Dependency on anything is never healthy.”

President Khama was not wrong, not least because Botswana’s diamond resources, which account for nearly half of government revenue and 70-80% of the country’s export earnings, are due to run out in 20 years.

Precious stones and progress

Botswana’s diamond reserves were discovered shortly after it gained independence in 1966, at which time it was amongst the poorest countries in the world. To exploit the newfound resources then President Seretse Khama, Ian’s father, struck a crucial and intelligent deal with the South African diamond giant De Beers.

Under the agreement, diamond mining would be a 50/50 joint venture between Botswana’s government and De Beers, allowing the country to directly share in its revenues rather than simply tax them. The partnership came to be known as Debswana and is today the world’s leading producer of diamonds in terms of value. Botswana is now responsible for over a fifth of global diamond production and is the world’s leading producer of gem-quality diamonds.

These precious stones combined with internal stability allowed Botswana’s GDP per capita to grow from under $80 in 1966 to around $6,500 today. The income and foreign currency reserves gained in exporting diamonds has also allowed the country to maintain a degree of economic policy independence from international organisations. Along with continued political stability and improving human development indicators, prior to the devastating AIDS epidemic, many commentators described Botswana as an ‘African miracle’.

Diamonds aren’t forever

All this is highly impressive. But, as Ian Khama and many others have stressed, Botswana maintains its heavy dependence on diamonds at its peril. Despite some growth in sectors such as banking and high-end tourism, diamonds are still crucial to Botswana’s economy. This is worrying not only because reserves are predicted to run out in two decades, but also because it leaves a central part of Botswana’s economy openly at the mercy of the global market.

The drop in diamond-revenues due to the recent global economic downturn acted as a sharp reminder of the country’s diamond-dependence and vulnerability to market fluctuations. Revenues have recovered somewhat since 2009 and prices are predicted to remain relatively high in the near future as global diamond production remains lower than demand, but the impact on Botswana’s economy by events far out of its control thrust the dangers of single-commodity dependence into focus. Furthermore, despite some recovery, the relatively low mining output this year forced the government to revise its projected 8% economic growth for 2012 down to 3.5%, and the sector’s output is not expected to grow over 2013.

The worrying spectre of ‘Dutch disease’ is also ever-present, and although the government tries to contain inflation, it has risen above income growth and presents a problem for households struggling with rising living costs.

If things do not change, the long-term looks even less secure. National reserves could be fully depleted in 20 years. Major discoveries are rare, and new finds take around 4 to 13 years to develop. And Russia’s Alrosa recently announced it had discovered huge reserves in eastern Siberia. Reserves of such a scale, depending on the timing and quantity of their exploitation, could affect global diamond prices and, in turn, Botswana’s mining revenues.

The future: keeping the sparkle?

The need for diversification is thus clear. Indeed President Khama has lamented Botswana’s single-commodity dependence, and there has been some measure of diversification, with a degree of growth in manufacturing, construction and services.

For some, tourism is seen as a particularly promising future cornerstone of the economy and its contribution to Botswana’s GDP in recent years has increased. Botswana’s unique Okavango delta, various nature reserves, and the Kalahari Desert certainly provide ample opportunity to draw tourists, and the industry is fairly labour-intensive and jobs tend to be relatively low-skilled. The high spill-over effect also has the potential to generate employment in related fields. The government will have to be careful to ensure tourism is sustainable, that environmental considerations are addressed and that the land rights of minorities such as Basarwa are respected. But tourism seems to provide more scope than the capital-intensive diamond sector to address Botswana’s high unemployment and socioeconomic inequalities.

The financial sector has also seen growth, in particular the Bank of Botswana and the Southern African Customs Union (SACU), which has led to increased employment in urban centres. However, as is also the case for government-powered construction, the importance of diamond revenues to the government-owned Bank of Botswana does still leave it somewhat intertwined with the fate of Botswana’s mining.

Another avenue being explored is to move up the value-chain within the diamond industry and to process diamonds in Botswana rather than simply export the raw product. In fact, De Beers recently agreed to move sorting operations from London to Botswana’s capital Gaborone. However, developing sectors which themselves depend on diamonds appears only a temporary fix, as they too face decline with the resource’s demise, and are vulnerable to global market fluctuations. Rough diamonds from elsewhere may be sent to Botswana for processing in the future, but this would still put Botswana in competition with other more established players such as India and South Africa. Furthermore, it is uncertain if moving to processing would be enough to replace the lost revenues from extraction, which has the highest margins of any part of the diamond value chain.

One lasting benefit from the move to processing, however, could be that it encourages the expansion of other manufacturing industries in Botswana.

One sector that has been largely neglected is agriculture, which plummeted as a share of GDP with the discovery of diamonds. This low agricultural growth has meant that Botswana has to import large quantities of its food. Developing the agricultural industry, on which many Batswana already rely, is important for food security, pro-poor job-creation, and economic independence and sustainability.

Impressive though Botswana’s economic development has been, to continue to be an economic ‘miracle’, Khama’s government will have to address inequality and reduce its reliance on the resource that fuelled the economy’s ascent. The ruling Botswana Democratic Party (BDP) has been in power since independence and the opposition remains relatively weak. But given that much of the BDP’s legitimacy derives from its provision of public goods, made possible thanks to diamond revenue, if Khama and the BDP do not make sufficient plans to diversify the economy and ensure future growth, perhaps somebody else will.

Think Africa Press