BOTSWANA: Botswana, long dependent on the export of rough diamonds, looks to diversify its economy

These rough diamonds are just a tiny sample of a huge bounty that lies underneath the ground in the southern African country of Botswana. But they are also the bedrock of Botswana's economy. With a record of some 40 years of sustained economic growth, Botswana stands out in a region better known for political upheavals, war and poverty. Negative publicity for the diamond industry is likely with the launch of the upcoming movie 'Blood Diamond', starring Leonardo di Caprio. Although Botswana is a peaceful country the worry is that all African producers of diamonds, or all diamond producers worldwide, may be tarred with one brush. This was a big issue at the Kimberly Process's annual meeting of 46 countries and the European Union held this month in Botswana. The Kimberly Process Certification Scheme (KCPS) is a joint government, international diamond industry and civil society initiative started in 2002 to weed out the illicit gem trade that fuels civil wars. As Botswana points out, it relies heavily on diamonds to fuel development and any negative affect of the movie may jeopardise attempts to develop and diversify its economy. "Works of art cannot be stopped. The film is a work of art which is based on an event which is now the the past and if people look at that film they may lose their focus and think that is still happening and take decisions which affect the diamond industry. Even though really, it should not be the case. We are concerned about that. And that a proper perspective has to be followed and this is why we would like to keep informing the world about what Botswana is doing with its diamonds... applying its diamonds towards development," explained minerals and energy minister, Charles Tibone. One way for Botswana to diversify its economy is to add value to its diamond exports. Until recently diamond exports were almost entirely raw or "rough" diamonds -- cloudy rocks that bear little resemblance to the glistening gems in finished jewellery. Now Botswana wants to move beyond exporting the raw gems to get a slice of the lucrative processing industry and boost employment and its manufacturing sector. The country is targeting over 3,000 jobs, a large number for a country whose total manufacturing industry only has around 30,000 workers, The involvement of diamond giant De Beers is key to Botswana's strategy to boost its economy with added-value spin-offs from diamond mining, which already makes up a third of the economy and supplies half of government revenues. Botswana's diamonds are produced by Debswana, a joint venture company owned by De Beers and the government. De Beers, 45% owned by mining group Anglo American, tightly controls distribution of its diamonds to specially-selected clients. Botswana, along with other Southern African diamond producers South Africa and Namibia, have put heavy pressure on De Beers to help them forge downstream diamond industries. They want to move up the supply chain: the value of global rough diamond production of 12 billion US dollars surges to around 65 billion US dollars by the time it is sold in shops as jewellery. Botswana enjoyed particularly strong leverage during recent negotiations to renew mining licences because the world's biggest producer of quality diamonds accounts for about two-thirds of De Beers' total output. In a ground-breaking deal reached in May, De Beers agreed to transfer its diamond-mixing operations -- the mixing of diamonds into assortments -- to Gaborone from London by 2009 and create a marketing unit to supply rough diamonds to local cutters. Companies like Belgium's Eurostar, which set up in Botswana last year, agreed to forgo some profits to gain supply in a sector where new mines are scarce and ensuring a steady stream of top quality diamonds is difficult. With costs far higher in Botswana than in China or India, most factories due to set up shop in Botswana plan to polish more valuable larger stones here to lessen the effect of the higher cutting costs on margins. Eurostar is one of only four cutting factories in Botswana, but 11 others have been awarded licences and are due to open within the next two years. The factory's general manager, Izak Engelbrecht, says the company plans to expand its local workforce from 180 currently to 1100. Eurostar, which has cutting operations with 4,500 workers in China, uses a computerised reward system to lift productivity. Engelbrecht said that his company is committed to helping create an upstream diamond industry in Botswana. And so far he is impressed by the quality of the labour in Botswana. If Botswana is able to diversify its economy further, it is unlikely to be as worried the next time a movie like 'Blood Diamond' comes around.

ITN Source | November 29, 2006

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