Dutch banking giants, ABN AMRO is scheduled to officially open its diamond industry financing specialist unit at the Diamond Technology Park in Gaborone in three weeks' time.
Local diamond cutting and polishing firms who have been struggling with cash flow due to the global recession are said to be upbeat about the opening of ABN AMRO Bank Botswana on September 24.
The bank, which was recently granted a Botswana International Financial Services Centre (IFSC) accreditation, is to provide financial services to local and regional diamond industry players throughout southern Africa. "The support of both the Botswana Government and diamond industry leaders around the world have been instrumental in reaching this 'new beginning' for our business in Africa, which will form further foundation for another promising project in the country, the creation of the regional Diamond Hub," the group CEO of ID&JG, Victor van der Kwast, was quoted as saying on Diamond Intelligence early this week.
According to reports, ABN AMRO's International Diamond and Jewellery Group (ID&JG), will close its Johannesburg office and make Botswana its centre of operations in Africa. It has secured two licenses - one for providing local banking services and one for international business transactions.
ID&JG is the executive arm of the joint venture it is concluding with Lazare Kaplan International and the Overseas Private Investment Corporation (OPIC). According to OPIC, this involves a $333 million revolving facility in which OPIC will share credit risk for up to $250 million in loans to Botswana-based diamond polishing companies.
ABN AMRO will provide up to $83 million in revolving credits as part of the total facility.
The chairman of cutting and polishing firm, Rand Diamond, a subsidiary of Tiffany & Co, Mclean Letshwiti, said on Wednesday that the opening of ABN AMRO is a welcome development because of their industry expertise but the current challenge is the low demand for diamonds on the market.
"It's a positive development because its better when dealing with someone who knows the industry but our biggest problem right now is the market," he said.
The new Botswana unit is going to leverage off the global ABN AMRO processes, expertise, established client relationships and the growth potential in the region.
According to the latest Botswana IFSC newsletter, the current South Africa ID&JG portfolio will continue to be serviced out of ABN AMRO Bank Botswana.
The local unit will provide medium and short-term working capital credit facilities, cash management and forex dealings to Diamond Trading Company (DTC) Botswana sightholders.
"The spread of the beneficiation model across the southern Africa region creates an immediate value proposition for a diamond financing specialist institution such as ABN AMRO and its business division ID&JG," the bank said. ABN AMRO said it believes there are signs of the growing potential and importance of the local market especially after Botswana continues to be defined by many stakeholders as the new centre for distribution and aggregation of sights to approved Sightholders globally.
Other drivers for the Dutch bank, to enter the country are the entrepreneurial climate as well as the support of government towards development of industry.
"Our activities in Botswana will also be a key milestone in advancing the strategic objectives of the Diamond Hub and will go a long way in positioning Botswana as a diamond centre of excellence."
The Botswana IFSC said the country will over time benefit from the added sophistication to the local banking sector, introduction of new and innovative products into the capital markets, incremental tax revenue and employment opportunities.
Stanbic Bank Botswana was to open a diamond specialist branch at the Diamond Technology Park, but the global recession that resulted in a sharp drop in worldwide demand for diamonds seems to have stopped them in their tracks in the meantime.