12 June 2017

Southern Africa: South Africa, Botswana Clash Over Diamonds

Photo: The Herald
Diamonds.

Diamond production behemoth De Beers Group of Companies will hold a Sight next week at Diamond Trading Company Botswana (DTCB) in Gaborone where they will auction stones without rough diamonds from neighbouring South Africa. This follows a shocking decision last week by South Africa's minerals minister, Mosebenzi Zwane, of refusing to grant an exemption to De Beers Consolidated Mines (DBCM) to export diamonds to Botswana for aggregation.

Aggregation, which used to take place in London prior to relocation to Gaborone in 2013, is a process of mixing like-for-like rough diamonds produced from De Beers mines in South Africa, Botswana, Namibia and Canada. De Beers will hold their Sight in Botswana next week where aggregated stones will be auctioned to diamantaires from around the world.

The Patriot on Sunday could not secure a comment from De Beers as its Executives were said to be locked in a teleconference at the end of the week in preparation for the upcoming Sight when we enquired on the implications of the developments in South Africa and what measures are in place to mitigate any impacts on sightholders and their clients. With a blackout on reasons for the sudden obfuscation, opinion on the subject has been limited to speculation and conjecture. Chief Executive Officer of Botswana Chamber of Mines, Charles Siwawa, on Friday expressed shock at the turn of events.

For him, it is even more astounding that such a decision with far reaching implications on the relationship between the two SADC countries appears to have been made by the individual minister. "The decision could affect bi-lateral relations between the neighbours. It should not have been unilateral at ministerial level. One would expect that it would be reached after both governments engage at a high level where one would forewarn the other to make necessary preparations going forward," said Siwawa.

On the economic front Siwawa said although diamonds produced by De Beers mines around the world are aggregated at DTCB like they used to be in London, it is common knowledge that a certain portion (40%) is by law retained in the SA market.

He said although blocking supply from SA mines to come to Botswana for aggregation cannot stop operations at DTCB, it will obviously disrupt the diamond mix in the process. To buttress the point he makes example of a scenario where Botswana blocks export of diamonds from local mines, which he said will adversely affect the aggregation mix as Jwaneng produces the best quality gems in the world. "Taking a portion out of a mix will in turn affect quantity and quality during aggregation.

Although the effect may be minimal, there will definitely be some impact," said Siwawa, adding that the lack of clarity on the reasons for blockade makes it difficult to analyse the issue further. E-Consult Botswana Managing Director Dr Keith Jefferis said although it is not clear why the SA minister took the drastic decision, it will cause problems for the aggregation model of the (DTCB). He said unavailability of supply from SA will obviously interfere with the mix of stones from different parts of the world which are aggregated in Botswana before they are auctioned at De Beers Sights and exported for cutting and polishing.

Mining Weekly Online reports that up to now De Beers South Africa (DBSA) has received exemption yearly and once the aggregation process is complete, rough diamonds of higher value are exported back to SA for cutting and polishing. This makes aggregation a diamond beneficiation exercise that provides jobs and adds value, sustaining the diamond cutting and polishing industry. The online publication also reports that the denial comes despite De Beers exceeding all the legislated criteria for its 2017/18 levy exemption application and having a track record of never missing an exemption since its enactment in 2008.

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