Some Like Them Rough: The Future of Diamond Beneficiation in Botswana

Background

Since the opening of the Jwaneng mine 1982, Botswana has been the world’s largest producer of diamonds by value. In 2008, diamond production peaked and has not yet recovered to levels seen before the international economic crisis. Diamonds and the revenue that has accrued primarily from the dividends from the joint venture between the government of Botswana and rough diamond producer De Beers, has provided the necessary condition for Botswana experiencing the highest rate of economic growth in Africa from 1970-2000.

However, since 2000 the growth rate of the economy stalled and is below the sub-Saharan African average. In order to deal with the stalled growth rate and a persistently high rate of unemployment, the government of Botswana has introduced a policy to diversify the economy. One of the most successful elements has been the policy of diamond beneficiation: downstream processing of rough diamonds, which were previously exported as rough diamonds and processed elsewhere. The diamond cutting and polishing industry has created 3,200 industrial jobs in Botswana and is now the largest manufacturing sub-sector in the country.

Key Purpose of ECDPM Study

This paper examines the international trade in rough and polished diamonds, the move to diamond beneficiation by Botswana, the future of the cutting and polishing industry, and the role De Beers played and plays in this. It addresses the question of diamond beneficiation mainly from the perspective of Botswana, but also the other diamond producing SADC (Southern African Development Community) countries.

Key Findings of ECDPM 

• Diamond beneficiation in Botswana and throughout South African Development Community countries was made possible by a fundamental shift in De Beers’ corporate strategy, stemming in large measure from its decline as a monopolist.
• Diamond beneficiation, in the form of cutting and polishing, would not naturally occur in Botswana at this point in the country’s development if it were not for the criteria for selection and allocation of rough diamonds to the DTCB (Diamond Trading Company Botswana) sightholders.
• The reasons for the willingness of the DTCB sightholders to accept an implicit beneficiation tax stems from the benefit of access to rough diamonds.
• The future of the diamond cutting and polishing industry is of doubtful sustainability. A sectoral development plan for diamonds, which looks at effectively lowering production costs and the potential of other diamond beneficiation activities beyond cutting and polishing, should be the preferred approach to the development of the industry.