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Botswana - Diamonds

Botswana is the world's second biggest diamond producer. The expression of romance and appreciation through bridal jewelry and gift giving are very important to diamond customers. Diamonds are the hardest and most brilliant mineral and around the world diamonds are recognized as an eternal stone of value. Industrial diamonds play a key role in cutting and high wear applications. The vast difference between the hardness of diamonds, as opposed to every other mineral, means that there is no effective substitute for use in demanding industrial applications, including, particularly, the oil and gas drilling application.

A 1,111 carat "high quality diamond" was discovered at a mine in Botswana in November 2015, said to be the biggest find in more than a century, according to the mine company. The gem, only second in size to the 3,106-carat Cullinan diamond which was unearthered in South Africa in 1905, was mined by Lucara Diamond Corp. "The magnificent stone, which originated from the south lobe of Lucara's Karowe Mine, is the world second largest gem quality diamond ever recovered and largest ever to be recovered through a modern processing facility," the Stockholm listed company said a statement. Lucara indicated that the Karowe Mine had also in the same week turned up further finds—an 813 carat stone and a 374 carat stone.

The Diamond trade is for both rough and polished diamonds. Beneficiation of diamonds is a particularly promising avenue for adding value to natural resources. The establishment of the Botswana Diamond Hub in the later stage of NDP10 was intended to develop a sustainable secondary diamond industry in Botswana. In 2013, Botswana had 25 diamond cutting and polishing companies that employed nearly 3,000 workers. In the continuing expansion of diamond ancillary businesses, twenty eight (28) cutting and polishing companies have been licensed and were in operation by 2014. Although a significant proportion of these companies are located in and around Gaborone, there is also scope for establishing operations in other parts of the country.

The greatest value in the diamond market is found in “gemstones”: larger, clearer, relatively flawless rocks amenable to cutting. Fifty percent of the gemstone market is controlled and largely underwritten by the De Beers’ cartel, usually referred to as the “Central Selling Organization”. The Central Selling Organization (the "CSO"), which is affiliated with De Beers Centenary AG, a Swiss company, is the primary world-wide marketing mechanism of the diamond industry. The CSO seeks to maintain an orderly and stable market for diamonds by regulating the quantity and selection of diamonds that reach the market. Sales for the CSO are made in London by the Diamond Trading Company (the "DTC") to a select group of clients. Rough diamond prices established by the DTC have been characterized historically by steady increases over the long term.

Gemstones represent most of the sector’s value, account for approximately $10 billion yearly in sales of rough, or uncut stones. This translates into $25 billion of cut, but unset stones. The retail value of gemstones is about $60 billion annually, with over one-third of the retail sales being made in the USA. Over the past 80 years, increases in the price of rough diamonds have generally resulted in a corresponding increase in the price of polished diamonds. During the period of high inflation in the late 1970's, investors speculated in hard assets, driving polished diamond prices to exceptionally high levels which in turn caused significant increases in the cost of rough diamonds.

However, the moderation of inflation during the 1980's resulted in a sudden and massive shift of investments from hard assets to financial instruments, resulting in dramatic price declines for polished diamonds which caused a market liquidity crisis as prices of some categories of polished diamonds fell below the inventory costs of such diamonds. Since this period in the early 1980's, the pricing of polished diamonds has returned to its historical pattern of responding to increases in the pricing of rough diamonds.

Diamonds are made of carbon, the fourth most abundant element. They are crystals which grow by adding layer after layer of carbon atoms under extreme pressure. Africa is widely believed to be the richest continent for diamond mining. The major sources of diamonds are in the south with lesser concentrations in the west-central part of the continent. Even though diamonds are relatively abundant, they are hard to find in quantities sufficient to support economic mining. The best place to look for diamonds is where diamonds have been found before.

In 2012, the distribution arm of De Beers Group moved its operations to a new sorting center in Gaborone from where it shipped its products worldwide. The Government of Botswana established a new diamond trading company named the Okavango Diamond Trading Co., which was wholly owned by the Government. Okavango was to be responsible for marketing the Government’s portion of Debswana Diamond Co. (Pty) Ltd.’s production. Under the Government’s agreement with De Beers, Okavango had the right to market 12% of Debswana’s production in 2013; its share would increase to 15% by 2016.

Botswana’s diamond trade increased as it became established as De Beers’ new sorting center. The value of Botswana’s rough diamond production was estimated to be $3.75 billion in 2013, most of which was exported before any cutting and polishing. In 2013, rough diamond exports totaled $5.52 billion, of which $3.39 billion was reported to be from domestic production (domestic exports may include some reexports from other countries). In 2012, rough diamond exports totaled $4.02 billion, of which $3.06 billion was reported to be from domestic production. Imports of rough diamond from such counties as Canada, Namibia, and South Africa were valued at $2.04 billion in 2013 compared with $2.09 billion in 2012; most of the rough diamond imports were exported before any cutting and polishing was done.