De Beers has been the world’s leading producer of diamonds for more than 126 years, in which time has seeped into the public consciousness like few other mining companies could. It provided the diamonds for the British Crown Jewels, created the slogan “A diamond is forever” and has led the charge for ensuring diamonds are supplied ethically, free from the taint of conflict.
Last year, the company uprooted its rough diamond international sales business from London, the home of De Beers Global Sightholder Sales (DBGSS) for almost 80 years, to Gaborone, the capital city of Botswana.
The relocation was part of a 10-year contract signed by the De Beers Group and the Government of the Republic of Botswana in September 2011 pertaining to the sorting, valuing and sales of diamonds produced by Debswana, a joint venture between the two parties. It was anticipated that the move would help transform Botswana, from where the largest percentage of De Beers diamonds originate, into one of the world’s leading centres for diamond trade and manufacture. In an interview, the company told me the relocation would benefit Botswana through employment creation, skills transfer and widespread economic growth and diversification.
A massive undertaking
The relocation was a massive undertaking – according to De Beers, it was “one of the largest north-south transfers of professionals, skills, equipment and technology to date”. Nigel Simson, Senior Vice President of DBGSS says there have been some “minor” challenges but nothing insurmountable.
“The main challenges experienced to date have been related to travel, as there are currently no direct international flights to Botswana from many of the major diamond centres of the world,” he explains. “However, we continue to work closely with our government partners and other relevant stakeholders to mitigate any impacts.”
Despite these small hurdles, Nigel says the relocation “has gone extremely well” and that he has been “delighted” to see the work of the company, the government and the Sightholder community come together successfully.
“We had a very detailed and comprehensive project plan in place to manage the relocation successfully and we received great support from the Botswana community in making it a success,” he adds.
A successful first year
The Gaborone facility’s inaugural Sight was held around the middle of November in 2013. Nine months later, it has just held its seventh Sight and Nigel describes it as “another successful sales week” with “a high attendance of Sightholder representatives and a strong sales performance”.
He says that Sightholders have given very positive feedback about the Sights that have been held in Botswana. They have praised the environment in Gaborone, “from the quality of the diamond trading facility, to the standard of hotels and restaurants and the warmth of the welcome from the people of Botswana”.
Sightholders have also expressed approval for the ease of doing business in the country. “The location of Sights in Botswana means that the diamantaires who travel to the region can also travel easily to other diamond trading events in the southern African region, such as auctions in Botswana and tenders in South Africa,” Nigel adds.
“For us, there is the benefit of having excellent locations and facilities for corporate events and functions – as well as the fact that we have been able to connect our Sightholders even more closely with the origin of our product, such as when we took Sightholders to Debswana’s Jwaneng mine for a Business Excellence Seminar during Sight 7. This gave Sightholders a chance to see first-hand how much effort and expertise is required in diamond mining, in addition to the developmental benefits that diamonds and the diamond industry can have in a producing country such as Botswana.”
So what exactly are these “developmental benefits” and how successfully have they materialised since DBGSS moved to Gaborone? Nigel says that some of these benefits can be seen just by looking at the city and the recent performance of its businesses.
“Ahead of the relocation there was a period of preparation by the business community in Botswana and new hotels, restaurants and leisure facilities were established,” he explains. “Following the relocation, these services and others – such as chauffeurs and in-house catering – have seen increased demand for their offerings.”
More directly, Botswana’s domestic diamond industry has grown as businesses involved in services such as grading, certification, security, financing and diamond brokerage have set up operations in the country. The proliferation of these businesses has helped create jobs – an area in which DBGSS, with its 50% Batswana workforce, has contributed largely itself.
“Local banks are also benefitting, as Sight payments are being paid into Botswana-based accounts and thereby increasing the flow of capital into the country,” Nigel adds. “On top of all this, the media attention generated by the relocation has seen other businesses and industries show increased interest in Botswana as a destination for investment and industrial activity, so all in all it has had a very positive effect.”
New sales model
De Beers followed the relocation of DBGSS with an updated model for the allocation of rough diamonds for the March 2015 – 2018 contractual period. This new model involves a new method for determining DBGSS’s rough diamond customer base, with a simplified compliance and demand-based customer qualification process being introduced. Nigel calls the update “a further evolution of our already successful sales approach”.
It originated from a consultation with Sightholders and other key stakeholders, such as diamond financing institutions. “We received feedback from our existing client base that the approach used for the current contract took a significant amount of time and effort,” explains Nigel.
“We therefore decided that an updated compliance and predominantly demand-based allocations process would be more efficient and less complex for De Beers and customers alike. We also wanted to ensure that our customer base could show key stakeholders such as diamond banks, suppliers and customers that they are financially strong and transparent. As a result, we have introduced more rigorous financial requirements to go along with our existing ethical requirements.”
The updated allocation model also introduces a more flexible sales approach, through which non-Sightholder diamond businesses will have opportunities to purchase rough diamonds from De Beers. Nigel says this will promote a fair and competitive landscape for rough diamond sales, in which all eligible businesses have an opportunity to demonstrate demand for De Beers’ diamonds.
“We recognise that there will be changes in different businesses’ needs over the course of a contract period, and the new approach will give even greater opportunity for current non-Sightholders to purchase our rough diamonds if they are seeing heightened demand,” he adds. “Overall, the new approach will help us deliver an even more efficient distribution model for our rough diamond availability.”
The wider picture
With the relocation and other major overhauls complete, the next 12 months should be quieter for DBGSS. The larger De Beers Group, however, has plans aplenty. Group-wide, the short term goals are to keep safety “the top priority” and to “meet, if not exceed, our internal targets for production, sales and our two diamond jewellery brands.” In particular, De Beers’ Forevermark brand will be unveiling a new, emotionally driven global advertising campaign across TV and print in the US in the all-important fourth quarter leading up to Christmas.
In the longer term, De Beers Group will continue to invest in growing the downstream, midstream and upstream parts of its business. Downstream, in commercial sales, the focus of De Beers Jewellers is being shifted further east where demand for De Beers’ branded products is highest. Midstream, in rough diamond sales, the Group is continuing to develop its sales channels following the introduction of greater flexibility and new processes to DBGSS.
Upstream, in the mining part of the business, De Beers is looking to secure future supply through three major projects.
“At Venetia in South Africa, we are underway with our US$2 billion investment in taking the mine underground,” begins Nigel. “This project will extend the life of Venetia beyond 2040, producing around 94 million carats, and secure the future of the country’s best diamond asset while creating widespread economic benefits for the country and community.
“In Botswana,” he continues, “we have now completed the infrastructure development for Cut-8 at Jwaneng, one of the world’s richest diamond mines. This investment secures the future supply from one of the world’s only tier 1 diamond mines, while writing a new chapter in the outstanding diamond success story of Botswana.
“In Canada, De Beers has a 51% interest [Mountain Province Diamonds has 49%] in the Gahcho Kué project, which is in the final stages of permitting. On top of all that, De Beers is investing around $50 million on exploration in Angola, Canada, Botswana, India and South Africa.”
De Beers and Botswana
As the world’s leading diamond company, De Beers will always be a hive of activity. But Nigel’s attention, at least, will remain on DBGSS. He sees the operation’s relocation to Botswana, a country partner of De Beers for 40 years, as an exciting and essential step that has been a long time coming.
“Our relationship with Botswana has been praised internationally as a leading example of a successful public-private partnership, and the relocation of De Beers’ international Sightholder sales activity last year elevated that relationship to an entirely new level,” he says.
“The move demonstrated not only our belief in Botswana, but also the ability of this relationship to lead and deliver important and lasting change in the diamond industry. Botswana has grown from being a primary producer with a maturing manufacturing sector, into one of the world’s key rough diamond trading destinations. Not only does this bring increased economic activity and a regular influx of successful entrepreneurs to Gaborone, but it also sends a message to the global business community that Botswana is so much more than the world’s leading diamond producing country.”
And it’s this genuine passion for the business’s stakeholders which shows that De Beers is so much more than the world’s leading diamond producer.
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