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New era dawns for De Beers in Southern Africa Posted: Fri, 10 Feb 2006 [miningmx.com] -- All going to plan De Beers will have its international diamond aggregation business relocated from London to a new headquarters costing between US$80m and $90m in the Botswana capital of Gaborone from the end of 2009. New De Beers MD Gareth Penny confirms construction of the building is already underway. This is despite the fact that negotiations with the governments of various Southern African countries are still underway on the regulatory and other changes required to ensure this new business model will work efficiently. Penny says that, under the new system, De Beers will sort its own production to full "presentation" sorting status in each of the countries where it operates. . Those diamonds will then be sent to Gaborone instead of to London as at present. In Gaborone the diamonds will be "aggregated" - blending like with like - to provide overall consistency to De Beers’ diamond sales to its clients. Penny says this consistency lies at the heart of De Beers’ supplier of choice marketing strategy. Diamonds can then be sent directly in packages to the international "sight holders" who have the right to buy from De Beers or they can be sent to London where traditional "sights" will still be held for those buyers who prefer to do business that way. Penny says the new building will be completed by 2008. It will be three times the size of De Beers Botswana (Debswana) BDVC building in Gaberone in which Debswana's diamond production is sorted. The new building will be an extended, low-rise development instead of the current multi-storey building. Asked what is still to be negotiated Penny replies; "there are regulatory issues around the flexibility of movement of what will be billions of dollars worth of diamonds coming into and going out of Botswana. "What we are very clear about is that we must have the same benign environment that we have in the United Kingdom in terms of ease of doing business. "Issues for other governments include whether they are happy to see the free movement of diamonds within SADC (Southern African Development Community) countries," he says. That was a concern De Beers voiced in its opposition last year to the draft Diamond Amendment Act during which it first raised the possibility of moving its diamond aggregation business from London to Gaborone. Penny says that concern has been addressed in the amended legislation. "There is nothing in the final form of South Africa’s Diamond Amendment Act which prevents what we plan to do. There’s no right to do it but there’s no prevention from doing it. "We have taken comfort from that. I would not say we have been given assurances but we have considerable comfort that this will be supported across SADC. We are in the process of putting a full business plan together." he comments. He adds a key priority in the new arrangements has to be flexibility across the full spectrum of operations on aspects such as, for example, the granting of work permits to DTC International employees. Other requirements would involve an upgrading of Gaborone airport which currently has no direct international flights from outside Africa. Penny says this development will give huge credibility to Botswana which will become a world hub for the diamond business instead of being, at present, just the world’s largest producer of diamonds. "There is clearly going to be job creation, there will be general economic growth and infrastructure development. You also need to look at other beneficiation initiatives we are seeking to drive there. There are already four "sight holder" factories either in operation or under construction in Botswana. It’s exciting. We are very serious about this," he comments. De Beers has come under considerable political pressure over the past two years from the governments of Namibia, South Africa and Botswana to increase local beneficiation of its diamond production. In particular, politicians have pointed to the activities of Israeli diamond producer Lev Leviev who has set up diamond cutting factories in Namibia. Penny acknowledges the political pressure but comments; "it’s the right thing to do economically. There’s a happy marriage of what’s good for us to do from a business point of view and what’s good for us to do from a partnership point of view. "There’s no reason why we cannot aggregate in this part of the world. Major economic benefits will include a shortening of the diamond pipeline. Botswana, the major producer of diamonds, will no longer have to ship its goods to London. "We would not do this if we did not think it was commercially interesting. We are pleased that it is commercially beneficial and it obviously is hugely helpful in terms of Southern African development."
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