Botswana Ready to Leverage Its Diamond Supply

RAPAPORT... The December edition of the Rapaport Research Report, published on Monday, presents an in-depth analysis of how Covid-19 has impacted Botswana's diamond industry and, by extension, its economy. As the poster child for the diamonds-do-good story, Botswana has been particularly vulnerable during the pandemic. Its heavy reliance on the diamond sector means its economy gains when the market is doing well and falters when demand slumps. The pandemic spread just as prospects for the local industry were gaining steam. De Beers and the government were scheduled to renew their partnership deal in 2020. The 10-year agreement tends to be a catalyst for growth in the country's beneficiation sector, highlighting the need to expand its economy beyond diamonds. After all, diamond mining will not last forever. The country needs a contingency plan for when its deposits run out of rough.There are two strategies at play here: diversifying the economy in general, with sectors such as tourism, infrastructure and technology playing a central role; and the effort to broaden activity within the diamond industry.The trade has made significant strides in the past decade, in large part thanks to De Beers. The transfer of sights from London to Gaborone in 2013 changed the diamond industry landscape, forcing the major manufacturers to travel to southern Africa 10 times a year. While attending the sights, they can also participate in tenders hosted by Okavango Diamond Company (ODC) and Lucara Diamond Corporation, and they are a short flight away from sales events taking place in neighboring South Africa.But there is also a sense that Botswana's beneficiation program has plateaued. That makes the negotiations for a new deal even more important. Do local manufacturers have the capacity to take on more rough? How is the parastatal ODC faring? Can De Beers afford to give up more of its own supply to enable growth at ODC? And what about their joint mining programs? Is now the time to invest in expansion?The questions suggest a tense relationship between the two parties, but they have a long history of working together. And Covid-19 - which has forced them to postpone talks until 2021 - may have brought them even closer. The Rapaport Research Report for December explores the implications of Covid-19 for Botswana and its relationship with De Beers. The pandemic may have delayed a deal and put pressure on Botswana's economy, but it may also have strengthened the country's resolve to build a sustainable diamond hub. The Rapaport Research Report presents proprietary data on polished diamond prices, along with market intelligence and analysis. Subscribe to the report here.