15 Aug 2016

If there is any one stark reality that stares the nation in the face, it is that diamonds are not forever.

Local entrepreneur Mr David Magang said this at the Botswana Institute of Chartered Accountants (BICA) dinner dance, which marked the closing of their two day, 9^th biennial international conference, where he was asked to present on ‘mitigation on dependency of diamonds’.

“The fact that diamonds are responsible for the fairly buoyant economy Botswana is today is the good news. The bad news is that we still depend on diamond revenues to sustain our economy 50 years after we sent the colonialists packing. Over 70 per cent of government revenue comes from mineral exports. We are hooked on diamonds folks and that must send shivers in us all,” he lamented.

Mr Magang stated that the nation needed to ask itself what happens when those Kimberlite ores get mined to the last pebble?

 “We have of late been told that diamond production will continue until the year 2050. It is actually possible that Orapa and Jwaneng could still be running up to the end of the century. Indeed, the Kimberly mines of South Africa chugged for 100 years. But even if that were the case, diamonds would not generate the same return as they have traditionally done,” he said.

He said that was because the operating costs and capital expenditure will rise as Debswana drills deeper to reach the ores located in the bowels of the earth.

“The cost of extracting a carat of diamonds from the dug-up ores will mount and government will simply have to resign itself to much lower returns than it has been accustomed to in the past”, he said.

He said over-dependency on one major economic activity also had the disadvantages that in the event of a tumble in commodity prices, the shock to the economy overall will be telling.

“That actually has been Botswana’s experience. Diamond prices have fallen by 40 per cent in the last three years. In fact, the prices of metals in general have plummeted to record levels, including those of copper and nickel amid a prolonged bearish market.  The result has been the closure of several mines in Botswana, with BCL teetering on the brink,” he said.

Mr Magang said in the diamond industry, four factories have closed and over 1 000 jobs have been lost.

He said the name Botswana was for all practical purposes synonymous with diamonds.

“We are a fairly buoyant economy primarily on account of the briskly saleable and lucrative commodity that are diamonds, not to mention the added element of the fairly responsible management of the revenues that have accrued from these gems  over the years”, he said.

He however expressed concern on the advent of synthetic diamonds, which are taking over the market of natural diamonds.

“These are laboratory-produced diamonds which are said to be better than natural diamonds and cannot be distinguished from natural stones without using a sophisticated machine and they now make a roaring business ,” he said.

“Indications are De Beers is about to enter the synthetics market too to peg its claim on the flourishing market.  Clearly, synthetics represent one of the greatest threats to Botswana’s economic well-being for the ramifications are that even if our mines were to continue to be operational for the next 100 years, no one would buy our diamonds if synthetics became fashionable,” he cautioned. ENDS