With the recent opening of the Diamond Trading Company (DTC) in Botswana, Africa will now be assured of further economic growth as it shares in the profits of rough diamonds. Built and gifted by De Beers, the world’s leading diamond company, the DTC will now become the largest and most advanced diamond-sorting venture in the world.Established in 1888, De Beers has long been a leader in the diamond mining industry and currently has a 40 percent market hold. The history of De Beers and Africa spans over several decades and at times has been severely strained. The chairman of De Beers has had closed doors meetings with the government of Africa and voices his concern of improving the quality of life for the area.
With mining operations in Botswana, Namibia, South Africa and Tanzania, De Beers is a major employer of the country with roughly 17,000 of employees based in the southern Africa region.
The opening of the Diamond Trading Company (DTC) in Botswana will create 3,000 jobs, which represents a tenth of De Beer’s workforce. Botswana is the world’s largest diamond producer and the new facility will involve some job transfers from the United Kingdom.
According to Oppenheimer, the move may be unconventional, but it does not make sense to house jobs in London. Building the DTC in Botswana made good business sense for De Beers and the economy of Botswana.
Government officials of Botswana are not arguing. Since the country began mining diamonds in the 1980’s, the country has moved up the social chain and has gone from extremely poor to middle-class. The gems mined now account for more than a third of its gross domestic product.
However beneficial the diamond mining industry has been to Africa, it has been plagued with recent challenges. Concerns over new leadership and the continuing power crisis have disrupted mining efforts as well as profits. While some are hesitant to plant such firm roots in South Africa’s economy, Mr. Oppenheimer insists that the region remains an investor-friendly area.
Although Oppenheimer acknowledges the recent controversy over the change of power and accusations of corruption in the government causes for some unrest, he firmly believes that the government will remain a pro-business supporter. The only issue he foresees is the natural process of a change of power - there is always some adjustment period.
The liberal views of the Oppenheimer family has long endeared them to the new black elite, and they have moved from being considered one of the country’s “lily-white” companies to leading the radical Black Economic Empowerment (BEE), moving for a real transformation within the industry.
The recent power supply crisis in South Africa, has led to severe power cuts and job losses in the local diamond mines. Oppenheimer admits that it is a large problem, and long-term power supply issues will drastically affect the mining of diamonds if solutions are not identified. This not only affects De Beers, but the economy of southern Africa as well.
While diamonds are being mined in the name of profits - those profits will be shared with Africa. The $83 million dollar building, gifted by De Beers to the new DTC, is a good example of business creating something that is sustainable. Oppenheimer believes in helping Botswana create a solid economy that will improve the quality of life for all of its citizens.
Now instead of rough diamonds being mined and shipped to Europe, the diamonds will remain in Botswana and be processed at the Diamond Trading Company. Profits from the DTC will be shared with Botswana, Namibia and South Africa, bringing widespread economic benefits by creating jobs and revenue. In exchange, De Beers was awarded a 25-year extension on the Botswana Jwaneng mine - the richest diamond mine in the world and where De Beers has focused its investment capital.
It is understandable as far as Oppenheimer is concerned, mining and processing the diamonds on homeland makes good business sense for the South African government. Although he acknowledges that De Beers probably would not have moved so quickly to pour its investment capital so quickly, had it not been pressured by the government - it would have been a business decision eventually made.
Demand for rough diamonds is very high these days with demand from India, Russia and the Middle East on the rise. Although slightly worried that a recession in the U.S. could potentially hit sales hard, he points out that the U.S. market is dominated by less expensive gems and the sales of up-market gems is likely to be largely unaffected.
For now, Oppenheimer remains optimistic that the government will recover from the recent controversy and power crisis. In addition, he believes that the partnership between De Beers and the South African government will ensure the mining of diamonds in Botswana will continue and bring much needed economic stability to the region.
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