GABORONE (Business Day) -- Poets, dancers, choruses and even Botswana's own "Three Tenors" marked the high-profile opening of the Diamond Trading Company (DTC) Botswana on Tuesday night. The good and great were there to watch as De Beers chairman Nicky Oppenheimer handed over a gilded key to the custom-built facility just outside central Gaborone.
Before the snoek mousse starter, De Beers group MD Gareth Penny praised the move as "one of the largest transfers ever of commercial activities from Europe into Africa." Ahead of the pan-fried chicken piccata, Oppenheimer declared "there is no doubt the centre of gravity of the diamond world is shifting."
Only after the unveiling of a plaque did a moment of clarity slice through the hyperbole. In his vote of thanks, Ponatshego Kedikilwe, Botswana's minerals minister, spoke of how the new developments had once been regarded by the diamond company.
"Some of the changes were inconceivable or even anathema," he bluntly said.
By the end of next year the joint venture company between the government and De Beers will be selling $550 million worth of rough diamonds that has up until now been sold by De Beers' London-based operations.
The figure is small - last year De Beers sold $5.9 billion of rough diamonds globally, but the creation of DTC Botswana reflects a desire by the government, agreed to by De Beers, to establish an industry relating to diamonds that involves more than just mining the stones.
A consequence of the agreement is that 16 of De Beers's clients, or sightholders, which include such brand names as Tiffany, Graaf and Steinmetz, have set up a presence in the country. Their cutting and polishing operations would, by the end of next year employ as many as 3,300 locals, De Beers said.
Botswana, which supplies 25% of the world's diamonds and is home to the world's richest diamond mine, is keen for a downstream industry to create jobs and teach skills. Beyond the business of sorting, cutting, polishing, marketing and selling diamonds, the government has set its sights on becoming a diamond centre.
"We are a diamond mining country, but we wish to be marketing diamonds, we want to be selling jewellery, we want to dovetail diamonds with tourism," said Akolang Tombale, permanent secretary of Botswana's minerals, energy and water resources ministry on Tuesday.
"The hope is that bringing these together will facilitate other developments like banking, technology, security and related industries."
The DTC Botswana takes over the role of an earlier entity, the Botswana Diamond Valuing Company (BDVC). In the past the BDVC would make an initial appraisal of local stones before sending them to London, but the full sorting and valuing process will now take place in Botswana.
A similar change took place in De Beers' South African and Namibian operations last year. Botswana is the most significant producer for the company - last year it produced 33.5 million carats, in comparison with South Africa's 15-million and Namibia's 2.2 million.
The DTC Botswana will now take on the process of "aggregating" all the stones from the region - arranging them into packages for sale to clients - a process which has until now been performed in London.
The opening of DTC Botswana symbolised a big change in the relationship between the government and De Beers. In agreeing to expand its sorting and valuing operations and promote a downstream cutting industry in Botswana, it was giving in to moves it had long resisted.
"Whatever De Beers is doing, they've been forced to do. They fought tooth and nail about moving the DTC to Botswana," says Charles Wyndham, a former De Beers director and now CEO of the diamond information site polishedprices.com.
Wyndham, a long-standing critic of De Beers, is not the only one to say that the company plays a different role these days.
"The historical policies of the diamond distributors have consistently resisted beneficiation in Africa, mostly on economic grounds," said Chaim EvenZohar, the principal of Tacy, a Tel Aviv-based diamond consultancy, at the Antwerp Diamond Conference in October last year. "When pressured, they supported token manufacturing operations - which were not often very successful."
The turning point in this relationship came over the renegotiation of the 25-year mining lease for the Jwaneng mine. After 18 months of negotiations, De Beers came out with a package of agreements that included new leases for the Jwaneng, Orapa and Lethalakane mines, a reduced profit margin and a commitment to look into moving its aggregation business to Botswana from London.
Sheila Khama, the CEO of De Beers Botswana, says there has been a change. "I'm not arguing the government of Botswana hasn't revisited the dynamics."
But Khama says the needs of Botswana now differ from those of 1969, when the country first went into partnership with De Beers and needed its help for infrastructure and basic development. She says things will change further.
"Fifty years from now, when we renegotiate, the image will not be what it is," said Khama.
Others are reluctant to define the change in such a way. Oppenheimer says the move is because the Batswana "have come to understand the diamond business extremely well."
The negotiations over Jwaneng and Orapa hastened the changes, but these were things the company would have done off its own bat, he said.
"The government would obviously like as much of the diamond industry to be in Botswana and put pressure on us to do that. But what we're doing makes good business sense. Would we have done it so soon without as much pressure? Probably not."
Officials play down talk of a change in the relationship. Akolang Tombale, permanent secretary in the minerals department, says De Beers' after-tax profit was cut, but that this was not linked to beneficiation and other concessions.
"We thought this was the time to get into the other facets of the diamond industry."
But getting into these new facets happens at a time when De Beers has a very different attitude from before.
Wyndham recalls a previous attempt to boost beneficiation. Under government pressure, it opened Temene Cutting, a factory at Serowe in eastern Botswana in the early 1990s.
"That factory was not allowed to make money for De Beers. They adjusted the price of the rough going in so it never made a profit."
Penny agrees the factory never became profitable, but denies there was a strategy to undermine it.
While the relationship may have changed, De Beers is looking on the bright side.
"The relationship is great these days compared with what it was," says Peter Kettle, De Beers' beneficiation manager.
