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Botswana Diverts from De Beers in its Diamond Industry

De Beers’ stronghold over diamond mining in Africa has seemingly only further loosened, as Botswana President Mokgweetsi Maisisi announced last week that the African nation would buy a 24% stake in Belgian gem processing firm and De Beers competitor HB Antwerp. As part of the deal, Botswana’s state-owned diamond trading company, the Okavango Diamond Company, would supply rough diamonds to HB Antwerp over the next five years. On the one hand, such a decision from Maisisi comes in spite of Botswana’s 54-year relationship with the diamond giant, a relationship that included Botswana’s 15% stake in De Beers itself, and the two’s co-ownership over Africa’s largest diamond producer, Debswana. Under a 2011 agreement, De Beers is entitled to 75% of Debswana’s total output, an arrangement recently highly criticized by Maisisi as talks between the two are held to discuss a new deal. Barron’s reports, “Maisisi said the country had been receiving less than it ‘should get’” and that “Maisisi warned that his country may sever ties with De Beers if those talks produce a sales deal which proves to be unfavorable to his government.”

As Maisisi declares “the dawn of a new era for the diamond industry in Botswana,” a newly struck deal with HB Antwerp may serve to be the first shots fired in a rebellion from the long-standing, yet slowly declining, diamond consortium. From its creation in 1888 to roughly the turn of the 21st century, De Beers may have been one of the most successful monopolies in history, controlling 80 to 85% of the world’s rough diamond distribution for the over century-long period. As of 2019, that share has fallen to 29.5%, as competitors seek to employ new technologies in the diamond manipulation supply chain. Meanwhile, Brian Benza with Reuters observes that HB Antwerp buys diamond stones “at prices based on the estimated polished outcome of each diamond, determined through state-of-the-art scanning and planning technology.” As HB Antwerp co-founder Rafael Papismedov puts it, “It’s a strategic partnership, it will add more value to Botswana not just in terms of price or money, but empowering the people of Botswana.”

Source: Statista

Like many African countries, Botswana serves as the beginning of a supply chain for a highly-coveted natural resource, with the country being the second largest producer of diamonds in terms of volume in the world, and the largest producer in terms of value, with 62 percent of its GDP emanating from diamond sales. Yet also like many other African nations, Botswana has largely only served as the extraction point of raw materials, meaning that further steps of the supply chain where value is added and thus income is generated is more often than not outsourced to other countries. This serves to be a colossal factor in explaining how many nations within Africa continue to be relatively poor in spite of their abundance in natural resources. Nonetheless, as HB Antwerp vies to innovate the diamond industry while delivering further income to the Botswana economy, there is seemingly little to deny the fact that market competition has proven to be beneficial for the African nation. In a process observed time and time again, a once omnipotent monopoly is finding itself slowly withering away as new firms innovate their strategies and serve the interests of their consumers, in this case, African countries. The result is a supply of hope as abundant as Botswana’s rough diamonds, as the country has witnessed first-hand the effects of the invisible hand of competition in catering to their interests and generating income for the country.


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