Botswana defends its diamond cutting plan
By Paul Simao
CAPE TOWN, Feb 6 (Reuters) - Botswana's mining minister on Wednesday defended efforts to set up a local diamond polishing industry, saying the government's "beneficiation" plan could be an economic stimulus for the southern African nation.
"We consider this to be crucial. It's hoped that this will help stimulate economic development," Ponatshego Kedikilwe, Botswana's minister of minerals, energy and water affairs, told the annual Indaba African mining conference in Cape Town.
Botswana, the world's top producer of diamonds by value, wants to cut unemployment by reversing a trend that has seen the major polishing centres for the gem based in countries that don't produce diamonds.
The government has pressured large diamond producers, including industry leader De Beers, to sell gems to local cutters and polishers rather than export rough stones directly to Europe and Asia.
Although some producers have criticised beneficiation as not viable, they have had been forced to change their tune in the face of Botswana's determination to pursue the scheme.
South Africa and Namibia, two other huge African diamond producers, also are pushing ahead with similar plans.
Botswana's Diamond Trading Company, a joint venture between the government and De Beers, which is 45 percent owned by mining group Anglo American Plc (AAL.L), expects to sell $360 million worth of rough diamonds to local gem cutters in 2008.
DTC Botswana said it had agreed to supply diamonds to 16 local diamond cutting firms on three-year contracts, as it moves to spur the industry and create some 3,000 jobs for Botswanans.
But some analysts are questioning the economic wisdom of the beneficiation programme.
Chaim Even-Zahar, principal of diamond consultancy Tacy Ltd, told the Indaba conference earlier this week it was difficult to rationalise the programme economically until its cost structure was radically changed.
He said southern African countries paid about $100 per carat in wages to polishers, while the cutting and polishing houses in India and China paid around $20.
"There is no economic rationale, it won't work," Even-Zahar concluded.
(Additional reporting by James Macharia in Cape Town)
(Editing by Chris Johnson) (Paul Simao, Cape Town bureau 27 82 312 4114)
