Monday, December 18, 2006

A Different Perspective on Africa's Diamonds

photo courtesy of King's Jewelry

With recent events and buzz diamonds may not be in the "hot" columns at
the moment, but this story shows why they could still be a business person's
best friend.

This story also highlights the fact that many of the diamonds coming out of
Africa are not "blood diamonds".

"Local businessman, Mclean Letshwiti, has partnered with Tiffany's & Company
to open a diamond cutting and polishing company in Botswana.
The company, which has already been registered, will be operational by March
next year. Tiffany's is a renowned jewellery retailer with a US$ 3 billion yearly
turnover and a US$ 6 billion market capital value.

In an interview with Mmegi, Letshwiti did not reveal the figures involved in
the partnership but however said his shares are of substantial value.
"At the moment I am going at it alone but I will be inviting other
Batswana to join me in the partnership. I am not just going to keep it
to myself."

courtesy of AllAfrica

This article seemed interesting to me because Botswana
enjoys one of Africa's highest per capita incomes and derives the bulk
of it's income from diamonds. Additionally, Botswana recently
expereinced a slight reduction in foreign direct investment in it's
diamond industry. However, this was not due to press associated with
"blood diamonds". In fact this contraction was due to a statement made
by a diamond executive at a leading diamond cutting and polishing
company about Botswana's diamond supply. It just illustrates the
sensitivity of small developing economies to damaging public relations.

Hopefully, this does not happen in Sierra Leone.

What do think? Please feel free to comment, if you are not able to comment on
this particular post but would like to let us know that you were here , please sign our
View my guestbook


coldtusker said...

If only Kenyan politicians had 1/2 the brains of the Batswana...

Was in Gaborone & I did not see one pothole in the city... I did see one outside the main city but nothing like the craters in Nai!

Benin "Mwangi" said...

Coldtusker, thanks for your contribution.

After like my sixth or seventh time reading reading your comment and then going back in my mind to some of your other posts that are out there in the blogosphere I just sort of shook my head and said to myself, "that's Coldtusker"...

Though, I am not really inclined to use this blog as a platform to discuss political issues, you raised an interesting point.

I have observed some of the potholes that you are probably referring to on your post. I also would concur with you that many of Africa's countries (or for that matter many of the developing nations outside of Africa) lack the level of infrastructure found in Botswana. Botswana's success should definitly be studied by other developing nations.

Before going deeper let me say that I need to research this issue further. But my current understanding of what makes Botswana different is that yes the politicians are doing a good job, but just as much credit could be given to Botswana's traditional rulers. They demand, for their communities, that politicians be held accountable for their actions and operate in a transparent manner. Also, the same might be said about their communities too.

This partnership between Botswana's populace, traditional leaders, business community, and government creates an environment that gives investors confidence. In Botswana's case the earnings from their diamond industry were wisely reinvested into more infrastructure and also into attracting more investment from abroad.

Now getting back to Kenya, to my knowledge Kenya lacks vast storehouses of natural resources. Plus, Kenya also has a different history than Botswana creating a different set of circumstance. Along with Kenya's unique circumstances come a different set of strengths and weaknesses (for the purpose of this post I will dwell upon those strengths).

Does the fact that Kenya has a different background than Botswana mean that Kenya can't achieve the same as Botswana or more? No, it certainly should not. Moreso than upon politicians, I would say that Kenya's future depends more upon her people.

You see....without the huge storehouses of natural resources enjoyed by some of Kenya's neighbors, Kenya has managed to become an engine of growth for the East African region. What causes this to occur? Do you think that it has anything to do with Kenya's industrious population? What about the entrepreneurial spark that ignites development and which is so evident when one walks through Nairobi and passes so many bustling small businesses? What about education, can Kenya's highly educated workforce(relative to many of her African counterparts) be a resource that could attract investment? Then there is Kenya's robust diaspora, which reinvests very heavily back into Kenya-does anyone think that this group could help improve further upon Kenya's current successes? Finally, are there examples of people or communities within developing countries, both in Africa and abroad, that have been able to contribute to the rebuilding and renewing of their local infrastructure?

My hunch, it's just a that "all of the above" would earn someone high marks

Coldtusker you are one of a kind, let's meet up again...

Black River Eagle said...

Botswana has consistently shown the world that its government and its people have made a series of smart decisions re: the country's diamond reserves. Botswana also ranks #1 among Africa's best countries for business and direct foreign investment.

Unfortunately HIV/AIDS has ravaged the population over the last 2 decades and is causing considerable difficulties for the workforce and communities. In addition, Botswana's heavy dependence upon diamond mining and processing leaves it susceptable to the market forces controlling this not-so-rare commodity.

Those "forces" are clearly in the hands of only a few global mining companies (Anglo-American, DeBeers, Rio Tinto, etc.), the processors (diamond cutting and polishing sweatshops in India), the major importers and wholesalers (Europe, Asia, Middle East), and a zillion jewelry retailers around the world.

Nonetheless it is good to see that local businesspeople are beginning to form partnerships with major retailers like Tiffany & Co. AND that diamond cutting and polishing work remains in Botswana vs. being outsourced to unscrupulous businessmen in India. In this way Tiffany & Co. has more control of the demand-supply chain and can guarantee their customers that the product is not only "conflict-free" but also that it is "sweatshop-free" and is sourced from one of the most transparent countries in the world, Botswana.

Similar deals have been signed last year in Angola (an Israeli company) and in Sierra Leone with a New York City design house. Investing in McLean Letswhiti's business with Tiffany & Co. is probably a good opportunity for both local and foreign investors interested in the diamond trade.

Then there is the issue with the attempted robbery of valuable, mineral-rich lands from the SAN people (bushmen) by the government of Botswana that is still going through court proceedings...

Nobody's perfect, I guess.

Benin "Mwangi" said...

Black River Eagle:

Thanks for stopping in. Whoa....before responding to your comments one really must collect their thoughts. You said quite a lot-and what you have said is factual.

It may not be possible, therefore, for me to address each and every point individually. What I can try to do is address what, to me, appears to be the underlying theme that supports each of the points that you have made. My intrepation, and please forgive me if it's off, is that you are saying that though Botswana has some notable market successes, that they may still have a long way to go before curing all of their many social, strctural, and even economic shortcomings.

My friend, wholeheartedly, I am in agreement with you. Right now it seems like, as you have said, the most widespread threat to the tiny nation's social and economic wellbeing is HIV/AIDS. Recently, some friends, colleagues, even some people that I didn't know, and myself all got together and watched
the documentary entitled Africa Open for Business. One of the standout stories was of an entrepreneur in Botswana who quite, coincidentally had a diamond polishing business. From the gentleman's accent my guess is that he was from South Africa. He praised Botswana as the most corruption free government in Africa, if not the world. Morever, he addressed illness, although I can't remember if he actually talked about AIDS. To summarize what stood out to me, he seemed to indicate that his biggest investment or one of the biggest was in healthcare costs. Not in the way that we in the West understand business healthcare costs. I mean his business provided traditional healthcare, but in addition it also actually had an onsite clinic staffed with professional RN's. Whenever someone was sick they went there for whatever care might have been deemed necessary. If their sickness kept them from working, my understanding is that they were still paid.

There was another entrepreneur of Asian descent in another southern African country who was also interviewed on the documentary who made similiar comments. She did actually mention AIDs and said that because of it's prevalence her company helps it's employees by supplying them with perscription care, condoms, and etc. to combat the further spread of the virus and to help the affected employees to still maintain productive lives.

Now, although the market based answers to AIDS in Botswana and other parts of southen Africa may help those who are employed at such companies, it doesn't help those who are not employed there.
So more must be done in this area, we are in agreement. The bottom line is that although entrepreneurship and market based solutions do play a very huge role
helping to improve situations in Botswana, as well as other parts of Africa, you are right it does not actually make up the entire puzzle-right?

When an entrepreneurial success story is cited here, it is not to take away from the very real problems that do exist on the continent, but rather to point out that there are successes too coming out of Africa. As a result of my decision to only focus on business and entrepreneurship in Africa, sometimes it is difficult for me to know the best format for bringing forth these other issues that are indeed just as important.

Thank you for helping to balance out the commentary here BRE, you have contributed immensely to the discussion here. I am grateful to you for that, as I am sure that the readers of this blog probably appreciate that also. Please, by allmeans, continue coming back BRE.

In closing, let me pose this question, how can we as citizens and bloggers of our respective lands-blogging about different aspects of Africa, as well as concerned citizens of Africa help to put the entire puzzle together?

Where there is a will, there must be a way....

Black River Eagle said...

Dear Benin,

I did not intend to downplay the importance of the business described in your post but wanted to help round out the picture a bit. Botswana is a country that the U.S.A. (I'm an American by the way) and other nations must help to develop economically and strengthen politically and socially.

The business and environmental and ethical issues re: extractive industries in developing countries are many and oft-times very, very complicated to solve. Many people who closely follow this industry are aware of the problems, but the vast majority of consumers of the end products ignore these issues and/or are ignorant of the problems. That is why a film like "Blood Diamond" has an important role to play within societies, it helps people to become aware.

The theme of the film is somewhat outdated since "conflict diamonds" only represent approximately 1% of the total market, down from greater than 3% just a decade ago according to recent statistics from the International Diamond Council. Rampid exploitation, theft of national resources by corrupt politicians and businesspeople, irreversable environmental damage to both flora and fauna, slave labor and illegal child labor, land rights and compensation for landowners and indigenous peoples... these are the hot-button issues of the mining industry today. Some progress is being made to correct these ills but it is much too slow for those that need the help the most. The U.K.-based watchdog group Global Witness have been excellent in their work to stay on top of extractive industries in Africa, Asia, and South America.

Instead of going into the subject even deeper here in your comments section I intend to compose and publish an update post about blood diamonds and resource exploitation soon. In the meantime checkout one of my original posts on the subject: "Diamonds are NOT a girl's best friend" published on September 28, 2005. You can find that post (and more articles and posts on the subject by other authors) by entering that exact text "..." in Google Search.

What should we do about it? Roll up our shirtsleeves and get busy with people, governments, and relevant international organizations and industry and political groups.

Get the poor children out of those mines and riverbeds and jungles and Asian sweatshops and back into schools or into schools for the 1st time in their lives. Work with the ILO (Intl. Labor Organization) and UN agencies to help demand and setup better pay and working conditions for the millions of alluvial diamond and gold miners and jewel cutters and polishers throughout the world, strengthen the Kimberly Process and the U.K.'s EITI (Extractive Industries Transparency Initiative) at all levels of the demand-supply chain right down to the jewelry showcase in the local shopping mall.

And last but not least, invest our much-needed capital and business experience & expertise in the people (the entrepreneurs) like Mr. McLean Lethswhiti of Botswana to help them develop their businesses and overseas markets.

Thank you for your kind words and your welcome to comment here at your blog.


africa search