Bushmen's Diamond News


Leviev Opens Namibia Plant; Major Economic Step for Africa 

Leviev Group"s establishment of a diamond-cutting factory in Namibia is a huge step in African countries" efforts to add value to their natural resources, boost employment, and improve the quality of life for their people, industry analysts say. Leviev Group has invested some US$48 million in Namibia. Of the total, US$6.35 million (N$40 million) went to build the plant in Windhoek, Namibia"s capital, and the rest to Namco Mining, a company Leviev rescued in 2001. The facility, Africa"s largest diamond cutting factory, currently employs 300 people. It will employ 550 when it reaches its capacity of 25,000 carats a month. 

De Beers Denies Shortage of Diamonds 

De Beers is not short of diamonds and has "abundant availability from our intakes," or current mining efforts, a spokeswoman for the South African diamond giant said. De Beers was responding to a report in South Africa"s Business Day, saying that in the second half of 2004 it would sell rough based only on intake, not on inventory. The report said that a few years ago De Beers held $5 billion of diamond stock but now is facing severe shortages under its demand-driven Supplier of Choice policy and is selling only newly mined stones. De Beers "has been running down its stocks to a working stock inventory, which is where we are now," Lynette Hori, the spokeswoman, told Rapaport. 

De Beers May Close Some Operations at New SA Unit 

De Beers"s new South African subsidiary may close some operations because of the strong rand, Chief Executive Jonathan Oppenheimer said, according to the country"s Business Day. Oppenheimer called the unit"s Venetia mine "very exciting" but said five older mines "are really struggling right now. Some are losing money." The company might close the mines but preferred to turn them profitable, even given the strong rand, Business Day reported. On a more positive note, he said the Voorspoed mine in Free State, which was closed in 1902, could be reopened because of improvements in technology. 

Botswana Industry Disputes Assertion by Debswana CEO 

Local players in Botswana"s diamond industry are taking issue with Debswana"s managing director, Mmegi the Reporter of Botswana said. Louis Nchindo said recently that cutting and polishing diamonds locally is not viable, citing the case of Teemane Manufacturing Co., which collapsed. But Todd Majaye, managing director of Afrimond Diamond & Jewelry Institute, said polishing diamonds locally would improve the value of the diamonds and would help Debswana "monitor the markets and get the exact current value of its diamonds." He stressed that starting such an industry in the country could boost the economy, create employment and increase disposable income. Yani Melas, chief 
executive of business relations for Leviev Group, also disputed Nchindo. 

British MPs Visit Botswana as Court to Hear Bushmen Case 

A delegation of British MPs arrives in Botswana Sunday as the country attempts to publicize the benefits it has enjoyed since diamonds were first found here in 1966, South Africa"s Business Day reported. The group of about 11 MPs, invited by Debswana, are due to arrive a week before the high court is to hear a land claim brought by Botswana"s Bushmen, or San, Business Day said. The visit is part of Diamond for Development, launched by Debswana in 2002 to respond to claims that Botswana"s diamond mining industry has led to human rights violations. Debswana is owned 50-50 by Botswana"s government and De Beers. 

Firestone, De Beers to Explore Mopipi Project in Botswana

Firestone Diamonds plc said it formed a joint venture with De Beers to explore Firestone"s Mopipi kimberlite project in Botswana. The Mopipi project covers 1,235 square miles (3,200 square kilometers). It adjoins De Beers"s Orapa and Letlhakane diamond mines, which annually produce 13 million carats valued at $800 million. Firestone said the results of extensive exploration "strongly suggest good potential" for the presence of a new diamond-bearing kimberlite source in Mopipi. 



-1 point: Very good demand: $100-$200 whites. 
Good demand: $120-$180 white natts. 
Fair demand: $200-$250 whites; $125-$185 OW TTLB & TTLC. 

-2 point: Very good demand: $200-$300 whites. 
Good demand: $150-$200 whites; $60-$90 1-pointers. 
Fair demand: $310-$360 whites; $125-$175 white natts; $150- $225 OW TTLB & TTLC. 

2-7 point: Good demand: $200-$300 whites. 
Fair demand: $310-$350 whites; $200-$275 +8-white natts. 

8-18 point: Very good demand: $250-$525 whites. 
Fair demand: $400-$450 OW LC; $250-$325 TTLC, $200-$250 OW TTLB & TTLC.; +14-point $525-$575 OW TTLC; $200-$350 white natts; $90-$150 whites. 

20 points: Good demand: $150-$200 whites; $300-$350 whites. 
Fair demand: $200-$300 whites. 

25 points: Good demand: $175-$225 whites. 
Fair demand: $250-$400 whites. 

33 points: Good demand: $400-$500 whites. 
Fair demand: $225-$300 TTLB. 

50 points: Good demand: $800-$1,200 whites; $400-$700 whites. 
Fair demand: $200-$400 whites; $450-$600 OW TTLC. 

75 points: Good demand: $700-$1,300 whites. 

1 carat+: Very good demand: $1,000-$4,000 whites; $1,000-$5,000 +2ct I+ color. 
Good demand: $500-$1,000 whites. 
Fair demand: $200-$500 whites. 

Princess: -3 point: Good demand: $150-$250 whites. 
+3 point: Fair demand: $200-$250 whites. 
+9-18 point: Good demand: $225-$300 whites; +14 point: $275 - $325 whites. 
20 points: Fair demand:$300-$335 whites. 
33 point: Fair demand: $500-$600 whites. 
50 point: Good demand: $600-$1,000 whites. 
1 carat+: Good demand: $1,000-$1,200 whites; $1,600-$2,200 whites. 

Marquise: -6 point: Good demand: $250-$310 whites. 
Fair demand: $400-$450 whites. 
+7-18 point: Good demand: $175-$250 whites; +14 points $250- $300 whites. 
Fair demand: $500-$600 whites. 
20 point: Fair demand: $275-$325 whites. 
25 point: Fair demand: $325-$375 whites; $425-$450 whites. 
33 point: Fair demand: $400-$475 whites. 
50 point: Good demand: $550-$650 whites; $700-$800 whites & $900-$1,100 whites. 
1 carat+: Good demand: $800-$1,200 whites. 

Tapers & Baguettes: Good demand: $225-$300 2mm-2.5mm whites; $300-$350 
2.5mm-3mm whites; $150-$225 +2mm-3mm whites. 
Fair Demand: $575-$650 +5mm whites. 


1-7 point: Very good demand: $24-$50 & $65-$110 sawn princess; $16-$45 & $65-$107 rounds; $39-$85 crystals. 
Good movement: $11-$26 & $50-$100 makeables; $75-$105 sawables. 
Fair movement: $9-$20 TTLB; $12-$23 TTLC; $8-$21 white natts. 

8-20 point: Good demand: $40-$55 & $79-$119 rounds; $20-$36 & $65-$108 crystals; $25-$53 & $88-$124 sawn princess; $38-$85 clivage; $81-$118 sawables. 
Fair movement: $89-$121 makeables; $33-$50 LB flats; $43- $80 white flats; $33-$55 baguettes. 
Some movement: $15-$45 TTLB; $19-$53 TTLC; $14-$31 white natts. 

21-49 point: Very good demand & movement: $98-$125 & $150-$225 rounds; $85-$137 & $178-$230 sawn princess; $80-$121 crystals; $68-$105 clivage; $103-$148 sawables. 
Good movement: $48-$67 LB flats; $53-$80 white flats; $47- $95 baguettes; $53-$75 & $110-$145 makeables. 
Some movement: $25-$58 TTLB; $33-$60 TTLC; $20-$43 natts. 

0.5-1 carat: Very good demand & movement: $79-$129 & $176-$245 rounds; $96-$137 & $165-$220 sawn princess; $78-$138 crystals; $135-$205 OW; $115-$195 crystals. 
Good movement: $85-$125 & $150-$221 makeables; $285-$325 rounds; $290-$330 sawn princess; $70-$115 LB flats; $85- $130 white flats; $55-$95 baguettes. 

1-3 carat: Very good demand & movement: $120-$173 rounds; $110-$175 makeables; $185-$275 sawn princess; $160-$235 sawables; $85- $125 & $177-$240 clivage; $330-$465 & $909-$1,254 makeables & rounds +3-carats. 
Good movement: $250-$441 rounds; $200-$310 makeables; $100- $135 flats; $187-$283 OW LC; $150-$225 sawables.



"Is A New Era Ahead of De Beers in Africa?"

Only a week after Israeli diamantaire Lev Leviev grabbed headlines when he said he is giving African countries what they want – namely a bigger share of the diamond pipeline – Botswana is now singing the same tune as it carries out crucial negotiations with De Beers. 

In a potshot at De Beers last week, during a seminar on rough diamonds in Israel, Leviev told a packed hall that he did not understand why producing countries were told they couldn’t sort or polish diamonds. Their own diamonds. 

According to Leviev, one of the secrets of his success is that he stuck by his suppliers through hard times and helped them achieve their goals, as they expressed them to him. The Angolan Minister of Resources agreed with him during the seminar, as did the Namibian Prime Minister during the opening of Leviev’s polishing plant in the country earlier this month. 

Full Article : idexonline.com <http://www.idexonline.com/start.asp>


July 24, 2004

We’re a cut above the rest, insists boss of De Beers 

By Peter Klinger 

NICKY OPPENHEIMER, South Africa’s richest man, yesterday shrugged off an Israeli gemstone dealer’s attempts to break De Beers’ century-long stranglehold on the global diamond market. 

Lev Leviev, who owns the world’s second biggest diamond business with annual turnover of $2.5 billion (£1.3 billion), is hoping to establish operations in Botswana, the crown jewel of De Beers’ network. 

Mr Leviev is also pushing to decentralise the diamond buying process. Instead of buying diamonds from De Beers’ central clearing house, he has started to buy the gemstones directly from miners, such as Russia’s Alrosa. 

However, Mr Oppenheimer remains undaunted. He said: “I don’t lose any sleep over the competitors that we have.” 

He added: “We believe we are the best diamond miners in the world and the best marketers of diamonds in the world. The thing about De Beers today is that its expertise in diamonds is better than anyone else’s.” 

He conceded, however: “Mr Leviev is an important player in the diamond business and obviously a competitor.” 

Mr Oppenheimer, whose family controls about 40 per cent of De Beers, was speaking as the diamond company reported lower-than-expected growth in half-year sales. Sales at De Beers’ Diamond Trading Company in the six months to June 30 increased 2 per cent to $2.9 billion. Analysts had expected sales of up to $3.6 billion. 

Despite the modest sales growth, De Beers lifted pre-tax profits from $386 million to $513 million. 

The rise was largely because of two separate increases in the price of rough diamonds and a favourable revaluation of De Beers’ hedge book. 

Mr Oppenheimer said global diamond demand was showing signs of upward momentum. Demand in the US, De Beers’ biggest market, rose 7 per cent, the strongest showing in five years, while Japan’s market was experiencing increased demand for the first time in more than a decade. 

De Beers plans to open a store in New York next year as part of its venture with LVMH Group, the luxury goods company. 

Mr Oppenheimer said the venture’s London store, on Bond Street, was performing well, as were three outlets in Japan. 

De Beers will not meet its 7 per cent production growth target this year after operational problems in Botswana. 

Gary Ralfe, the managing director, said diamond production in the first half had been 20 per cent below budget, although he was confident that problems had been rectified. 

# Lev Leviev, 47, is the world’s biggest cutter and polisher of diamonds. Based in Tel Aviv, he is said to be worth $2 billion (£1.1 billion). He also owns a gold mine in Kazakhstan, equity in Angolan diamond mines and mining licences in the Urals and Namibia.


Botswana: ‘Prosperity Diamonds’

Diamonds are a contemporary phenomenon in Botswana. De Beers did not begin prospecting there 
until 1956, discovering their first kimberlite pipe in 1967 and bringing the first mine to production 
in 1971. Unlike its experiences in Namibia and South Africa, De Beers faced no competition in Botswana. They were the first there and quickly formed a jointly-owned company with the Government. The De Beers-Botswana Mining Company (Debswana) is a private unlisted company, with the government and De Beers each holding 50 per cent ownership. Diamond statistics in Botswana are astonishing. The country is by far the world’s largest diamond producer, by value. In 2000, Botswana’s only diamond mining company produced 24.65 million carats and sold it all to De Beers for US$1.9 billion. This yielded a gross profit of US$1.67 billion for Debswana. In 2000, minerals, of which diamonds represented the lion’s share, contributed over 33 per cent to Botswana’s annual GDP and made up 79 per cent of the value of Botswana’s exports. While the proportion of the total labour force working in the mining and quarrying industry is small (three per cent), its 6,000 workers comprise the largest labour sector in the country. Perhaps more important is the direct 
contribution of the diamond industry to the support of government. This single industry, with only three 
operating diamond mines, contributes 60 per cent of total government tax revenue. There are two other statistics that further define the story of diamonds in Botswana. The most striking is that over 70 per cent of the profits of the diamond industry are paid to the government. This staggering figure still underestimates the impact of the diamond industry on the economy. Two other large sources of government revenue are also largely diamond dependent. Customs fees from the Southern Africa 
Customs Union are generated to a large extent from the export of diamonds, and interest on foreign 
investment and bank accounts is also derived mainly from diamond profits. In all, approximately 85 per cent of government revenue is derived from diamonds.

Botswana: ‘Prosperity Diamonds’


The 70% solution 

Under Botswana legislation, Debswana pays a 10 percent royalty based on gross market value, and a 25 percent tax based on its taxable income (i.e. after deducting current expenses, capital allowances and other allowables from gross income). In addition to tax and royalty, the government receives a variable dividend. The amount of the dividend is calculated so as to bring government’s aggregate revenue up to a contractually agreed share of positive net cash flow. The dividend paid to the private shareholder (De Beers) essentially consists of whatever cash remains after the government has received the amount due to it. It is the variable dividend which enables the government to take in excess of 70 percent of the profits of Debswana, rather than the 35 percent or so that would result from statutory tax and royalty. The dividend arrangement is a function of the profitability of the business, which means that both the government and De Beers have an interest in making the industry successful. Even this underestimates their economic impact. Much of the financial, construction, manufacturing sectors and foreign investment in Botswana are also based on the diamond economy. 

Botswana continues to explore for new diamonds.

The government encourages companies other than De Beers to participate, although De Beers is involved in almost all the present exploration. De Beers Prospecting Botswana Pty. Limited (Debot) started exploring in the 1950s, and is currently working on prospecting licenses covering more than 
55,000 square kilometres, either on its own or in joint venture partnerships with other companies. Other prospecting companies partnering with De Beers have included TNK, Billiton, Ampal, SouthernEra, Repadre Corporation, Cratonic Resources and AfriOre. Debswana plans to open a new mine in 2002, consisting of four small kimberlite pipes about 20 kilometers east of the existing Orapa mine in central Botswana. US$45 million is being spent on the development and the mine will create 180 new jobs.

Value Added

Botswana has had only modest success in developing a cutting and polishing industry. At present there are three factories employing approximately 600 people, although the number of workers was once twice as high. One factory is a subsidiary of Debswana, another is owned by Schachter & Namdar of Israel6 and the third is owned by Mabrodiam International of Belgium. Teemane Manufacturing Company (Pty) Ltd., owned by Debswana, employs 214 staff and exports its production to De Beers’ Diamond Trading Company (DTC). In 2000, total production from Teemane was 9,640 polished carats with an average weight of 0.11 carats. Teemane is moving toward polishing 
larger stones where there is less international competition.7 All of the factories receive their rough 
diamonds from the DTC in London, which means that they do not know whether, in fact, they are 
polishing diamonds mined in Botswana Debswana also owns the Botswana Diamond Valuing 
Company (Pty) Ltd. (BDVC), located in the capital, Gaborone. BDVC is one of the largest diamond sorting and valuing companies in the world, sorting the entire output of Debswana’s rough diamonds. 
The company has a staff of 476 employees and plays a pivotal role in training and developing local citizens for positions in the diamond industry.

Debswana’s interests go far beyond diamonds. It owns a coal mine (Morupule Colliery Ltd.) which employs 304 people. It owns a short-term insurance company (West End Property Company (Pty) Ltd.), created to meet the company’s insurance requirements. It also owns Masedi (Pty) Ltd., a company involved in agriculture. And Debswana owns a controlling interest in the best primary school in the country, Broadhurst Primary School (Pty) Ltd.

Support for small and medium-size local business is facilitated through Peo Holdings (Pty) Limited, a business development initiative established by De Beers Botswana (Pty) Ltd. and Debswana in 1998. Its mandate is to promote and facilitate the development of commercially viable enterprises. During 2000, Peo Holdings assisted in the establishment of eight new businesses. The total financial assistance provided by Peo between 1998 and 2000 was approximately US$750,000. Together with 
capital provided by entrepreneurs and other financial institutions, total support for the program exceeds US$2.8 million, with 19 businesses providing employment for over 300 people.

In addition to its diamond mining and other commercial activities, Debswana manages a fund for 
development activities. During 2000, the Debswana Donations Fund allocated approximately $562,000 to a variety of projects in Botswana.11 Approximately one third of the Fund was donated to organizations that care for and rehabilitate disabled children and adults. The donations take the form of cash for specific projects and ‘in-kind’ donations of equipment and vehicles. An additional one third of the Fund in 2000 went to various community development projects in small rural communities. The remaining third of the Fund was divided between environmental and HIV/AIDS projects. 

In pure economic terms, diamonds have resulted in Botswana having higher economic growth rates than any other country in the world over the past thirty years. Between 1965 and 1996, Botswana’s annual growth rate of 9.2 per cent outstripped all of the so-called ‘tiger’ states of Asia. There are two issues that need further explanation. The first has to do with why the Botswana diamond experience is so different from others, and what lessons this might offer. The second is whether rapid diamond-led economic growth has resulted in meaningful social and economic development.

Khama’s Choice

Much of what has occurred in Botswana can only be understood in terms of the country’s unique history - as least unique compared to most other African countries. Paramount in the Botswana phenomenon is the evolution of its political environment and governance. In Botswana, the very lack of known economic assets at independence likely contributed to its political stability and its future economic prosperity. In 1885, much of the territory of modern Botswana was established as British Bechuanaland, a protectorate rather than a crown colony. The minimalist arrangement suited both the British and the local chiefs. There were none of the rich agricultural lands sought by European settlers elsewhere in Africa. There were few known natural resources worth exploiting. Britain was much more 
interested in the copper of Zambia, the minerals of what would become Zimbabwe and the whole of South Africa. Consequently, British policies toward Botswana were relatively benign, and there was little interest in, or incentive for, establishing firm control over the economy. The British presence, however, served another purpose, thwarting German advances from the west and Boer expansion from the east, and leaving the area without any externally induced conflict.

In 1962 the Botswana Democratic Party (BDP) came into being, led by Seretse Khama (later Sir Seretse). In 1965 Bechuanaland attained self-government and became the independent Republic of Botswana the following year. Elections have taken place every five years since 1966, elections that are among the most free and fair on the continent. The BDP has won every election. As it turns out, one of the most enlightened policies of Seretse Khama and the BDP was aimed at the mineral sector. At the time of independence, two issues required attention. First, traditional rights to land, and implicitly the minerals underground, were vested in individual ethnic groupings. If these rights were left unchanged, a chief in whose territory a major mineral discovery happened to lie would have considerable economic and political power, at the expense of the state. In the early 1960s most of the known mineral deposits and the major initial finds were located in the territory of Khama’s own 
Bamangwato ethnic group, forcing Khama to choose between his own people and the nation. Second, 
some mineral rights had, in the past, been ceded to private companies.

Khama’s choice was made clear in the BDP Election Manifesto of 1965:

“…leaving mineral rights vested in tribal authorities and private companies must necessarily result in uneven growth of the country’s economy, as well as deprive the Central Government of an important source of revenue for developing the country. 
…It will be the policy of the BDP Government to negotiate with all parties concerning the takeover 
of the country’s mineral rights by the Central Government, and subsequently expand the present 
mining operations and step up prospecting activities throughout the territory.”

Khama’s choice in vesting mineral rights in the central government would prove to be the key in establishing the authority of the state, and in providing a guaranteed source of government revenue. Rather than allowing inter-regional income differences to generate jealousies as has happened in other countries, the state’s share of the mineral wealth could be used for national purposes. In the case of diamonds, this is exactly what occurred. The government was thus in control when diamonds were discovered. With that discovery, the government next faced the task of devising a minerals taxation policy.

Again, in retrospect, the government proved to have been wise. It recognized that the value of any deposit was subject to considerable uncertainty. In such circumstances, a fixed royalty rate might yield far more than the rent attributable to the deposit, or far too little. Rather than relying solely on a high fixed royalty rate, the government focused on obtaining a significant share of the profits from the mining operation. This was accomplished by requiring, in addition to a modest royalty rate, that government share in the equity of the mining company. Since the government owned the lands when 
De Beers discovered diamonds, it was in a good bargaining position. Initially, the government took a 
15 per cent stake in the diamond mines, but once De Beers revealed the true scale and value of the diamonds, the government renegotiated the contract. Today, Debswana, is equally and jointly owned. 
Further, in 1987 the government actually purchased five per cent of the shares of De Beers itself. 
According to the Managing Director of Debswana, the move was aimed at diversifying the economic base away from the diamond industry. In 2001, the takeover of De Beers by Anglo-American, Debswana and the Oppenheimer family enlarged Botswana’s influence in the world diamond market. 
The fact that no diamond dealers are licensed in Botswana reduces the illicit diamond trade. This means that anyone found with a rough diamond has automatically broken the law. Between 1998 and 2001, 62 people were arrested in connection with rough diamond theft, although the diamonds involved were worth only $9000.14 This is considerably less than another estimate, which suggests that losses from the mines may have been as much as $70 million a year, courtesy of criminal syndicates in South Africa -at least until the installation of a new security plant at Jwaneng in 2000.15 Because of increasingly high levels of technology, rough diamonds are now said to be untouched by human hands and are not even seen between mining and their arrival at the sorting facility in Gaborone. 
Responsible government, generally good governance, and good management of the diamond industry have played a strong role in preventing Botswana from becoming a transit country for conflict diamonds from Angola and the Congo. On the Transparency International 2001 Corruption Perceptions Index (CPI), Botswana is ranked 26th out of 91 in terms of ‘clean’ government. It ranked higher than any other country in Africa, all countries in Asia except Taiwan and Singapore, and all countries in South and Central

Carat and stick

In January 2002, an issue that had been brewing for several years in Botswana became an international news item. Several hundred Basarwa, or San people living in the Central Kalahari Game 
Reserve were about to evicted from their land by the government. ‘The government says it wants 
to protect the wildlife, and cannot afford to keep track of the Bushmen,’ reported the BBC, using 
an old- fashioned and somewhat derogatory term for the San. ‘But many believe that they are 
motivated by the huge mineral wealth the Kalahari is believed to possess, including diamonds and possibly uranium.’ De Beers issued a statement saying that its interests in the area are limited to a 45km2 fenced area in which no families live. ‘It is unlikely that any mining will take place in the foreseeable future,’ De Beers says. Survival, a London-based NGO with offices not more than two blocks from De Beers’ own London headquarters, says ‘the Botswana government is trying to drive the “Bushmen” out of the area to make way for tourism and diamond mining. Over a thousand have been coerced into moving out.’ By early 2002, the government had closed health clinics in the area and stopped food trucks, and had dismantled the only water pump. At the time of writing, the issue remained unresolved.

Sources: De Beers, Survival, BBC and other news sources.

America, except Chile. It also surpassed many European countries, including Italy, Hungary, Greece, Poland, the Czech Republic and Russia.

Benefits: Growth versus Development

In 2000, the diamond industry in Botswana employed nearly 6,000 workers, and although this 
represented slightly less than three per cent of the formal labour force, it is still the largest sector of employment. About 80 per cent of the mineworkers belong to the Botswana Mine Workers’ Union (BMWU). Compared with workers in other sectors, diamond workers are the ‘labour aristocracy’. Debswana pays a minimum wage of Pula 900 (US$169) a month, compared with the national minimum wage of Pula 475 (US$89) per month. Diamond workers also receive medical benefits (70-80 per cent paid), and 20 per cent of salary contribution to a pension fund. Housing is provided free and is typically not in hostels but in semi-detached houses with electricity, water-borne sewage, in-house water taps and gas. All electricity and water costs are subsidized, and gas is generally free. All wages and other basic conditions of employment are negotiated in the Debswana Negotiating Forum. 
Despite their relatively good position, union leaders note that their position has weakened since 1993 when there were between 9,000 and 10,000 miners in the sector. Although the production of rough diamonds has expanded greatly, increasingly sophisticated technology has displaced labour at an even faster rate. It is not a new argument that rapid rates of growth in GDP and a prosperous government may or may not result in meaningful economic and social development. A growing GDP may be a necessary condition but it is not always sufficient. Given the economic growth rates in Botswana and the tremendous amount of money generated from the diamond industry, one might expect this to be reflected more positively in its social indicators. Botswana, however, ranked 114th out of the 162 countries on the UNDP Human Development Index (HDI) in the year 2000, dropping from 95th place in 1991. It lagged behind Swaziland, Morocco, Namibia, Equatorial Guinea, Gabon, Egypt, South Africa and Cape Verde. Some of this has to do with the rapid spread in HIV/AIDS. 
More people in Botswana, per capita, are living with HIV/AIDS than in any other country on earth, and 
this has reduced life expectancy statistics accordingly. 

But a major reason for Botswana’s low ranking is the high per centage of the population living below the poverty line, along with the country’s highly skewed income distribution. While per capita GNP in 1999 was $3,240, the Human Development Report shows that 33 per cent of the population live on less than US$l per day,18 and the World Bank records 61.4 per cent living on less than $2 a day — fewer than many African countries, but more than in South Africa, Namibia, Côte d’Ivoire, Egypt and Tanzania. Studies by the Government of Botswana are equally revealing. According to a 1997 study of poverty and poverty alleviation in Botswana, 47 per cent of individuals and 38 per cent of households were living in poverty. A higher proportion of female-headed households - 50 per cent - were living in poverty.

Human Development Indicators in Botswana 

Indicator 1991 Most Recent Yr. 
GNP per capita (US$) 2,580 3,240 (1999) 
Population (millions) 1.33 1.65 (2000) 
Poverty rate 59 (1985-6) 47 (1993-4) (% of population) 
Unemployment Rate 13.9 19.6 (1998) 
Literacy Rate (%) 54 76.4 (1999) 
Life Expectancy 65.3 41.9 (1999) at Birth (yrs) 
Infant Mortality Rate 48 46 (1999) (per 1000) 
Under 5 Mortality Rate 38 59 (1999) (per 1000)

Sources: Government of Botswana, UNDP Human Development Reports 

The National Development Plans of Botswana have long proclaimed social justice as one of the four planning objectives, along with sustained development, rapid economic growth and economic independence. To the extent that the distribution of income is related to social justice, the effort has not been very successful. One reflection of income distribution the share of national income of different groups in society. In Botswana, the bottom 40 per cent of the population receive 12 per cent of the national income, the middle 40 per cent receive 29 per cent, while the richest 20 per cent of the population receive 59 per cent of the national income. While it is significant that the distribution of income is highly skewed, it is also significant that in a recent 10-year period of rapid expansion in diamond output and revenue, the distribution has barely changed.

One conclusion is that the rapid growth of real per capita GDP since the beginning of the diamond boom has scarcely touched the distribution of income or the poverty levels. The poor may be better off than before, but a small business elite has become far better off. There is an additional issue. Despite the reserves - approximately 30 years at present production levels - diamonds in Botswana are unlikely to be forever. There has been little successful diversification of the economy, although this is a major emphasis in the government’s National Development Plan. At some time in the future, the diamonds will be gone and other sectors of the economy will have to take over. The year 2000 is not atypical, in that there was a relatively high GDP growth rate of 7.7 per cent while at the same time the non-mining sector growth rate decreased from 7.8 per cent in 1999 to 5.7 per cent. This reflected the relatively poor performance of the manufacturing, construction and transport sectors.

Agriculture, the economic sector most detached from diamond mining, and already in decline for several years, declined by 8.7 per cent in 2000 over 1999. Presently the agricultural sector only produces 12 per cent of the country’s cereals, and the rest are imported. The Botswana Institute for Development Policy Analysis (BIDPA) argues that sustainable growth of GDP and employment require an expansion of nontraditional exports. ‘Non-traditional exports’ for BIDPA means goods other than beef products, diamonds and copper-nickel. BIDPA concludes that in 1999, every million Pula of GDP (about $216,000 at the time) that was generated in the mining sector employed approximately one person. Every million Pula of GDP generated in the manufacturing sector employed 22 people. The equivalent figure for the rest of the economy was just under 16.

The Botswana government’s recognition of the importance of diversification away from diamonds is reflected in all of its National Development Plans. Over the years, the government has put in place a number of policies and programs to promote private sector development. One such program is the Financial Assistance Policy (FAP), whose fourth evaluation was completed in 2000. The evaluation revealed a high failure rate among FAP-assisted businesses, as well as widespread abuse of the scheme by participants. The evaluation report confirmed that about 75 per cent of small-scale FAP projects had not survived beyond the period of assistance. Corresponding failure rates were 45 per cent failure for medium-scale and 35 per cent failure rate for large-scale projects.

The Economist Intelligence Unit (EIU) reported that because the diamond industry performed poorly in 
2001, Botswana’s rate of real GDP growth was expected to fall from 4.3 per cent in 2001/02 to 4.1 per cent in 2002/03. The EIU stated that, ‘Quotas on purchases of rough diamonds imposed in mid-2001 by the De Beers DTC will limit exports of diamonds in 2002 to 88 per cent of capacity. However, production levels will be unchanged and unsold stones will be stockpiled, so there will be no impact on GDP growth’.24 The 2001 experience makes a point about the vulnerability of the diamond- dependent economy and perhaps more importantly about Botswana’s dependence on the vagaries of the international market, and the marketing policies of De Beers. Unlike many African countries, 
however, Botswana has large, diamond-generated foreign exchange reserves. These can act as an economic shock absorber when required.