De Beers has agreed with Botswana to create a local sales arm to promote more local processing of gems, the diamond giant's Managing Director Gareth Penny said. Details of the marketing joint venture still needed to be agreed with the Botswana government, Penny told Reuters.

 

In the meantime, the DTC has already encouraged foreign firms to set up four polishing factories in Botswana, Penny told journalists on the sidelines of a mining conference in Cape Town.

 

The Botswana finance minister referred to the joint venture in his budget speech on Monday, saying a deal was expected to signed by June.

 

Botswana -- the world's largest producer of diamonds by value -- and other African countries want a part of the value adding process, such as polishing the stones, in order to create jobs and promote economic growth rather than simply seeing the rough stones shipped abroad.

 

The idea for the sales venture arose during talks over renewing De Beers' rights to operate some of the world's most valuable diamond mines in Botswana, but Penny denied suggestions that the DTC was pressured by Botswana into agreeing to the venture in return for the renewal.

 

A local sales arm would be a natural progression from Namdeb - the De Beers-Botswana mining joint venture, Penny said.

 

De Beers has always said it was not viable to polish diamonds in Africa due to tough competition from China and India, where diamonds can be processed for around $10 per carat.

 

In Botswana, where polishing costs $40-$50 per carat, only high-value diamonds can be economically processed, but a strategy to promote more links between polishers and retailers was making it possible to establish more factories in Africa, Penny said.

 

"They have to have the downstream distribution strategy that offsets the higher manufacturing costs," Penny said.

 

Penny said the DTC had opened talks with Namibia on a similar sales venture and was discussing with South Africa bringing more DTC functions such as sorting into the country.

 

South African Mining Minster Phumzile Mlambo-Ngcuka said on Monday De Beers had been asked to move the DTC headquarters from London to southern Africa, but Penny said this was not feasible.

 

Basic marketing theory says firms must be close to their clients and most diamond purchasing is done by countries such as the United States, Japan and Europe.

 

"Quite rightly, the minister is encouraging us, and we are receptive to doing so, to locating into southern Africa the things that can be appropriately situated here," Penny told Reuters.

 

Speaking to African mining ministers recently, De Beers' Chairman Nicky Oppenheimer said southern African countries should insist miners operate in a way that brings the maximum benefits to their peoples but hinted they should be realistic in their demands.