RAPAPORT… De Beers has reduced its sightholder list in a revamp of its supply system, with more goods expected to go to pure-play manufacturers, especially those with Africa-based factories.
The new list features fewer diamond dealers than before, as De Beers wants as many clients as possible to be adding value by processing goods into marketable polished rather than reselling the rough, insiders told Rapaport News Thursday.
“A lot of people would just buy…the rough allocation and then they offload it,” an executive at a sightholder noted. “That was hurting everybody.”
The company called customers last Wednesday to tell them whether they had kept their sightholder status for the new contract period, which takes effect April 1. It’s unclear how many businesses lost their sights. The miner declined to comment.
Crucially, De Beers is planning to earmark a larger proportion of its higher-value diamonds for manufacturing in Botswana and other producing countries, sightholders said. This could mean a significant majority of rough stones above 2 carats would stay within Botswana for polishing, they noted. The cost and conditions of operating in Botswana mean only the more expensive rough is worth producing there.
The move comes amid ongoing negotiations between De Beers and the Botswana government over a new sales contract, which sources expect to include fresh benefits to help the national economy diversify beyond mining. The parties were due to unveil a new deal before the end of 2020, but extended the current agreement by a year because of Covid-19.
De Beers’ last 10-year deal with Botswana, in 2011, called for the transfer of the miner’s sightholder sales operation from London to Gaborone, which eventually took place in 2013.
The pandemic also delayed the rollout of the new sightholder contracts for 2021, which were due to go into effect on January 1. Under the revamped system, the miner is splitting sightholders into three categories — manufacturers, dealers and retailers — and will provide each group with more bespoke goods.
De Beers’ first sight of the year begins Monday.
Image: Rough-diamond parcels in a De Beers sight box. (De Beers)
De Beers Cuts Clients, Keeps More Goods in Africa
The Bottom Line
- De Beers reduced its sightholder list to prioritize clients who add value by polishing rough diamonds rather than reselling them.
- A larger share of higher-value rough diamonds, especially those over 2 carats, will be allocated for manufacturing within Botswana and other producing countries.
- De Beers is negotiating a new sales contract with Botswana aimed at supporting economic diversification beyond mining, delaying the rollout of new sightholder contracts until April 1.
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