China moves to rescue Botswana’s diamond industry

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Chinese ambassador to Botswana Ding Xiaowen has assured the country that China’s stable market could be the saving grace for Botswana’s under pressure diamond industry. The representative of the world’s third largest economy has urged the Botswanan government to turn to the Chinese diamond market.

According to estimated figures from the People’s Republic of China, about 10 million people tie the knot annually and spend a whopping 250 billion Yuan (about 25 billion euros) on diamond related items. The ambassador urged the Botswana diamond industry to seize this opportunity and open up more trade channels in China.

As the markets of the United States of America, Europe and Japan are floundering in the wake of the global recession, the Chinese market is said to be the most penetrable market for Botswana’s diamond industry. Ambassador Ding is quoted as saying that although China has been affected by the crunch, the impact has been minimal compared to that of the United States of America, Europe, Japan and other developed countries. As a result, the demand for commodities like diamonds have remained almost intact.

The economic downturn, has led to a 50% decrease in diamond exports leaving a huge hole in the Botswana national treasury, which has been heavily dependent on diamond revenues for a long time. The future may seem bleak at the moment only because the market players have adopted a wait-and-see attitude. The diamond dealers are waiting for the miners to cut their prices and the producers are also not willing to sell at low prices while they stockpile and limit production to regulate falling prices.

Meanwhile, Chinese state-backed companies who have more access to cash than their rivals in other countries are set to buy more developed mining assets and expand their mining and metals holdings in developed economies, thereby shifting focus from Africa as more global mining companies in financial distress search for cash-rich, long-term investors.

Stretching consumer’s patience to the limit

Elaborating the endless market opportunities open to China, Keith Spence, president of Global Mining Corp, a China-focused resource investment company, last month revealed to the Financial Times that only a year ago the Chinese “were going to Africa to acquire early-stage development assets. But now they are looking for larger tonnage, longer life, later-stage assets. There is less of an emphasis on emerging markets, because now there is choice.”

The Chinese might not be in a hurry to acquire and salvage Africa’s bleeding mining industry as the “Chinese companies we are looking at are also aware things have changed. Even though they have the money, they are also cautious.” Keith Spence continued. This coupled with the wait-and-see-attitude adopted by dealers is expected to slow production and make it even more difficult for the Botswanan consumer whose patience is being stretched to the limit while awaiting a compromise. But according to Ding “This – the Chinese market opportunity opened to Botswana – is why I believe the diamond industry will rejuvenate soon and the future is not so bad for Botswana”.

China and Botswana seem to be enjoying mutual economic relations at the moment. Only last November, Xinhua news agency reported that the Chinese government availed a US$586 billion stimulus package to Botswana, which includes massive expenditures on the infrastructure development, partly finance low-income housing, and technological innovation.

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