05 Nov Interview with Mmetla Masire, Managing Director of Okavango Diamond Company (ODC)
BF: Botswana’s largest economic pillar is its mineral sector, which represents about 85% of the country’s foreign earnings. Okavango Diamond Company (ODC) is a key player in the mineral sector. Please tell us a bit about ODC’s role in the country’s success story?
MASIRE: ODC is a company that has been operating for 10 years. It was established in Botswana with the main goal of granting Botswana direct access to the market. In the past, Botswana used to sell all its diamonds through De Beers. However, Okavango entered the scene and provided a strategic position for Botswana. This move also enabled the government to gain valuable insights into the diamond industry. There are several benefits to the country as a result of this. Firstly, it allows us to compare the value we receive from our diamonds with what Okavango offers, potentially improving our gains. Additionally, the information and capabilities of the Botswana government are enhanced through the valuable information provided by ODC.
BF: What does the company currently provide for Botswana and what are your future plans to accompany the sector’s diversification?
MASIRE: We bring several important contributions to Botswana. Firstly, we instill belief and hope because there has been a longstanding question about Botswana’s ability to effectively manage and sell its diamonds. However, over the past 10 years, we have successfully demonstrated our competence, with our initial year’s sales reaching around $94 million, and currently achieving an annual revenue of $1 billion. This significant growth indicates that the question of capability has been resolved, and now the focus is on how much further we can expand.
Secondly, we offer Botswana a more diversified customer base. Previously, all goods were sold exclusively through De Beers. However, with our presence, Botswana now has an additional avenue to sell its diamonds through Okavango. This diversification helps mitigate risks, as we can step in to purchase diamonds if De Beers decides not to buy. Consequently, the sales of diamonds is distributed across multiple channels.
In addition, we provide financial benefits beyond the purchase price of the diamonds. Similar to De Beers, we pay the same amount for the diamonds we acquire, but on top of that, we also payout dividends to our shareholders. This extra financial gain is an added advantage for the government.
Furthermore, we contribute by offering skills and expertise that may not be readily available locally. By bringing in our knowledge and experience, we enhance the overall skill set within the country. Additionally, we create job opportunities and support various social and community initiatives. These smaller benefits complement the primary advantage of generating substantial revenues that directly benefit the government.
BF: How are you going to manage to make the company more profitable and therefore Botswana more profitable through diversification?
MASIRE: Our focus remains within the diamond industry, but we are expanding our operations along the value chain. Currently, our main involvement lies in marketing rough diamonds. However, to reduce risks and diversify our business, we are exploring opportunities in the polishing sector. This means that in addition to selling rough diamonds through auctions or contracts, we are establishing partnerships in the polished diamond market. By doing so, we aim to explore the potential benefits of this segment.
Naturally, the progression from polishing diamonds would lead to venturing into the jewelry sector. However, it is essential for us to approach this expansion step by step, taking one phase at a time and ensuring its success before considering further developments.
BF: What opportunities does this point of renegotiation between the De Beers and Botswana represent for Okavango Diamond Company and the country? What good will come from more competition in the market?
MASIRE: The negotiations hold significant importance as their outcomes can greatly impact ODC. These negotiations encompass various aspects such as allocation, potential increase in diamond purchases, and the establishment of agreed-upon conditions between the involved parties. These factors can directly affect ODC’s operations , as decisions made by shareholders may impose obligations or have implications for us. Therefore, we eagerly await the conclusion of these negotiations.
Regarding HB Antwerp, it represents an intriguing addition to our business. When comparing Okavango to De Beers, the sole dominant player when we began operating a decade ago, we have successfully demonstrated our expertise in selling rough diamonds to sightholders via auctions. However, HB introduces another dimension by allowing us to explore the potential benefits of selling and partnering through the polished diamond market. This diversification provides us with alternative channels for selling our diamonds, considering that the diamond industry can respond differently to market conditions. Sometimes, the polished market outperforms the rough market, and having this option helps mitigate risks in our business operations. Additionally, it enables the government to allocate resources, accordingly, focusing on the route that is performing better at any given time. In essence, it brings flexibility to our operations.
BF: How would you assess the current level of human capital within Botswana’s mining sector, and what are the government and ODC doing to help train the leaders of tomorrow?
MASIRE: For many years, Botswana has utilized its diamond revenue to support free education and sponsorships, resulting in the development of a talented pool of individuals. Particularly in the mining sector, there is a wealth of expertise, even though there may be more room for growth within the diamond sector itself. It’s important to note that certain locations, such as Debswana, Orapa, and Jwaneng, have made significant advancements. Jwaneng, for example, boasts the world’s most sophisticated fully integrated diamond recovery plant, largely operated by citizens. However, areas where we still need to strengthen our knowledge and capacity include polished and rough sales.
As ODC and as a country, we have been actively focusing on addressing these gaps. We have taken the initiative to sponsor and train our citizens involved in diamond dealing, sending them to programs and academies to enhance their understanding of the industry and its terminology. Currently, we are developing an incubation program that will concentrate on the manufacturing and polishing aspects, encouraging citizen participation and growth. While Botswana possesses the fundamental skills for basic polishing, our aim is for citizens to also take ownership of diamond businesses and gain expertise in running diamond-cutting and polishing factories.
Despite ODC being a relatively small organization in terms of its structure, we actively seek collaborations to avoid excessive bureaucracy. We have collaborated with the industry to provide training through the Diamond Dealers Association. Furthermore, we are seeking partnerships where we can jointly undertake incubation programs, occasionally providing funding, and leveraging existing expertise within the industry. Rather than reinventing the wheel, we take responsibility for designing and sponsoring these programs to ensure their success. However, it is not our intention to run an academy or acquire all the necessary skills in-house. Instead, we prioritize providing access to relevant academies and training institutions for interested individuals.
BF: How significant has US investment been in the development of Botswana’s diamond industry in general? What kind of new opportunities do you see opening up for investors coming from the US?
MASIRE: From Botswana’s perspective, the United States holds significant importance as a crucial market. The US plays a vital role in the diamond industry as approximately 55% of polished diamonds are purchased there. Ultimately, the diamonds we mine and sell need to be polished and transformed into jewellery, making the destination of these diamonds critical.
However, it’s important to note that assistance from the US may sometimes be intangible. While it may not appear as direct investment, there are indirect benefits that result in investment opportunities. We have already seen companies like Tiffany’s and Signet establish cutting and polishing facilities in Botswana, which represents a form of direct investment. Additionally, various US companies have invested in the industry within Botswana, and this presents opportunities for further growth.
Although the US may not be a prominent cutting and polishing center itself, there are industry needs that can be met. For instance, Florida is a potential hub for investors who could serve the Latin American market. These opportunities are available due to Botswana’s abundant diamond deposits. Investors can consider investing in diamond mining itself or explore avenues such as jewelry production and cutting and polishing, similar to what Tiffany’s and Signet have done.
In summary, while the US holds significance for Botswana, both as a market for polished diamonds and a potential source of investment, there are still various untapped possibilities in terms of mining, jewelry, and cutting and polishing.
BF: Why should investors choose Botswana’s diamonds over the competitors?
MASIRE: When considering Botswana’s diamonds, there are several key factors that provide assurance and value. Firstly, the ethical nature of these diamonds is guaranteed. It is clear how the diamonds benefit the country as they contribute to funding free education and healthcare services. In Botswana, the diamonds are not owned by any specific tribe or town but belong to the entire nation.
Moreover, Botswana is known for producing high-quality diamonds in significant quantities. This ensures that buyers can have their specific requirements met. With four active mines—Orapa, Jwaneng, Letlhakane, and Damtshaa—operated by Debswana, and the presence of Lucara Mine, a separate company, there is a diverse range of diamonds available. Notably, Botswana has a track record of producing special, large stones, with many notable discoveries originating from Karowe mines.
The value, ethics, and traceability of Botswana diamonds are crucial. The Gemological Institute of America (GIA) has made substantial investments in Botswana, establishing one of the world’s largest laboratories in the country. Local traceability measures have been implemented, allowing the use of advanced technologies to trace diamonds back to their specific mines. This ensures transparency and eliminates any confusion regarding the origin of a diamond. Okavango exclusively sells diamonds from Botswana, meaning that when purchasing diamonds from Okavango, there is absolute certainty that they are sourced from Botswana and no other location.
BF: What are your top three priorities as managing director of ODC?
MASIRE: Our top three priorities revolve around de-risking the business, increasing citizen participation, and driving revenue growth. Firstly, we aim to de-risk the business by diversifying our sales channels beyond the auction platform. This includes exploring options like contracts and potentially polishing a small percentage of our goods. By doing so, we can better respond to different market conditions and reduce reliance on a single sales channel.
Secondly, we are focused on getting citizens more involved in the diamond industry. This involves designing sales lots/packages specifically targeted for citizen participation, ensuring affordability and accessibility. We are looking at implementing incubation programs and initiatives to provide opportunities for citizens to develop their skills and actively participate in the industry.
Lastly, revenue growth is a significant priority for us. We have been investing in automation and technology to enhance our responsiveness and capacity to handle a greater volume of goods. Our three-year strategy aims to achieve a revenue target of over a billion and a half US dollars per year. While a larger allocation from the negotiations would facilitate this goal, we are confident that there are still opportunities to unlock more value even without a bigger allocation.
BF: What’s your vision for the company in the context of the industry?
MASIRE: Our vision for ODC is to establish it as a prominent international platform and become the preferred choice for diamond buyers. We have achieved significant success in the auction sector, holding the record for one-day auctions of rough diamonds. Our auctions have seen tremendous growth, with the record amount reaching 182 million US dollars in 2022, almost doubling the previous record. As a result, we have gained extensive experience and expertise in the auction platform, which has positioned us to explore other avenues.
Our goal is for customers to prioritize allocating a portion of their budget specifically for ODC. We want them to view us as a trusted and reliable partner, ensuring that when they have $3 to spend, they reserve $1 for ODC while distributing the remaining $2 among other players. By creating this mindset, we aim to become the preferred destination for diamond purchases.
Transparency is a key aspect of our approach. Unlike other major companies, we publish our auction results and provide information about upcoming auctions and sales lots. This transparency has helped us establish a strong rapport with our customers, leading to trust and continued support even during challenging times. While many companies canceled their auctions due to market difficulties, we have maintained our sales, attracting customers who appreciate the transparency and consistency we offer.
The importance of transparency and consistency lies in providing customers with a clear understanding of what they can expect from us. This enables them to participate in blind bidding, where they make purchases based on accurate descriptions without physically inspecting the goods. This eliminates the need for customers to incur expenses and time traveling to Botswana to view the diamonds every time we have a sale. By ensuring our descriptions align with the actual products, we instill confidence in our customers, allowing them to bid and buy with confidence and certainty.
Consistency and transparency are crucial elements for successfully navigating the diamond industry, which can be unpredictable and reliant on being in the right place at the right time while offering exceptional service. We believe that by maintaining these principles, we can establish ODC as a reliable and trustworthy platform that meets the needs of our customers effectively.
BF: Do you have a final message to the readers of USA Today?
MASIRE: Diamonds are synonymous with Botswana. You cannot have Botswana without diamonds. Unlike other industries or sectors, diamonds are our primary source of sustenance. Therefore, we hold them in high regard and prioritize their protection and preservation.
We are unwavering in our commitment to upholding the integrity and value of diamonds. We refuse to compromise or take shortcuts that could jeopardize their significance. When you choose to invest in diamonds from Botswana, you can be confident that they will be cherished, safeguarded, and held in high esteem. Our commitment to the preservation of diamonds ensures that your investment will be secure and that you will not regret your decision. We deeply value and protect these precious gems that are the cornerstone of our nation’s prosperity. In Botswana, diamonds are for development and for doing good.