The Okavango Diamond Company (ODC) in 2023 celebrated a decade since establishment, reflecting on a journey that has been successful, despite odds not in favor of the state-owned diamond marketer. ODC is preparing for another decade ahead where it will play a key role in the next chapter of Botswana’s diamond dream.
In an exclusive interview with The Projects Magazine, ODC Managing Director, Mr. Mmetla Masire, revealed key insights into the company’s evolution, challenges, milestones, and future role as the company prepares to become a major player in the global diamond industry.
ODC was established in 2013 with three main mandates: to ensure that the Government of Botswana has a direct commercial route to market for a portion of its share of Debswana diamonds, to provide the government with strategic information about the diamond industry, and to assist the government in developing Gaborone and Botswana into a major rough selling centre.
FORMATIVE YEARS CHALLENGES
However, the path was not without hurdles. The diamond industry is not kind to new comers, and ODC was not going to be an exception. Skepticism loomed over ODC’s viability as a business entity mainly due to its government association.
“People were skeptical as to whether ODC will survive as a business. People saw ODC as a parastatal or a government entity, and generally such entities are not associated with success,” said Mr. Masire as he reflected on early challenges of ODC.
The company was initially registered as Okavango Diamond Trading Company in 2012, and re-registered in April 2013 as Okavango Diamond Company (ODC).
According to Masire, the way the company was originally structured and constituted would have meant that it would have been a loss-making organisation, dependent on government subvention for survival.
ODC was originally registered as a company limited by guarantee like clubs, associations and non-profit organisations. It would not pay any dividends and would be on life support from day one. This was identified on time and the company was re-registered now to operate as a private company thus allowing it to develop profitable and competitive strategies.
ODC was given the initial working capital loan by the shareholder. Masire highlighted during the company’s 10th anniversary stakeholder dinner, held on December 6th that the initial working capital was the first and last time that Government gave ODC a loan which was all paid back.
However, for the benefit of the market, especially the financing institutions, the Government of Botswana, being the sole shareholder, provided a USD 100 million guarantee, but ODC has never drawn down on this guarantee. Its significance was that it enabled ODC to negotiate good credit facilities with banks at favourable rates and terms.
ODC was ready to go out and have its first sale by June 2013, but, according to Mr. Masire, nobody knew ODC let alone trust it to a point that they would be willing to pay large sums of money for diamonds before they were delivered to them.
In the initial stages of entering the market, ODC faced the challenge of being relatively unknown and, consequently customers could not trust it. To overcome this hurdle, the company commenced operations with a select group of customers, gradually establishing trust and credibility. Today, ODC stands as one of the most reputable and transparent rough diamond sellers, boasting a clientele of well over 500 customers, as highlighted by the ODC Managing Director.
Challenges persisted, from weathering global recessions to navigating the unprecedented challenges posed by the COVID-19 pandemic. Yet, ODC swiftly overcame the negative global impacts, demonstrating resilience and adaptability in tumultuous times. During the COVID-19 pandemic, ODC management was not able to meet, and their customers were not able to travel to view diamonds in Botswana.
BUILDING A RESILIENT ORGANISATION
Despite the initial skepticism, ODC showcased its prowess by achieving notable milestones. From an inaugural sale of US$94 million during 2013, at its infancy to surpassing this to a remarkable $1 billion revenue mark in 2021/2022, ODC’s trajectory has been one of consistent growth and success.
“First year it was set up, it was able to sell US$94 million worth of diamonds. In today’s money it is not a lot of money, but at the time, under the climate it was operating and the skepticism, it was a lot of money,” said Mr. Masire.
“In 2014, it reached half a billion in sales revenue, proving that it was a company on the right track, by the time we got to 2021, we were already breaking the record for single day rough diamond auction sales.”
A cornerstone of this success has been the cultivation of strong relationships with global customers mainly from Belgium, Israel, Dubai and India. Transparency, reliability, and consistency in product delivery have fortified these ties, with customers exhibiting unwavering loyalty, even during challenging market conditions.
“We maintain strong relationship with our clients, we are transparent with them, and we present our product in the manner that suits our customers. We have been consistent with delivery,” highlighted Mr. Masire.
“We have created a trust arrangement. Most of them choose us. I want our customers to be able to say, if we have three (3) dollars, One (1) dollar is for ODC. The other two (2) dollars can go to other suppliers. We saw that during this year; it has been very difficult, some of them chose not to attend other tenders/auctions, but they consistently came to the ODC auction. This demonstrates an element of loyalty and strong relationship.”
THE BOTSWANA DIAMOND DREAM
The new sales agreement, which was agreed on the 30th of June 2023, was the result of negotiations between the Government of Botswana and De Beers, who have been partners in Debswana, the joint venture that operates four diamond mines in Botswana, since 1969.
The new agreement, yet to be concluded, will give Botswana more control over the pricing and marketing of its diamonds, as well as more opportunities for local beneficiation, such as cutting and polishing, jewellery manufacturing, and diamond trading. It also allows Botswana to sell its diamonds to other buyers, besides De Beers, through ODC.
Mr. Masire understands that ODC reaching its 50% of Debswana run-of-mine is contingent upon the company being able to successfully sell its initial and ramped up allocated portions, which will commence at 30% and progress over the 10 years of the sales agreement to 50%.
“Government took a bold step in trusting ODC to handle 50% of Debswana production. It is not a small decision. I think ODC needs to up its game obviously, and ensure that it delivers because if we don’t deliver it will have negative impact on Botswana. The success of this deal is linked and tied directly to ODC,” said Mr. Masire.
With the new deal taking shape, ODC will have to rise to the occasion, as it will move from contributing just over 5% of the global rough diamond supply to being a major player globally with over 10% of the global rough diamond sales in the next 10 years.
“We foresee several significant changes stemming from the new deal. Primarily, the transition to our new headquarters, scheduled for mid-2024. The new facility will offer ample space for diamond viewings and provide a specious working environment for the operational team,” Mr. Masire stated.
“And it provides appropriate security requirement for the business we are in. The building itself is a major achievement, but in terms of the way we work, we are reviewing our whole organisational structure. What it means is that, the new deal positions ODC and elevates its significance it terms of supplier of rough diamond in the world, thus we must make sure we have the right team to deliver.”
TECHNOLOGY AND DIGITILIZATION
Technological innovation and digitalization have emerged as critical component for ODC’s future. ODC is embracing digital solutions and collaborating with various players to streamline processes, enhance sorting technology, and fortify its position in the global market.
Moreover, with increasing demand for traceability and ethical sourcing in the diamond industry, ODC is actively working on programmes that provide clear provenance for its diamonds, underscoring Botswana’s role and commitment to ethical practices.
“Covid-19 was a trigger to ODC to review and enhance how it does business. We have established formal partnerships with the likes of Botswana Institute for Technology, Research and Innovation (BITRI), and the University of Botswana to help us on the design and refinement of our sorting technology. Engagements with BIUST have also started. Since ODC started, all the diamond handling and sorting was done physically by our staff. We are trying to introduce machinery to assist in that regard, which will assist in two ways, increase the volumes we can handle, and reduce physical workload on our staff,” Mr. Masire said.
ODC has already invested in valuation technology, such as the Galaxy system, to help with the grading and pricing of its diamonds. “We are looking at a major step up in terms of the technology we are going to deploy,” Mr. Masire added.
Another key aspect of ODC’s technological strategy is traceability and provenance, which are becoming increasingly important in the diamond industry. G7 countries have put a lot of pressure on diamond-producing countries to demonstrate and show where their diamonds are coming from, and demonstrate that they are not conflict-linked. ODC will have to pass this requirement/test.
Masire explained that ODC’s current customers who are buying diamonds also want to know where their diamonds are coming from, even if they are not from Russia, the customers still need assurance that they are ethically sourced. “With lab grown diamonds also coming in, we need to show what natural diamonds are doing for the producer countries, and why Botswana is where it is because of diamonds,” he said.
Mr. Masire said that one of the challenges for ODC is to obtain a license to operate, because without selling to G7 countries, it would be in big trouble. “Once we have satisfied that, we now need to show the consumer that these diamonds benefit Batswana. We need a technology that will be able to track where the diamonds are coming from,” he said.
ODC has been working with the Gemological Institute of America (GIA) in terms of the mine to market programme, m2m, which allows consumers to access information about the origin and journey of their diamonds. ODC has also partnered with Rapaport and GIA to launch the Green Star Diamonds, which are certified as natural and ethically sourced from Botswana.
ODC is now looking at having a formal programme where it can put its diamonds on a digital platform that can verify their traceability and provenance. “Whether it is Tracr, Sarine or any other system, we are in discussion with all these organisations as we speak. Because the G7 starts demanding the traceability of diamonds in March, we need to be on one of the programmes within the next two months,” he said.
Masire added that ODC also wants to tell the story of its diamonds, the story of their origin, the story of what diamonds do for this country, the story of diamonds for development, diamonds for transformation, and so on. “We want to showcase the positive impact of diamonds on Botswana and its people, and how ODC is contributing to that,” he said.
BENEFICIATION AND CITIZEN PARTICIPATION
Beneficiation is the process of adding value to the rough diamonds by either cutting, polishing, or manufacturing them into finished products. ODC has been selling a significant percentage of its goods to local customers who have set up manufacturing facilities in Botswana to support the Government Beneficiation strategy.
“Going forward as our allocation increases, and we introduce contracts, there will be special contracts called beneficiation contracts, whose objective will be to supply only those who have set up in Botswana or those who want to set up in Botswana. If we give them more diamonds, they will need more resources and more people locally,” said Mr. Masire.
Citizen participation is another key aspect of ODC’s strategy, which aims to empower Batswana to participate in the diamond value chain. Mr. Masire said that ODC is looking at citizen participation in three areas: ‘to help citizen businesses by giving access to rough diamonds, to capacitate citizens and give them knowledge on how to run their diamond businesses and expose them to the diamond industry and issues, and to help with the general awareness so that Batswana can start appreciating the value of diamonds.”
ODC has already made progress with selling to citizens, giving them direct access to its diamonds through a model called 3P3E. ODC has already had two sales under this model, in October and December 2023. “We met all the companies, and understood their challenges, and came to an agreement on how we can support them better,” he said.
THE SOCIAL LICENCE TO OPERATE
Masire said that the company has identified the country’s needs and decided to align its CSI and ESG programmes with its vision and values. “We at ODC believe that our company is youthful, entrepreneurial, transparent, and well-run. Therefore, we decided to associate ourselves with something that matches our beliefs,” he said.
ODC has chosen to focus on three areas: education, youth, and women. The Managing Director said that ODC is still working on developing a full-blown strategy around CSI and that it is trying to increase the amount of support it gives compared to the previous years. ODC is collaborating with other organisations and stakeholders to maximize its impact.
Mr. Masire admitted that ESG was becoming almost a license to operate, as customers are going to judge ODC on many grounds. He said that ODC’s strategy had a pillar dedicated to the development of an ESG programme, which is not normally something that one would find in a strategy as an objective.
“We put it there deliberately, just as we did, with citizen empowerment and participation. We put them in the strategy to highlight them and to hold management accountable. The board will demand on a regular basis that we report and talk about them,” he said.
Mr. Masire said that ODC had gone out on tender to have consultants to work with it and help develop that aspect of ESG. He said that ODC has a fairly well developed and active CSI programme, but it now needs to bring its environment and governance side and put it in a manner that could align with sustainable development initiatives.
“This fiscal year, for the first time we will be releasing a comprehensive integrated report. We are starting to slowly move towards having a full-blown ESG programme. The expectation is that next financial year we will have a full-blown ESG programme,” he said.