They spoke of Botswana’s desire to go down the value chain, what natural diamonds have to offer that lab-grown can’t, future diamond supply, the chances of finding a new mine, and smart mining. Above all, they clarified what is standing in the way of De Beers and Botswana renewing their agreements.
Following is the transcript of the interview held September 15, 2022, during the Facets 2022 conference in Antwerp.
Edahn Golan: Good morning, gentlemen. Honorable Minister Moagi, Mr. Bruce Cleaver. Thank you for setting aside some time to sit and talk with us and answer some questions. We won’t start with negotiations, but (Bruce Cleaver: that didn’t take long).
We have a lot of guys here with a background in economics and good agreements, so maybe we’ll get some tips out here.
So, we have a panel later today in the event on how to create sustainable diamond economies. And clearly, we have two people here that have some experience, if not a lot of experience in the field. Minister Moagi, what are your views on what are the keys to success?
Minister Moagi: Thank you very much moderator, and from the perspective of the government of Botswana, the critical success factors really relate to how we use our diamond revenues to actually impact the socioeconomic lives of our people. And to say this, we also use the diamond ecosystem to actually reach out regionally and internationally in terms of how we use our diamond revenues for the people of Botswana.
I’ll give a few examples, and this includes, you know, investing in healthcare because we need our people to be healthy, to actually carry out everything that we need to do for the development of the country.
We use our revenues for the education sector, so as to have the requested skills that we can then use everywhere else in the country to develop our country. We use our revenues to actually improve on the infrastructure, so that we have a fit for purpose, services that we can use for the development of our country.
We also then look beyond that and look to create hubs of innovation or technology hubs that can also then impact just beyond the diamond industry, so that we can have the industries that we need.
But further, we’ve dealt so much in the upstream process. We now need to go down through the value chain, so that we can now start implementing our beneficiation strategy, going through all the facets of the business, so that our people can now start enjoying each and every step of the diamond value chain.
This we do. We believe these are the critical success factors of a relationship like this in using the diamond revenues for our country.
EG: Bruce, you have a company’s perspective. What are your…
Bruce Cleaver: Yeah, I mean, my thoughts are very similar actually to the minister’s. I suppose the way I look at it is it’s not really feasible to have a successful sustainable diamond industry if you don’t have successful, sustainable economies in places like Botswana, where a significant portion of the diamonds are produced.
So, you know, the way I look at it, these gotta be kind of in sync for us to make sustainable businesses for all of us, all of us in the room, and all of us in the producer countries. And I think, you know, some, some good examples spring to mind in the COVID period, a kind of terrible COVID period.
I think there was tremendous cooperation between all sides here in order to keep the kind of long-term sustainability of the industry going. So, you know, we spent a lot of time during COVID talking to the government, talking to Mr. Moagi and his colleagues about how we collectively can work together to keep things going.
The minister mentioned healthcare. One of the things that was really important to us in the period was to try and ensure that we kept our people as healthy as possible in Botswana and all the other countries in which we operate. And, you know, even though retail stores were shutting, you don’t have to think back far, two years ago, it’s very complicated to shut a mine for all kinds of reasons.
It’s very complicated from a safety point of view. It’s very complicated to restart them. They’re not like retail stores [where] you just close the doors in the morning.
So, we spoke a lot, and we determined to keep the mines going. And one of the reasons we did that is we wanted the whole supply chain, which is in Botswana, lots of local participation to continue, you know, to benefit from that. Really important people were healthy, that they had food on their tables, you know, things like that.
And so, if we’d shut all of those things down, all that supply chain would’ve stopped. and I think, you know, we actually carried on buying, buying diamonds at a time when we, I knew we couldn’t sell ’em, and we canceled sights along the way. But we did it in very close collaboration with government, with a clear objective in mind, which is this will pass, and we need to make sure that we can create an economy and an industry that can sustain itself beyond that.
So, I think there are good illustrations in the company, as well as to how we’ve done that. I think in the future, we are going to have to think about different things. And I know we’ll get onto later today talking about kind of topics of the future. But to me, the only way you can do this is if you do it in a way where you all recognize that in this ecosystem, we all can thrive if we can thrive together, and we won’t if we sort of fracture.
I’ll give you one example, which has got nothing whatsoever to do with the diamond industry, but it is an illustration to me of where this all broke down. And people have heard me say this before. I mean, one of the things that I will never forget as long as I live is vaccine inequality.
You know, we had 79 people die in the De Beers group, 78 in the Southern Hemisphere from COVID. And their only real reason is governments in the developing world couldn’t get vaccinations quick enough. And governments in the developed world hoarded them. It’s quite simple, you know, as I’ve often said, why should it be that my 20-year-old son in England should get three doses of a vaccination before my 85-year-old parents in South Africa could get one?
There’s an example, I think, of how this all broke down. So that’s, as I say, it’s not an example relevant to the diamond industry, but it’s an example of what’s going to happen if you can’t collaborate in a more intelligent way to make a sustainable end-to-end business for all of us.
And so, you know, my thought on this is you’re not going to have a sustainable diamond industry unless you have a sustainable Botswana. You’re not going to have a sustainable Botswana unless you have a sustainable diamond industry. And together we can make these things sustainable.
What is Keeping Botswana & De Beers Together?
EG: Yes. So, this is to both of you, maybe Minister Moagi will start. What has been the secret of the, a kind of a sappy question, what’s the secret to the relationship between De Beers and Botswana? What keeps it alive?
MM: Well, with over half a century of this partnership, which you can equate to a marriage in a way, we believe that transparency, communicating effective communication together, doing things ethically, corporate governance has been part of it, and the role of law is really how we get to appreciate each other. We look each other in the eye, and we don’t necessarily have to agree together all the time, but at least we appreciate each other’s perspectives.
And because we see the value of this business for both of us, it helps us to sit down, around the table, and then we can actually get to resolving a lot of issues together.
One of the key issues also is the agility in terms of how we do things. You know, our business is, is very volatile, is very uncertain, complex decisions to be made, and we need that agility to actually do these things.
Therefore, this brings us to 2020, during the COVID era, where we’ve had to actually look at some of the operational issues that we had to deal with, you know defer in some of the things that we needed to defer, you know. There were no sights where people come together to view our diamonds and things like that.
We’ve had to change the way we do things, and we had to do that together around the table, given the nature of the business. So, this has actually helped us to cement this relationship because we looked into the longer future and said, “If we don’t do this together, we all perish.” So, the need to actually engage each other frankly, so that we can actually resolve an issue has come to the fore in terms of how we build on this relationship.
And we believe that, over the years, there has been a fundamental strength from both ends. Those fundamental strengths are actually what is keeping us together to move beyond where we are today.
BC: I’m not sure there’s much I can add to that, actually, because I think that sums it up. I think, you know, if you take a step back, you know, I mean, I go around the world and people often ask me about this partnership, and many presidents say to me, it’s, you know, “Why can’t we replicate it in our countries?’”
And, you know, it’s a model that I think the minister would agree, people are completely envious of us around the world. And although, you know, as the minister says, of course, there are times when government has a different aspiration than a commercial partner, and we recognize that.
But I think there’s so many things that draw us together here, and Minister Moagi touched on them, and we all want the same thing. We want proper ethical value chains. We want to treat our people properly; we want proper governance.
And we are almost obsessed with governance in the way we operate together. We want the best practices in the world. We want the best for the people. We want to be able to enhance the skills of the people, as the minister says.
But I think, most importantly, is the point that he made, which is, you know, when there are differences in any marriage, as everybody would know, those that are successful are ones where people can sit down and talk about them, and talk about them in an adult fashion and resolve the issues.
And those examples of what happened in 2020 are a good illustration. You know, we, we went to the government and said, “People can’t travel, so we can’t, It’s not possible to have sights in Gaborone.”
And as the minister said, it didn’t take a long time for government and De Beers to agree that we would do them differently.
It didn’t go through a whole long process that required six months of agreements to be written and so on. And of course, the world is recovered, and we all delighted to be back in Gaborone. So, there’s a good example, I think, of flexibility and trust.
So, it’s built on trust. I think it’s built on a very, very common set of values. And notwithstanding the fact that we sometimes have different aspirations, we have the same core values for the businesses that we operate together.
Botswana’s Long-Term Position in the Diamond Sector
EG: To follow up on this, and on the previous question as well, how does Botswana want to evolve its position in the diamond sector long term? We’re going to get to the question about the contract later, but long term?
MM: Yes. obviously,
EG: Or maybe it’s tied together. I don’t know. You tell me.
MM: Obviously, we realized over the years, that we’ve had the strengths we’ve had, whatever we could get out of this relationship. But we also believe that there’s continuous improvement in anything that we do. We spent a lot of time on the upstream process of our business.
And we believe that as we evolve, it is time that we now go full hawk on the midstream, go full hawk on the downstream of the business, capacitate citizens in terms of getting into the cutting and polishing industry, into the jewelry industry, into the marketing and pricing of our business.
And we believe that the time is now that these skills are imparted onto our people, and they are also capacitated to actually not just have the skills, but also now turn into owners of these businesses.
So, this is the evolution of how we see it as a government. We also believe in a knowledge economy. We believe that technology and innovation will also see our people through. We can also improve on our business as we get more involved in terms of technology and innovation in that space.
And we believe that with this technology-centered approach, it’ll also transcend not just the diamond industry, but a lot of other industries in the country, in our business. Therefore, we believe that we must now go beyond just being in the upstream. We must go into every facet of the value chain, and therefore, that is wealth to our people, wealth to the economy and the development of the country.
Communicating That A Diamond Comes From Botswana (& De Beers)
EG: So, you mentioned technology, and I want to talk with you a little bit about, one of the issues that we are constantly dealing with. There’s a growing focus on provenance, demand that’s coming from both consumers, but also from high-end companies in the industry. What do you want to communicate about a diamond that comes from Botswana? What do you want the consumer to understand?
MM: There is a story behind where you get your diamonds. The consumer of today is actually looking at how that diamond has been sourced, you see. So, it also helps the country to actually sell that story. It is not that about buying a diamond – it is about the emotional connection of that diamond, that natural diamond to the consumer.
And you want him to him or her to actually keep that relationship of actually buying that ethically sourced diamond natural diamond. Therefore, yes, continually we need to up our scale in terms of talking about the provenance, how our diamond has been sourced ethically without doing harm to the environment, and how it has actually transformed the lives of the people, because we now talk right from exploration to retail, and then we have to take everybody else through that story.
And how the benefit, the work from that, those processes has actually impacted the education, impacted their healthcare, impacted the socioeconomic wellbeing.
Therefore, yes, it is imperative, It is important that we continue to actually tell the consumer out there where and how their diamond has been sourced. And we know, traditionally, back then, you just wanted a certain type of good without necessarily wanting to understand how that good was made.
But now, as you increasingly go into the ESGs, we really need to be ethical in the way we do our things just to make sure that all of these, which we keep in custody for the next generations, they can actually find when they actually come to be.
EG: Bruce, I think he brings up a couple of interesting points. You know, selling diamond jewelry is always about telling a story, and the minister makes a compelling case about why we should say this diamond, a particular diamond, came from Botswana. But if we look at the history of it, we don’t see a lot of success in terms of country-specific branding. Why do you think that’s the case?
BC: I think actually that the minister has touched on that, Edahn. I think that the world has evolved beyond just where the goods came from.
So, I think the days of French champagne, simply because it’s French champagne, it’s going to sell at a premium to all other sparkling wine, were probably passed. I think the question is now, and it’s a question that retailers are asking, and more and more consumers are starting to ask, certainly millennials and Generation Z are starting to ask this question as the minister says.
It’s not just about where, it’s about how. Now, you know, and sort of in simple terms, unfortunately, a number of our consumers don’t know their geography terribly well, so they don’t actually necessarily know a country in Africa from another country in Africa. So, I think, and it’s just a fact.
So, I think the pure point that it came from a country alone, I think is a good building block to build on. But I don’t think that in and of itself is going to differentiate the product very well.
And if you take, it’s an example, if you take the car industry, I don’t think people pay a premium for German cars just because they’re German. They pay a premium for German cars because they’re made in Germany, and they know they’ve done well, but they’re BMW or they’re Audi or they’re Mercedes.
So, I think there’s an element of a brand attached to this in order to do the storytelling that the minister talks about. I think consumers exactly, as the minister said, are more and more interested in what they’re buying. Does it have the same values that they do? Does the product or the brand represent the same values they do?
And we have an amazing story to tell here. I must have touched on a number of them, but we, in the natural diamond business, can do things that nobody else can do. You know, the good that we do for communities is incredible.
You know that story I told earlier about keeping supply chains going and keeping many, many, many people employed and healthy is a really powerful story. You know, the work we do with women and girls, all the Building Forever work that we do, the work we do on provenance, the work we do on continuing to enhance ethical standards. Nobody else does that. Lab-grown can’t do that, for example.
So, the question for me is now how do you tell that story and how do you attach the uniqueness to every single diamond a consumer buys to what that diamond actually did?
The schools have built, the roads that, you know, the roads have built. I mean, you know, all these stories about Botswana, but when we found Orapa in the 1960s, there were four miles of tarred road in Botswana. They are now 4,000 miles of tarred road. There’s no way the lab-grown industry can do that.
That’s because the government wisely invested its diamond revenues for the good of the people. So those are the kind of stories I think we’re going to have to tell. I think we have rich storytelling content, and we are in the beginning of devising more and more innovative ways of telling those stories. You know, Code of Origin in De Beers is a really interesting example of this because it’s not just the country of origin. It’s the whole story, as the minister mentioned.
And I think that’s why, to come back to your question, why a pure country mark alone probably isn’t going to move the dial. But it’s the building block for, I think, some very rich storytelling and an engaging [one] with particularly younger consumers, in a way we really all need to think about doing business.
The Story of Responsibly Sourced
EG: I agree. So, kind of following up on that, how can diamond companies carry the story of responsibly sourced? So, it’s the environment, but it’s also the investment in infrastructures, the example that you gave, in places like Botswana, and bring it all the way down to retail so retailers can actually carry that story into…
BC: Yeah, it’s a great question, and it’s one we, of course, spend a lot of time thinking about. And I know all of you in the room spend a lot of time thinking about it. And, of course, good news is a harder story to get out, in general, to bad news.
And it’s a fact of life, you know. Social media and these things make it easy to tell negative stories and kind of fake news, et cetera, et cetera. So, I think we all are going have to be better, more thoughtful, more deliberate, and more targeted about how we tell these stories.
So, I mentioned Code of Origin. I mean, we’ve got a program going on that is a very exciting program that tells the story of Botswana, for example. But tells it in a way that I’ve been talking about it, you know, in a rich way. And, in due course, you’ll be able to track the good that your diamond did all the way along the value chain.
Now that’s gotta be something we’ve all gotta think about doing. And it comes back to this point of being together. You know, if we all pick a little piece of this, and don’t do this in a more collaborative way, I think we might not deliver the full value we need to.
So, I think all of us have to think about this, government has to think about it, we need to think about it, everyone in the room needs to. I think we need to think differently about the way we do it. We have different tools these days, you know, social media, we have influences and all these things.
But it’s not a particularly easy thing to do because, as I say, bad news travels fast. I think all of us need to be really focused on governance, on ethics, on supply chains that are absolutely the best they can be.
Because these are the kinds of things consumers demand. These are the kinds of things governments demand, and we can do it. So, I think it’s a great question. I don’t have a magic answer for this question, but I think it’s one we all need to spend a lot of time deliberating and working on. And I know you’ll be talking about that in the course of the day,
EG: And it’s probably an evolving answer as well.
BC: Yeah. And the answer today will be different to the answer in five years’ time. The world moves on really fast and, you know, we live in a world that is, the changes are so fast now that, you know, you have to keep adapting.
Bringing the Story to Consumers
EG: Minister Moagi, you know, there’s a perception that government, you know, countries see producing, countries see their needs, the midstream sees their own needs, the retail sector – it’s sort of a disconnect. But I want you to follow up on that. How do you think a country such as Botswana should bring its story all the way down to retail?
MM: We don’t have a story as a country without all the stakeholders and the players, whether it is upstream, midstream, or downstream. Therefore, all of you have to come together and ensure that you can all tell a story because it is a win–win situation for all of the participating partners.
Therefore, whatever the midstream does, the downstream does, or the country does, we need to tell that story. Because it is about the people, at the end of the day.
There are people working in the midstream, people working in the downstream, people in government, there are people in the country. All of this wealth is meant to actually impact those lives for the good of the country. And if all of you are together in this endeavor, then everybody else would actually appreciate what does.
You see, people go to work, they want to come back home healthy and not hurt. They want to have skills; they want to go beyond where they are today. So, it is a cycle that needs to be weaved together with all the stakeholders.
The Kimberley Process: Needed, But There Are Issues to Resolve
EG: So, kind of continuing that, and I want to take a slightly different direction, but Botswana is now chair of KP (Kimberley Process). Any thoughts on the future of KP?
MM: Well, if we look at where KP is today, and at when we started, I think the diamond industry would be in bad shape had it not been there. We see KP has got its issues and it needs all of us at the table to actually resolve those issues. So, I believe that we need to continually look into KP and fix it. But it’ll be very bizarre and hurting to the diamond industry if the KP process was not there.
So, we believe that whatever the challenges that KP has, we need to continue working on those for the good of the industry rather than to believe that we can simply just scrap it and move on with our lives.
I believe that since its inception there has been some good that has happened to the industry, and we need to continue to build on that and to improve on whatever is not currently obtaining at KP. So, I still believe there’s a life for KP. It just needs all the members and the participants to actually sit around the table and resolve the issues.
EG: So, we have a government representative that is a producing country, that says “we believe in KP” even though there’s some criticism that says that it’s not “there”. You’re a founding member. What are your thoughts?
BC: Yeah, I mean, I think we, as an organization, are in a similar space. I think that KP is an important building block in delivering ethical value chains that people want. It’s not the only one. It’s certainly one that government has, governments generally have more control over.
And then, as you know, we’ve built out our Best Practice Principles along the way and we continue to evolve those. But, you know, there’s many facets that go into ensuring that there’s a completely ethical, sustainable value chain. And the Kimberley Process is an important part of that. I know, as the minister says, I don’t think anyone would pretend it’s perfect. I think it has brought stability to an industry, and I think when it was brought in, it was very effective. I would agree that there is more work needed to be done on it.
And I think, you know, some of the work on the definitions definitely does need to be done. There is some momentum to do that.
I think it has to be done inside the process. I don’t think getting it done outside of the process is going to achieve anything. So, I’m in the same camp. I think to abandon the KP now would be a terrible mistake.
I think we do need to work together on reforming it, and we do need to work together on all the other building blocks we have to ensure ethical value chains.
You know, just for example, it’s only governments who can police customs. Nobody else can do that. It’s a very, very powerful tool, for example, in combating money laundering. It would be a very silly thing to do, in my view, to get rid of it. And it’s going through a difficult time right now for reasons we all know.
And that’s not easy, but I mean, our position will be to continue to support it and to continue to work with the participants in order to try and reform it in a way that is acceptable to all the participants. But I think for people to suggest that it’s something we can do without, in my view, would be a mistake.
Why A New Sales Agreement Was Not Signed Yet Between Botswana and De Beers?
EG: Yeah. So, the elephant in the room, are we ready for that?
BC: <laugh> Of course.
EG: Okay. So why have the two parties not yet signed a new sales agreement? And I’m not pointing fingers, but which one of you wants to answer?
BC: Do you want to start or shall I? <laugh>
MM: Well, I’ll take it.
EG: We know Botswana likes elephants, so maybe you should…
MM: Over 45,000. Yeah.
MM: Yes. Let’s look at the positives. We’ve built a successful partnership over the years, over decades actually. And over the decades there, we’ve had successes along the way. And you’ve also talked, even Bruce talked about it earlier on, what we’ve done throughout the years, the bringing of the business to, and other issues there.
So, we note, over the years, that we’ve got some key fundamental issues that we hold dear as a country, and as De Beers as well. And therefore, that is actually cemented how we look at the business for both of us.
And we look at each other across the table and say, “This is how I view this.” And also, as a business, they would say, ‘This is how we view this,” and, therefore, it forces us to now sit and really extract every little element out of the many elements in the agreement for the good of both the business.
Yeah, so when they come with a compelling argument, we sit and really dissect it so that, at the end of the day, we believe that, yes, we’ve given it thought, and we are keen to agree with them, or we’re keen not to agree with them.
So, we believe that, over the years, we’ve learned a lot out of the relationship and now we want to really ensure that what accrues really goes towards the impact of socioeconomic lives, of the people of Botswana.
That is why we really are taking our time. Despite the delays of COVID, we’re taking our time to ensure that whatever comes out of this relationship is really solid for all of our people. The people of Botswana, the people that De Beers impacts on their lives, wherever they are.
But we’ve had some ticks on the many elements that form this agreement, this relationship. So only a few things are left. And we believe from where we are coming from and how we view this relationship, we be able to get to a consensus in the not-so-distant future.
EG: So, if I may draw a quick conclusion, the majority of the issues are resolved and there’s a little bit left. Maybe. Bruce?
BC: Well, it’s important to stress a few things here. I mean, firstly, we’ve done a number of these over the years, and they’ve all taken time. And that’s important that both sides have been able to take the time to consider all of these matters.
These are very important matters for both parties. In the past, every time we’ve done one of these, we’ve come to an agreement that is an agreement both sides are happy with. And I’m absolutely confident that the same will happen in this agreement.
I think we should also remember that we are actually doing two things here. One is we are negotiating a sales agreement, but the second one is, at the same time, we are negotiating an extension of the leases at Debswana for 25 years.
Now, you’ll appreciate that is a once-in-a-generation discussion because it’s 25 years, and these are the world’s, is the world’s, greatest diamond mine.
And it’s important then that both parties think very carefully about the terms of that renewal, and that requires a very detailed understanding of what the assets are and what they can do.
Not today only, but in the future, and the investment we all gonna make in those assets to make them work, and so on. So, it’s actually a much more complicated conversation than, I don’t mean the word like this, but just doing the sales agreement. We’re actually doing two things at the same time, and they both have tremendous importance to government and tremendous importance to us.
We then did have COVID, and you’ll appreciate, these are definitely discussions that are much better held face to face. And that took a while and did set us back, there’s no question. But we were dealing with other things as, as you heard from the minister. I think I agree with the minister.
We have made a lot of progress over the last few months. A lot of items have been agreed, and I’m very confident that, very soon, we will agree on the remaining items.
BC: And I don’t incidentally think it’s an elephant in the room. I think we both welcome the question, and we have nothing to hide here on the question. So don’t feel bad about asking the question at all.
De Beers and Botswana on Lab-Grown Diamonds
EG: Okay. So, maybe there’s another elephant, maybe a different elephant in the room. Bruce, from the perspective of the world’s leading seller of natural diamonds and the minister from the world’s leading producer of natural diamonds, and the country that maybe as we heard here, benefited the most from natural diamonds, what’s your view on lab-grown?
BC: Well, let’s start with me. I mean, I think our view is very clear and very well known. Our view on lab-grown is, of course, shaped by the research we do on it, and we’ve done for years and years and years.
And there is lots of the research – it’s not different today than it was five years ago – and that is, if consumers know what they are buying, and if they know the true facts about what a lab grown is, and what a natural is, they, for the most part, do not regard them as the same category.
They regard lab-grown, and so do I, as a perfectly legitimate category, but not the same thing. Regard it as a fashion jewelry item. You often hear me use the words fun, lighthearted in relation to them, and it’s not the same thing as a natural.
And that’s actually behind our view on, on lab grown. So, we think there is a place for them. We think that, ultimately, and we think there’s some evidence that this is happening already, they will separate into two completely distinct markets.
And that, of course, has been what our Lightbox strategy has been. We want to offer consumers what they tell us they want. What is important, and I’m sure we’ll both come onto this. What is important though is consumers are given absolute clarity on what the two are, what they aren’t, and what the differences are. That’s not always happening.
So, there’s really clear evidence in my view of things like wholesale, online, retail, for example, that there are tremendous divergences in price between natural and lab grown. And that’s because they are not the same thing. I can see that at retail physical retail stores, there’s definitely still some confusion, but from my point of view, you know, the more production there is, the cheaper the product will get as it must. It’s just a technology product.
The more people produce, the cheaper they will produce it, the lower the cost will go, and we will end up in a situation where, you know, where we always thought this would be. So, for us, and I know you hear me say this all the time, De Beers is a natural diamond business.
We will spend between 10 and 11 billion dollars over the next five years expanding our natural diamond business. We wouldn’t be doing that if we weren’t super-confident in it, and so I feel very strongly that lab-grown is a perfectly legitimate category, but it’s not the same thing.
Thoughts On LGD’s Sustainability Claims
EG: Minister your thoughts, and if you could also add something about the sustainability claims made by lab-grown companies.
MM: Yes, our position really is informed by the importance of our natural diamonds to our present and our future. And I’m inclined to agree with Bruce here that, you know, anything that has got no rarity is mass produced, and will naturally not stand with the natural diamonds that we have.
We believe that these are two entities that will run parallel, but to never converge.
You see, there’s a place for naturals – there’s a place for LGDs, you see.
But, of course, we are in this business together. And that is why we’ve also been spending time to actually understand them, and so that we make sure that there’s a lane for each and every one of these.
We believe that our naturally sourced, ethically produced diamonds have a long way in terms of addressing the socioeconomic needs of our people. And therefore, that is where we are spending a lot of our energy.
We believe also that the LGDs must be marketed for what they are, and not marketed along the malignment and degrading of how natural diamonds are produced. Because, at the end of the day, those two elements can also be expanded by the natural diamond producers. But we believe that in business, it is about selling and marketing your product rather than chiding and degrading whatever your competitor is all about.
BC: I mean, I would agree with that. I think there are two things that are worth saying here. The one is, you know, I don’t like – it’s not everybody – but I don’t like the way some lab-grown producers like to advertise their product by being degrading about the natural product. I think that’s wrong, frankly. And I think, you know, by all means market your product, but I think let’s just stick to the facts here, particularly as those facts are not true. And then, the second one isn’t, again – you both touch on it – there are some lab-grown producers who talk a great deal about sustainability.
Well, firstly, we know from the evidence that the vast bulk of the lab-grown producers are not operating sustainable businesses at all.
But secondly, they cannot begin to compete with the good that natural diamonds have done. So, you know, the story about Botswana, I can give you other stats in that story.
I think there were three schools in the country in 1967, I think, and there are now 300 or more. You know, there’s no way a lab-grown industry could do that. That’s because the government used its diamond revenues wisely and built a country. And that can never be done by a factory that employs 50 people and produces the same thing again and again, and again and again, as the minister said earlier, there’s no rarity in that.
There’s no uniqueness in that. There’s no specialness in that. And so, I do think, it’s something we do need to keep on top of as the natural industry.
We’ve got a great story to tell, and we should tell it better. And we need to be thoughtful about people who we think tell stories that are not really factually accurate. And I think there’s probably more work to be done there.
Diamond Supply Peaked, Current Level Steady
EG: If you look at the long term, we know that diamonds, natural diamonds, are a finite resource. Any chance that lab-grown could actually step in and replace…?
BC: I don’t think so at all. I think, I think as I said earlier, they are two completely different categories.
In fact, you know, you might even find one day that lab-grown is an entry product into the natural. Whereas people might start buying a lab-grown and can’t afford a natural, and, in time, as they get more wealthy, trade up into a natural.
So, you might find this as an additive benefit for the natural industry, but I think the supply point needs to be made as well. I mean, I’ve said for a number of years supply has probably peaked, but I’ve also said that if you look at the great mines of the world, they’ve got long lives ahead of them still.
So, we are not facing an era of supply falling off a cliff. And we are doing an enormous amount of work in Debswana and in other parts of De Beers about extending the lives of these great assets.
I’m sure the minister will talk about the Debswana extensions, and we are doing that – because these are tremendous assets, but you know, these assets will keep going for a long time. So, when I talk about supply and demand, what I mean is supplies probably peaked, but will stay largely flat, I think for 20, 30, 40 years, and potentially even beyond that because, often, these mines have life beyond them.
We just haven’t done enough drilling to know that they do. And technology will get better.
So, mining these complicated ore bodies will become easier. And it may be that there are other ore bodies out there that you can’t mine today, but you can mine them in 10- or 15-years’ time because the technology improves.
And we should at some point touch on that because there’s great work going on there. But I think it’s important to stress it’s not as if we are facing, you know, in the next 5, 10, 15, 20, or 25 years, a natural diamond supply crisis.
Actually, we are in a good space here. We’re going to have broadly flat levels of natural diamond production. If we can carry on growing demand at above that, which I’m absolutely convinced we can do, we’ve got a great future ahead.
EG: At today’s levels?
BC: At today’s levels. Yes, Yeah.
Technology is Changing the Diamond Industry
EG: Interesting. Your thoughts? Bruce mentioned technology. Do you think technology will change the diamond industry in Botswana?
MM: Indeed, I believe that technology continues to actually impact the way we do things in the diamond industry.
Even look into diamond-producing companies’ exploration of itself. You look at Botswana, well over 70% has been explored. But now if you get into the technologies that they’re using nowadays for exploration, a lot more of the country will be explored. Who knows? You might even find the next Jwaneng in those countries.
But it is the technology that is going to improve the way we do things right from exploration right after retail. Further, it’ll also improve the way we do business. Safety is very paramount in our business. Yeah. Future smart mining is what we’re going to be bringing in. So that there’s a lot more of the physical person coming out of the coalface. And then we’ll do execution much more safely in things like that.
Productivity, data analytics – those are the things that are going to be used more to actually get these things out of the way. And also, if you look into, in terms of the green technology, you see the advent of hydrogen-powered vehicles, you see that will reduce our carbon footprint.
So that’s technology working way right across the value chain. So, all of these things, including what Bruce talked about earlier, the blockchains, the tracer, this helps and further goes to the consumer where the consumer now needs to know where that diamond has been sourced. So, tracking of that is part of it. So yes, I believe that technology will continue to go a long way.
We now moved, as Bruce mentioned earlier, from mostly our traditional open-pit mining to underground mining, and things like that.
There’s a lot of technology that is coming under that, a lot of technology that detects underground gases and things like that. So yes, there will be a huge impact in terms of how we do business in the diamond industry.
Extending Life of Mines
EG: So, you actually touched on my next question, and that is, how do you intend to extend the life of mines in Botswana and get more out of them?
MM: Yes. There’s a lot of work that is currently happening now, moving away from the traditional open-pit mining. For instance, we’re giving an example of the Jwaneng mine, which is the biggest diamond mine. There, they are now under the last cut, cut nine of the open pit. The most economic from the studies that we’ve done so far is to now go underground on those cuts.
Orapa as well. There extension of new cut, cut three, that response. We’ve got other diamond mines in Botswana. If I can just mention Lucara, they’re now moving into underground mining because they’ve now exhausted the economic potential for open-pit mining. So yes, we’ll continue to use technology just to make sure that we can add another 50 years into the lives of our mines.
BC: And if I may add that, I mean, I think technology is already changing the world for all of us. I mean, just look back 10 years. I don’t think we could ever run our businesses 10 years ago through COVID, but we all did. We found a way. We spent our lives looking at a screen, but we found a way of doing something we’ve not been able to do before. Yeah.
And I think people sort of underestimate sometimes the speed of technology change. So, all of these things that the minister talks about are absolutely being embedded in our businesses. And this question of future smart diamond mining, it’s how are you going to mine a deposit in a much more environmentally friendly way, in a much smarter way, in a way that’s more automated in the sense that you remove people from harm.
And there’s already a lot of great work going on there in the mining space to do things, in a way where you can keep people away from the coalface, where data is being used to analyze everything.
But it’s more than just that. It’s a whole mindset change about how do you mine in a more gentle way, how do you work with communities more as you start rehabilitating mines from the day you start, rather than from a long way along the value chain. And it doesn’t stop there.
You know, there’s huge amount of change going on in the midstream. I don’t have to tell anyone, there’s all kinds of different technologies coming out. Tracr is one we’ve spoken about. We’ve got some others coming, lots of other people are working on it. The retail world’s completely different.
Digital sales are completely different, online is completely different to what it was 10 years ago. And that will change. So, I think the opportunity to extend these assets’ lives is completely linked to how the way we operate in a completely different way. The hydrogen fuel cell is a great example.
You know, [De Beers parent company] Anglo-American has built effectively the world’s first hydrogen-powered mining trucks. These are 360-ton trucks that you couldn’t possibly run with a battery electric vehicle.
It’s doable, you know, and it’s doable in this decade. And there’s loads of other work going on about sustainability, making sure that all of the mines around Southern Africa are powered by renewables, and so on. And it’s all part of this thinking, which is technology is gonna be something that completely changes the world.
You know, when I last went to Jwaneng, for example, there in the plant, I don’t know when you were last there in the plant, there is a control nerve center that is completely digitized and completely automated in a way that you wouldn’t have seen five years ago.
So, there’s a few folks sitting in the room who might have slightly different skills to what they might have had 10 years ago because they’re all, they’re skilled in IT. And, you know, they can tell you what’s going on in the plant anywhere across their plant at any minute without having to leave the control room.
We’ve got, I’ll give you many examples. You know we [are] very big on something called predictive maintenance. So, we’ve now got AI that can predict when a machine that’s working in a mine is going to fail. So, you can fix it before it fails.
And those are just great. And that’s obviously from a cost-and-time point of view, it’s brilliant because you can fix it at its next maintenance cycle. You don’t have to wait until it breaks in the field, and then move it.
And so, I think those are just lots of examples of how technology will completely change the game for us, and I think will make for a better environment for all of us and allow us to invest more in communities while we’re at it.
The Prospects of Finding Another Major Diamond Deposit in Botswana
EG: So, with all these new technologies, are we going to find another major diamond mine in the near future?
BC: Yeah, it’s, it’s a great question. I think we are making an effort to – I can tell you that.
MM: But also, Edahn, with all these skills imparted, it is not just Botswana. These skills can be exported to other countries. I mean there are lots of other diamond mines elsewhere. They need these skills and, as much as 50 years ago, we needed skills, and we brought in the skills through partnerships.
So, this is the time now that some of these skills can be exported to those countries who made the skills to impart those skills. That’s the knowledge economy. So, we are looking into this because we know that once you’ve got the knowledge, you need to use it, and you can use it for the better elsewhere. Yeah.
BC: So just to come back to that question on exploration. It’s a difficult question to answer. Diamond deposits are not particularly difficult to find, diamondiferous deposits.
Economically extractable ones are very difficult to find. You know, I presume you heard this. There’s some great statistics here in the history of diamond exploration. About 7,000 kimberlites have been discovered, 700 of which had diamonds in them. Seventy only were economically extractable. And seven only, two of which are in Botswana, are what we call tier-one assets containing value of more than $20 billion.
So, there’s no question that we will find more kimberlites. The question is, will we find more kimberlites that are economically extractable?
As the minister said, there’s large parts of Botswana that are unexplored. And so, it’s quite possible that we will find one. What I am clear on though is that when we find one, as the De Beers group anyway, we will build a mine in a completely different way because we have to take cognizance of all these things that I’ve spoken about in order to deliver them quicker.
EG: And have it built from the get-go.
BC: Yeah, and plan it from the beginning, plan the future better from the beginning, have it built quicker, more sustainably less invasive, and so on. So, I think there’s actually an exciting world out there. It may be that we don’t ever find another mega deposit, but there certainly will be deposits found. And I think as technology goes along, there will be better ways of extracting them.
That’s why I don’t sit here thinking there’s going to be a supply crisis in 20 years’ time where all supply just falls off the cliff. I think we, as the mining part of the world, will find other solutions to ensure that supplies are sustainable.
EG: And that’s why lab-grown won’t take the place of diamonds
BC: Yes, I mean that’s one of the reasons, I mean, the main reason I still think they’re not the same thing at all. And I think by the time another five and 10 years has passed, that will be even clearer.
The Long-Term View of the Diamond Industry
EG: So, considering that, where do you see the industry in 10 years’ time?
BC: Yeah, it’s a great question, and it’s obviously one we all think about a lot. I think some of the trends we are seeing today will continue. I think provenance is never going to go away.
And I think it’s a big opportunity for all of us. I think what we call building forever, sustainability, ESG, is a massive opportunity for those who do it right. And it’s a massive risk for those who do it wrong.
But I think that’s a big part of the story in the future. And I think all the work that we do there, we’ve spoken about carbon neutrality and these kinds of things are going to be very, very important. I think digitization and automation are definitely a part of the future. Not only mining. in the midstream, in the downstream, and so on, I think.
EG: Traceability will be…
BC: Traceability, provenance, I think kind of link those I suppose as part of the same thing. Traceability will be very important for consumers telling the story. For consumers will be very important, and I think brands will be more important. I think brands are going to be a way of allowing – brands are a shortcut to trust after all.
So, I think they will be a way of allowing consumers to buy the brand and buy that story we were talking about earlier. But I don’t think they’re gonna buy the story outside of the brand. I think the brand is important because it’s gonna allow them – it’s assuming it’s a brand they trust – to trust the story of all these things that happened along the way.
Fundamentally, I think if we do our jobs right, there is no reason to think that consumer demand for natural diamonds will fall. I think people still love the product. They love it. They’re deeply invested in it.
Yes, we’ve gotta be better, and yes, we’ve gotta be different. But that to me is the core of what will still drive the industry. And of course, driving demand is something we all gotta do.
EG: You have thoughts on this? I mean, I see the wheels turning.
MM: Yes. I mean we, I share the sentiment that Bruce is talking about. There’s a long way to go, but there’s a lot more of doing things differently due to technology that is there. Digitization space is also very key in how things are going to evolve. I mean looking to how we actually conducted auctions and other things during the COVID era.
So, these are the things that are really saying to us the industry evolves differently. We just have to be agile in terms of making sure that we can get to those decisions much faster and prominently like we do. And sustainability is key. Sustainability is key using the common footprint. Right now, we have mines now, all of them bringing in solar technology and other green technologies in terms of how they produce the diamonds.
So, the story will keep on selling that this has been done with due regard for their environment in that sense. So when you look into the ESGs, we are really saying we want to continue the good story of the naturals by ensuring that everything has been done ethically, has been done with true regard for the environment, has been done with our people in mind because it is the people at the end of the day, that really we need to take care of and make sure that they’re happy, and their socioeconomic wellbeing is taken care of. So, yes.
Managing Through Disruption
EG: Okay. So, we’re closing, we’re close to the end. I have a question about, I asked about lab grown. We talked a little bit about technology, but you know, there’s always disruption that happens, You know, something unexpected. COVID is an extreme example, but how do you know from a managerial standpoint, and if you can you know, maybe give some insights for. This is a room full of managers. What do you do when you’re hit with something that disrupts your business in such a…
BC: Yeah, it’s a great question. And, you know, I often reflect on COVID, and I obviously reflect on the war in Ukraine and the sanctions. And I think when we look through, we’re very focused on preparing risk logs, and we are the risks in the business and how we are mitigating them.
You didn’t find a pandemic on our risk log until 2019. Nor did you find a war that was followed by sanctions, whatever you might think of them in on the risk log either. So, it’s a great question.
I think, we live in a very, very uncertain world. I think the minister made that point earlier, and I think we have to expect that there should continue to be disruptions that we can think about and disruptions that we can’t plan.
You know, when I think about disruptions of the diamond industry, not global ones like that, but ones that disrupt the diamond industry, I always say to my team, I think we spend too much time thinking about our competitors that we know. We should all spend more time thinking about the competitors we don’t know. Because often those are the, the people who turn up and surprise you.
And so, we do spend a lot of time scanning the future horizons, looking at trends, looking at, you know, potential outsiders who might want to get into the industry, and maybe they’ll bring good to the industry, but maybe they’ll disrupt the industry.
So, I think we all need to think a little bit more out the box than the way we traditionally have. I think when one of these crises happens, I think that’s really when you get really stretched as a management team because you really have to divert a lot of the effort and the focus that’s going on in the rest of the business to deal with this crisis. And so, if you take COVID, and I’m sure the minister will tell you a similar story about government.
I mean, we had to divert all of our attention to COVID. And so, keeping our people safe and getting the vaccinations to people and all the equipment we’ve provided and those kinds of things.
That requires tremendous focus by a tremendous number of people. And you need to give them the space to be able to do that.
The challenging bit though is the business will come back, and how do you keep going, keep the core business going relevant, ready to go when things come back? So how do you keep investing in marketing during that period? How do you keep investing in consumer insights? How do you keep investing in keeping those mines open that we spoke about? And it isn’t easy.
So, I think it’s about finding the right people in your organization, finding enough space and enough focus to focus on the short term. But you can never forget the medium-to long term, because it will come.
Weathering the Expected Economic Turbulence
EG: Absolutely. So, one of the goals of this conference is to find ways to take the knowledge that we have and have a discourse with other parts of the industry that we don’t usually talk with. And so, either of you, what’s the key to all parts of the industry to successfully get through the expected economic turbulence that is expected to be upon us in the coming months? And what can we learn from the challenges that are ahead?
MM: Well part of it, foremost, is the engagement of all the players. You need to appreciate where the challenges are, but you also need to be steadfast in terms of your long-term vision of where you want to go. I mean, crisis will always come into play somewhere. You don’t even know whether how to resolve them. But you also need to have the hope of a resolution beyond where you are today.
One case in point is COVID is already mentioned. We could have buried our head in the sand and just waited and waited. But we decided that some things have to really give. So, we actually took a decision as a government that first and foremost will be the lives of the people. We also through his excellency [the president] brought in the research agenda of how we are now going to do things differently to what we’ve been doing, anticipating, also that there will always be those crises and risks that we need to now be ready for.
And, therefore, we also embraced a lot more in terms of lack of digitization in the economy because we believe that a lot more things could be done without necessarily being physically there.
And so, we accelerated and catapulted the way digitization could actually impact even the remote villages in terms of education, whereby there’s remote learning and things like that. Extension of the networks so that it can reach to all and sundry. So really, it is about going beyond the norm of what you currently have been doing and anticipating things that you would otherwise. If things were normal, you wouldn’t anticipate.
So yes, that’s how we look at it. And as a country, once we dealt with the huge impact of COVID, we were able, everything else fell into place now because everything else could actually happen.
We saw that in the mines, whereby they wanted to stop their mines, but our economy runs on this. Surely, there ought to be one way that we could look at it and actually continue to execute. And we had a meeting of minds, and we continued, but making sure that the health and the welfare of our people is foremost.
EG: Thank you, honorable minister, Mr. Bruce Cleaver. I think we got some pretty interesting answers here today. We do not have a date on the signing of the contract, but we know that.
BC: You’ll be the first to know.
EG: it’s imminent. Thank you very much. I think they deserve a round of applause.
The interview with Minister Lefoko Moagi and Bruce Cleaver is available on YouTube.
Photos courtesy Shruti Mehta and AWDC.