THE state-owned Okavango Diamond Company (ODC) in Botswana has taken the proactive step of suspending its rough diamond sales as part of a broader industry initiative to address the surplus inventory arising from a decline in global jewellery demand, its Managing Director, Mmetla Masire, announced on Tuesday.
ODC, which boasted a remarkable $1.1bn in revenue in 2022, conducts ten auctions annually to market its 25 percent share of production sourced from the Debswana Diamond Company, a joint venture involving Anglo American’s De Beers and the government of Botswana, pursuant to the partners’ gem sales agreement. In 2022, Debswana produced approximately 24 million carats, with ODC securing an allocation of about 6 million carats.
The company’s upcoming November auction has been cancelled, and a decision on the December sale is pending, reflecting the diamond industry’s struggle to contend with slowing demand for cut and polished diamonds, particularly in the United States and China.
Mmetla Masire explained the situation, stating, ‘For the first time, we have had to build up inventory as we do not want to just irresponsibly release goods into a market which is already oversupplied. For now, we have stopped the auctions, we will decide on the December auction.’
This halt in diamond sales is part of a broader strategy to address the challenges stemming from market dynamics. Notably, last month, trade associations in India, responsible for cutting and polishing about 90 percent of the world’s rough diamonds, called upon their members to temporarily cease rough diamond imports for two months to balance supplies and stabilise prices due to weakened demand.
In August, De Beers, a prominent player in the diamond industry, announced its willingness to allow customers to defer a portion of their purchases for the remainder of the year.
In parallel to these measures, under a new agreement between De Beers and Botswana, ODC’s allocation is set to increase to 7 million carats. Masire disclosed that the company is actively exploring the introduction of contract sales, a sales model predominantly employed by De Beers, encompassing almost 90 percent of its supply, along with other innovative sales channels.
Masire explained further, ‘We are still to decide on what percentage of our allocation will be sold through contract sales to complement our auctions. We are likely to have two-year sales contracts and we are looking at going into partnership with only a limited number of buyers so that we can better serve them.’
This strategic shift highlights the diamond industry’s adaptability and determination to navigate the challenges posed by the evolving dynamics of global demand and supply, ensuring long-term sustainability and growth in this essential sector.
