Africa may be a source of fabulous wealth, but the money never stays long: soon enough it ends up in London or New York, or a Zurich bank account. Which makes the move by De Beers, a global diamond firm, to relocate its head office from the United Kingdom to Botswana all the more remarkable.
By the end of this year De Beers will have moved its entire corporate structure from a tasteful, upmarket London address to earthier surrounds in Gabarone, the sleepy capital of landlocked Botswana.
In doing so, it transfers a US$6.5 billion (Dh23.87bn) a year business from the heart of capitalism to an economic backwater many of its clients hardly even know exists.
"It is a groundbreaking business move that will change the history of Southern Africa. It will bring international sales, as well as aggregation and supply chain functions, to Botswana by the end of 2013," Varda Shine, the chief executive of De Beers' Diamond Trading Company, which handles the company's sales, told a news briefing in Gaborone earlier this year.
In doing so, De Beers will execute the largest-ever corporate investment in Africa. The company is the world's largest diamond producer and marketer, accounting for almost half the global trade.
But it has long been the complaint of major producing nations such as Botswana, that stones are shipped out raw, with value-adding cutting, polishing and setting taking place elsewhere.
Israel, for instance, is one of the world's top diamond exporters, even though the country does not have a single mine on its soil. Belgium, Antwerp, London, Delhi, and increasingly Dubai, are also significant processors of quality stones, whereas Botswana, the mines of which produce a third of annual production, trails far behind.
The reason companies head north are many; economic and political uncertainty to investor-unfriendly laws. South Africa places severe restrictions on capital repatriation, which means investors can't always get their money out when they need it.
In total, the World Bank estimates sub-Saharan Africa has lost more than $700bn in capital flight since 1970, a sum that far surpasses the region's external debt outstanding of about $175bn.
As for De Beers, the company de-listed from London and Johannesburg bourses in 2001. It dominated the diamond trade to the extent that its executives were barred from entering the United States, where the company was labelled an unfair monopoly.
De Beers is now 85 per cent owned by Anglo American - another African mining company that emigrated to the FTSE in the 1990s, and the Botswana government, which holds about 15 per cent of the company.
With deep-pocketed backers, it has no need to raise capital. But this is not to say this won't change. By moving to Gaborone, De Beers has all but turned its back on the traditional financial pipeline. It will also have to leave behind half of its corporate staff, many who are reportedly going to quit rather than follow their employer to a city hardly known for its sparkling cosmopolitan lifestyle.
Still, De Beers' move is expected to help transform an economy that depends as heavily on diamonds as Abu Dhabi once did on oil. Several Indian banks have already reportedly opened offices in Gaborone; so has Tiffany & Co, one of the world's leading luxury brands.
And 10 times a year, De Beers holds its sightholder auctions, which major diamond dealers must attend if they are to have stock.
Already, diamond firms in Dubai, Tel Aviv, India and Antwerp are looking for office space in the city. Hopes are also high that cutting and polishing firms will also want to set up in the country.
The influx of skills and demand for services are expected to assist with the government's long-cherished goal of diversification and beneficiation. As with the UAE, Botswana is hoping it can use the wealth buried in its soil to transform itself into a modern economy.
It is an experiment being closely watched. Should Botswana succeed, other African countries will begin pressing for companies that mine the earth to bring more to the continent than digging equipment.
business@thenational.ae
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10 tips for entry-level job seekers
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Arda Atalay, head of Mena private sector at LinkedIn Talent Solutions, Rudy Bier, managing partner of Kinetic Business Solutions and Ben Kinerman Daltrey, co-founder of KinFitz
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MATCH INFO
Euro 2020 qualifier
Russia v Scotland, Thursday, 10.45pm (UAE)
TV: Match on BeIN Sports
Another way to earn air miles
In addition to the Emirates and Etihad programmes, there is the Air Miles Middle East card, which offers members the ability to choose any airline, has no black-out dates and no restrictions on seat availability. Air Miles is linked up to HSBC credit cards and can also be earned through retail partners such as Spinneys, Sharaf DG and The Toy Store.
An Emirates Dubai-London round-trip ticket costs 180,000 miles on the Air Miles website. But customers earn these ‘miles’ at a much faster rate than airline miles. Adidas offers two air miles per Dh1 spent. Air Miles has partnerships with websites as well, so booking.com and agoda.com offer three miles per Dh1 spent.
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Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
Ain Dubai in numbers
126: The length in metres of the legs supporting the structure
1 football pitch: The length of each permanent spoke is longer than a professional soccer pitch
16 A380 Airbuses: The equivalent weight of the wheel rim.
9,000 tonnes: The amount of steel used to construct the project.
5 tonnes: The weight of each permanent spoke that is holding the wheel rim in place
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In Praise of Zayed
A thousand grains of Sand whirl in the sky
To mark the journey of one passer-by
If then a Cavalcade disturbs the scene,
Shall such grains sing before they start to fly?
What man of Honour, and to Honour bred
Will fear to go wherever Truth has led?
For though a Thousand urge him to retreat
He'll laugh, until such counsellors have fled.
Stands always One, defiant and alone
Against the Many, when all Hope has flown.
Then comes the Test; and only then the time
Of reckoning what each can call his own.
History will not forget: that one small Seed
Sufficed to tip the Scales in time of need.
More than a debt, the Emirates owe to Zayed
Their very Souls, from outside influence freed.
No praise from Roderic can increase his Fame.
Steadfastness was the Essence of his name.
The changing years grow Gardens in the Sand
And build new Roads to Sand which stays the same.
But Hearts are not rebuilt, nor Seed resown.
What was, remains, essentially Alone.
Until the Golden Messenger, all-wise,
Calls out: "Come now, my Friend!" - and All is known
- Roderic Fenwick Owen
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Euro 2020 qualifier
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TV: Match is shown on BeIN Sports
BORDERLANDS
Starring: Cate Blanchett, Kevin Hart, Jamie Lee Curtis
Director: Eli Roth
Rating: 0/5
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Engine: 1.5-litre, four-cylinder turbo
Transmission: seven-speed dual clutch automatic
Power: 169bhp
Torque: 250Nm
Price: Dh54,500
On sale: now
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1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
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3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
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6. Further transfer pricing enforcement
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8. Pillar 2 implementation
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9. Reduced compliance obligations for imported goods and services
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10. Substance and CbC reporting focus
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Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
Infobox
Western Region Asia Cup Qualifier, Al Amerat, Oman
The two finalists advance to the next stage of qualifying, in Malaysia in August
Results
UAE beat Iran by 10 wickets
Kuwait beat Saudi Arabia by eight wickets
Oman beat Bahrain by nine wickets
Qatar beat Maldives by 106 runs
Monday fixtures
UAE v Kuwait, Iran v Saudi Arabia, Oman v Qatar, Maldives v Bahrain
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MATCH INFO
Tottenham Hotspur 1
Kane (50')
Newcastle United 0
Results
1. Mathieu van der Poel (NED) Alpecin-Fenix - 3:45:47
2. David Dekker (NED) Jumbo-Visma - same time
3. Michael Morkov (DEN) Deceuninck-QuickStep
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7. Anthony Roux (FRA) Groupama-FDJ
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10. Fausto Masnada (ITA) Deceuninck-QuickStep
The%20specs
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Soldier F
“I was in complete disgust at the fact that only one person was to be charged for Bloody Sunday.
“Somebody later said to me, 'you just watch - they'll drop the charge against him'. And sure enough, the charges against Soldier F would go on to be dropped.
“It's pretty hard to think that 50 years on, the State is still covering up for what happened on Bloody Sunday.”
Jimmy Duddy, nephew of John Johnson
