VZCZCXRO5190
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHOR #0233/01 0790744
ZNR UUUUU ZZH
R 200744Z MAR 09
FM AMEMBASSY GABORONE
TO RUEHC/SECSTATE WASHDC 5653
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHLO/AMEMBASSY LONDON 0225
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFISS/HQ USAFRICOM STUTTGART GE

UNCLAS SECTION 01 OF 02 GABORONE 000233 
 
SENSITIVE 
SIPDIS 
 
STATE FOR AF, EEB 
STATE PLEASE PASS OPIC 
STATE PLEASE PASS USTR 
 
E.O. 12958: N/A 
TAGS: ETRD EMIN EFIN EAID BC
SUBJECT: BOTSWANA: U.S. DIAMOND FIRM WAITING OUT THE GLOBAL 
CRISIS 
 
SENSITIVE BUT UNCLASSIFIED.  NOT FOR INTERNET POSTING. 
REPORT CONTAINS PROPRIETARY BUSINESS INFORMATION. 
 
¶1. (SBU)  SUMMARY: U.S. diamond manufacturing and 
distribution company Lazare Kaplan International (LKI) 
recently completed construction of a $10 million factory in 
Gaborone, but has suspended local operations and retrenched 
staff due to the global economic crisis.   LKI's Botswana 
Managing Director Alfred Dube told Ambassador Nolan March 19 
that he expects the diamond industry to suffer from weak 
demand at least through 2010.  However, he reports that LKI 
is moving forward with plans to implement a $250 million loan 
guaranty facility for sightholders of Botswana's Diamond 
Trading Center (DTC) approved by the OPIC board in September 
¶2008.  Maurice Tempelsman, the Chairman of Lazare Kaplan's 
Board of Directors, plans to visit Namibia and Botswana in 
early April.  In Botswana, Tempelsman will meet with 
President Khama and other GOB officials to discuss 
implementation of the OPIC loan program and possibly to 
propose a plan for a group of investors to buy rough stones 
and hold them until diamond demand resumes.  END SUMMARY. 
 
 
--------------------------------------------- ---------- 
LKI Botswana Operations Suspended Due to Lack of Demand 
--------------------------------------------- ---------- 
¶2. (SBU) The Ambassador and Pol/Econ Chief met with Alfred 
Dube, the Botswana Managing Director for U.S. diamond 
manufacturer Lazare Kaplan International on March 19.  Dube 
explained that LKI recently completed construction of a $10 
million dollar factory in Gaborone, and the company had 
previously expected the factory to be engaged in cutting and 
polishing operations by this month.  However, because global 
demand for diamond jewelry sharply declined in the 4th 
quarter of 2008, LKI realized that they could not begin 
production in Botswana at this time.  Despite having hired 
and trained staff, LKI was forced to retrench them and 
indefinitely suspend operations at its new factory.  Mr. Dube 
commented that Lazare Kaplan's Christmas sales had been 
terrible, and this left a great deal of excess inventory with 
retailers and in the company's pipeline.  Though Mr. Dube 
predicted that demand for diamonds was not likely to improve 
much until at least 2010, he was confident that Lazare Kaplan 
and the other 15 ightholder companies that operate in 
Botswana will be able to wait out the economic crisis. 
Though2009 will be a very bad year, Dube believes that te 
sightholders will not pull out of Botswana. 
 
------------------------------------- 
Implementation of OPIC Loan Guaranty 
------------------------------------- 
¶3. (SBU) In September 2008, the OPIC Board approved a $250 
million guaranty facility to help Botswana develop its 
diamond cutting and polishing industry by increasing 
available credit.  The OPIC facility was awarded to Lazare 
Kaplan in cooperation with participating banks, to include 
ABN-AMRO.  According to Mr. Dube, LKI is still working with 
ABN and the GOB on implementation of this program.  ABN is in 
the process of applying for a license to operate as a bank in 
Botswana, which they hope will be granted soon.  Though the 
16 Botswana sightholders are not borrowing now as they are 
not buying stones, Dube confirms that LKI is taking the long 
view and preparing to implement the credit facility so that 
it will aid business once demand improves.  Maurice 
Tempelsman, the Chairman of Lazare Kaplan's Board of 
Directors, plans to visit Namibia and Botswana in early 
April.  According to Mr. Dube, Tempelsman will be in Gaborone 
April 7-9 and plans to meet with President Khama, Finance 
Minister Gaolathe, and other GOB officials to work out the 
details of how the OPIC loan guaranty will be implemented. 
Mr. Dube also explained that during Mr. Tempelsman's visit to 
Botswana, Lazare Kaplan hopes to propose a plan to the GOB 
and Debswana which may help as the country and company suffer 
from the global economic slowdown.  According to Dube, it is 
a complex plan, but the essential idea is to use the capital 
market to raise a fund to pay Debswana for a stockpile of 
stones, with the agreement to hold the stones for a certain 
period and then sell them once diamond demand recovers and 
split the returns amongst shareholders.  Lazare Kaplan has 
heard initially positive feedback on this idea from both 
 
GABORONE 00000233  002 OF 002 
 
 
Debswana and the GOB, but they will present a more detailed 
concept paper fleshing out the idea during the Tempelsman 
visit. 
 
 
----------------------------------- 
Skepticism Over Zimbabwe's Diamonds 
----------------------------------- 
¶4. (SBU) Ambassador Nolan asked Mr. Dube about reports of a 
diamond discovery in Zimbabwe's Eastern Highlands.  Dube 
commented that he is skeptical about the Zimbabwe find 
because there is so little reliable information available. 
Though the Government of Zimbabwe tries to give the 
impression that this is a major discovery, Dube says that no 
evidence has yet been offered to support the GOZ's claim.  He 
said that "some diamonds are being grabbed and sold by 
corrupt government officials, but they have no idea what they 
have" (in terms of mining potential).  Mr. Dube does not 
believe that the deposit will be found to have significant 
value, and he noted that it has not yet been properly 
assessed.  He also confirmed that the GOZ had sought out 
Russian investment in the diamond field, but that Russia had 
declined the offer.  Mr. Dube noted that his biggest concern 
was that the Zimbabwean diamonds could cause a negative 
perception of the diamond industry in western markets.  He 
expressed hope that the Kimberly Process will be used to keep 
the Zimbabwean stones off the market to avoid any negative 
perception about illicit diamonds from Zimbabwe. 
NOLAN