Technological Innovation and Export Diversification through the Development of Diamond- Processing Capabilities in Botswana’s Diamond Cutting and Polishing Industry Dr. Letsema Mbayi 27 th August 2014 FES/BIDPA/UB Conference

The Government’s Ambitious Plan Transform the country into a Diamond Centre by developing downstream capabilities in: Cutting and Polishing Trading Jewellery Manufacturing Ancillary services To achieve this the government signed ground breaking agreements with DeBeers in 2005 and 2012 to help establish a downstream industry Local rough diamond sales Independent sales window 20 cutting and polishing companies have been licensed in Botswana Receive rough diamond allocations on a number of conditions, including that they train locals with cutting and polishing skills

The Cutting and Polishing Skills Diamonds are cut and polishing using a series of steps, maximum light reflection and refraction, giving polished diamonds their sparkle Traditionally the skills are craft skills Learnt over long apprentices Tacit knowledge was crucial in the craft Technological revolution that started industry in the 1980s has changed the nature and mix of skills used in cutting and polishing process. From tacit to codified knowledge Technologies like laser, computer numerically controlled (CNC) machines and computer-aided design (CAD) have increased accuracy and improved the quality of the polished diamonds Knowledge codification has simplified the skills needed by production workers and simultaneously enhanced the skills required in machine maintenance.

The Current Development of Diamond-Processing Capabilities in Botswana All cutting centres built capabilities by transferring skills from expatriates to locals Government provides general skills (basic education) Firms are providing industry and firm-specific skills mainly through on-the-job training There are plans for the provision institutional training –To reduce the firms’ costs of training –Create more local knowledge on the downstream industry (regulators, service providers) –But the current level of institutional training is still very low

Botswana’s Opportunity Since Botswana is a latecomer to the industry, provided the scope for it to leapfrog to the most efficient technologies aiding the country’s ability to build diamond-processing capabilities State-of-the-art factories using the latest technologies in the industry These technologies are making firm training for production jobs more efficient since less tacit knowledge needs to be transferred to workers during training Generally the firms were impressed with how quickly training was taking place amongst locals for production jobs but the development of maintenance skills was less satisfactory Weakness in institutional training is affecting the country absorptive capacity for the new technologies Maintenance skills Related technical skills

The Changing Composition of Diamond Exports

Policy Implications Yes technology does mean that potentially less jobs are created But you build more competitive industries faster Competitiveness is crucial for a latercomer to any industry Technology needs to be seen as a good thing and not just a threat to job creation Leapfrogging Policies needs to support technological absorptive capacity in new industries Training Technological acquisition Policies also need to encourage global firms to play an active role locally in technological development Through the innovation hub – policy coherence Innovate technologies that are more relevant to the local conditions BUT issues of productivity need to be addressed with separate policies e.g. Benchmarking

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