The year 2019 presented a difficult sales path for diamond mining giant De Beers Group, the lucrative industry behemoth has to date sold about $ 1.2 billion less worth of polished diamonds this year.
During the first half of the year, sales portrayed steeper downward trajectory in the wake of muted manufacturing sector resulting in a backlog of polished diamond inventories in the midstream and weaker trading conditions. The company which ethically sources about 60 % of its diamonds in Botswana through Debswana, a 50-50 partnership with Government of Botswana conducts 10 cycles in a year at its high rise magnificent Global Sight Holder Sales block in Gaborone.
Ten times a year, sight holders descend Sir Seretse Khama International Airport from Belgium, United States, India, China & the Gulf amongst others markets for about a week long auction sale of rough diamonds from Botswana, Namibia & Canada and South Africa. De Beers Global Sight holder Sales relocated from London to Botswana in 2011.
In the year 2018 De Beers’s rough diamonds sales amounted to US$5.39 Billion, approximately P54 Billion, this was a slight pickup from the 2017 sales value of US$5.31 Billion. For the year 2019 nine (9) cycles have only gathered total sales provisional value of US$3.60 billion, way below the 2019 value of the same period by over $1.2 billion. The slow start was evident right from the beginning of the year with 2019 Cycle 1 registering actual value of US$544 million , US$128 million less than the 2018 cycle 1 which hit heights values of US$672 million.
The first quarter of the year showed slight upward trajectory with cycle 2 sales a bit higher than cycle 1 and cycle 3 showing improvement from cycle 2 as well, however still below the same cycles in the previous year 2018. Right from after cycle 3 De Beers Rough diamonds sales graph started showing steeper downward gradient with Cycle 4 registering US$416 million compared to $US554 million recorded in 2018. De Beers Group Chief Executive Officer attributed the low performance to macroeconomic uncertainties as well as the period‘s seasonally slow trends owing to Indian factories closing temporarily for the traditional holiday period.
A major decline was registered at Cycle 6, which only managed to sell rough diamonds worth US$250 million, way below the 2018 cycle 6 values of $533 million. This was the lowest amount earned from a sale since December 2015, spilling over from cycle 5 value which were also below the 2018 corresponding cycle by about 32 %. De Beers explained that the trend was attributable to sluggish rough diamond trading circumstances in China, the second largest economy and one of its major markets
“While overall retail sentiment for diamond jewellery in the US remains solid, a more challenging environment in China and higher than normal polished diamond inventories in the midstream resulted in a cautious approach from rough diamond buyers during the fifth cycle of 2019," said Bruce Cleaver De Beers Group Chief Executive in June this year. For cycle 6 the group explained that sales were significantly low also because of persisting macroeconomic uncertainty, with retailers managing inventory levels, and polished diamond inventories in the midstream continuing to be higher than normal.
De Beers Group then provided customers with additional flexibility to defer some of their rough diamond allocations to later in the year. Rough diamond sales continued to be very slow in August (cycle 7) with sales revenue totaling to US$287 million, a slight increase from cycle 6 but still significantly lower that the corresponding cycle in 2018 mirroring 44 % decline when gauged against 2018 cycle 7 value of $503 million.
De Beers continued with its flexibility offer into cycle 7 and 8 giving its clients the opportunity to leave up to 50% of available goods on the table to lower the pressure on buyers without lowering their prices. The company announced in an internal communiqué to sight holders in August De that it would buy back up to 20% by carat weight of customers’ purchases instead of the typical 10%, specifying that they could not use both options on the same box of goods.
The company offered several options to increase the flexibility for manufacturers and traders struggling with an oversupply of rough and polished: in addition to the higher level of buybacks – whereby customers purchase the diamonds and then sell them back to De Beers at an agreed price, while having those purchases count toward their 'demonstrated demand' which determines future allocations. De Beers also enabled buyers to make additional deferrals of goods to later sights, and set an earlier date on the annual opportunity for customers to reschedule their purchases.
When commenting in August after cycle seven Bruce Cleave said “With midstream participants continuing to work down polished diamond inventory levels and reduced levels of manufacturing in the key cutting centers, De Beers Group provided customers with further supply flexibility during the seventh cycle of 2019.” To further respond to market pressures De Beers decreased its rough diamond production in Q2 by 14% to 7.7 million carats and revised its full-year guidance downwards to 31 million carats in response to a backlog of polished diamond inventories in the midstream and weaker trading conditions.
INCREASED MARKETING SPEND
In November De Beers Group announced that its marketing spend in the entire 2019 will be totaling to $180 million (around P1.9 billion). This was revealed by De Beers Group Chief Executive Officer Bruce Cleaver on the sidelines of the Diamond Conference held in Gaborone. Bruce said the $180 million dispatch is De Beers largest marketing spend in 10 years.
“This illustrates how difficult the market was in 2019 , and contrary to what many may think ,when the global demand is subdued we may cut down any expenditure for cost containment but not the marketing spend ,that is actually when you have to increase the marketing budget,” he said.
REDUCED PRODUCTION FORECAST FOR 2020 & 2021
When giving a business update in London this week Group Chief Executive Officer of Anglo American, De Beers’s parent company Mark Cutiffani said during 2019 the diamond industry didn’t have it easy, trade wars sparked uncertainty, depressing manufacturing inventories and slowing down the polished diamonds market uptake.
Anglo reported that De Beers sales fell 26 percent this year amid challenging market conditions adding that this will result in the company lowering its lowering its sights on production in the near future.â€¨â€¨Following its revised full year guidance Anglo noted that De Beers is expected to mine approximately 31 million carats of diamonds in 2019, down 11 percent from 35 million last year.â€¨â€¨Prices on a full-year basis have dropped about 20 percent while the diamond price index is down about 5 percent. De Beers’ mix is down in terms of quality (by price) about 15 percent, due in part to the company holding back some higher-quality goods in hopes market conditions improve.
Anglo has cut its diamond production forecast for the next two years. In 2020, it expects De Beers will mine 32-34 million carats, down from its previous outlook of 33-35 million. For 2021, the forecast was cut from 35-37 million carats to 34-36 million carats. Production guidance for full year 2022 is 33 to 35 million carats.
Homegrown LED light manufacturing company, The Bulb World, has kick started operations in South Africa, setting in motion the company’s ambitious continental expansion plans.
The Bulb World, which was partly funded by Citizen Entrepreneurial Development Agency (CEDA) at the tune of P4 million, to manufacture LED lighting bulbs for both commercial and residential use in 2017, announced last year that it will enter the South African market in the Special Economic Zone (SEZ) of North West province under the auspices of North West Development Corporation (NWDC).
The company has already secured a deal with South Africa authorities which entails production factory shells and tax incentives arrangements.
The company founder and Chief Executive Officer, Ketshephaone Jacob has also previously stated that the company is looking for just under P50 million to finance its expansion strategy and is reaching out to institutional investors such as Botswana Public Officers Pensioners Fund (BPOPF) and government investment arm, Botswana Development Corporation (BDC).
However, Jacob told WeekendPost that instead of sitting and waiting for expansion funding the company has started hitting the ground running.
“We have decided to get in the streets of SA, start selling lights from door to door, ” said Jacob who is in currently in Rusternburg to oversee the introduction of The Bulb World products in the market.
Jacob explained more brand activations will be undertaken in South Africa. “The plan is to do it the whole of North West and Limpopo province, through hawkers, we give the hawkers the lights to sell at a factory price and they put a mark up and make a living,” he said.
The Bulb World operates from Selibe Phikwe, it currently employees 65 young people, 80 % of which are Phikwe youth. The company plans to add 100 jobs this year alone as it forges ahead with its regional and continental expansion plans.
In July this year Bulb World products will hit South African Shelves: Pick n Pay, Checkers and Africa’s largest retailer Shoprite.
The Bulb World has been registered as a company in South Africa; the company will start producing lights from Mogwasa after striking a special economic zones deal with North West Development Corporation in North West Province South Africa.
“Over the next 10 years we are looking to create over 5,000 jobs in Africa. Through our expansion into all of Africa we will be able to create employment for various individuals in different sectors namely; manufacturing, distribution electronics and retail,” Jacob told this publication earlier this year.
Jacob said if all goes well, the plan is to have taken over Africa or rather penetrated, and have prevalent presence in the African market.
“We are gunning to have at least 30 percent market share by then. According to a 2016 Market Survey, the total valuation of sales for LED Lighting was 57BN, a portion of which we plan to have taken over by then,” he said.
While the company has set its eyes on Africa, Jacob said, the company has not fully exploited its local growth, indicating that there could be strategic factories built to supply neighbouring countries of Angola and Zimbabwe.
“There is potential for further local expansion as well to other areas of Botswana if things run smoothly as anticipated. Hopefully in the long-term if our fellow Africans and all these markets receive us well we are planning to build another factory,” he said.
“We are looking to build another factory in the Chobe/Ngamiland Area that will give priority to markets in Zimbabwe and Angola,” he said
The Maun based Okavango Research Institute (ORI) has downplayed the impacts of oil and gas exploration in part of Okavango delta arguing that given the distance proposed the likelihoods of negative impacts drilling these exploration wells on the surface water systems is likely to be negligible.
The Institution released a position paper titled ‘Proposed Petroleum (Oil and Gas) Exploration Operations in the Petroleum Exploration License (PEL) No. 73,’ with findings stating that, in the event of discovery of economically viable hydrocarbon deposits, much more careful consideration of the impacts and economic benefits of development of the resource will be needed.
For example, the fracking process for gas and oil extraction is known to require large volumes of underground water.
It further argues that increased extraction of the underground water is likely to affect the water table level and further affect the overall water availability in the river-basin.
“The effect on water availability and use may become worse if surface water is reticulated or sourced by any means from the Kavango River. Should the exploration and fracking for oil and gas expand to Block 1720, 1721 and 1821, the impact on water availability and quality will be significant, especially if the wastewater is not well managed,” said the paper.
The research unit recommends close communication between the relevant Basin State Ministries (Mineral Resources, Environment) and the Permanent Commission on the Okavango River Basin, OKACOM, and other stakeholders must be facilitated.
This will facilitate sharing of the correct information on the desired intentions of the basin states and compromises sought for the sustainability of the ecosystems in the downstream of the Cubango-Okavango river Basin, states the position paper.
ORI as a key stakeholder with scientific information says it is positioned to provide scientific advice and guidance to decision-makers on the potential impacts of both exploration and development and operation activities.
It also recommends that while the impacts might be minimal at the exploration stage, environmental impacts during the development and extraction process are significant.
Findings also state that the SADC Protocol places a mandatory duty to make a notification of planned measures undertaken in any riparian state in cases where such measures hold the potential to cause ‘significant adverse effects.’
It further states that where the planned development is trivial and not expected to cause any significant harm, the development state is not under duty to notify other riparian states.
Given that the drilling in the Kavango Region in Nambia is merely for exploratory purpose and the possibility of harm is minor, it is therefore not surprising that the Namibian government did not inform Botswana.
However, should it be found that the oil can be profitably or economically exploited, the Namibian government would be under a duty to notify both Angola and Botswana.
The institution further states that to ensure sustainable development in the Okavango Delta the following in the context of exploration for and potential development of hydrocarbon deposits within the Cubango-Okavango River Basin, it must be considered that the Okavango Delta is a World Heritage Site listed in 2014 by UNESCO and one of the binding requirements of the listing is the non-permissible commercial mining of any mineral, gas or oil within the World Heritage Site.
It states that the Okavango Delta is also a RAMSAR site in which mining is not allowed.
Should the exploration for minerals, oil and gas be allowed, there is a high chance that a mineral, oil or gas may be found given that the Delta is sitting on karoo sediments and shale rocks which in other parts of the world have been found to be sources of oil and gas deposits. Should oil or gas be discovered, there will be a strong socio-economic pressure to mine oil or gas and create jobs for the masses.
Manufactured in Turkey, Pakmaya Instant Dry Yeast can be used in the production of various fermented products, as it is suited for both traditional and industrial baking processes. All kinds of breads, buns and fermented pastry products are typical examples of applications.
Pakmaya Africa Sales Manager Cem Perdar says Pakmaya has 4 plants in across the world, further indicating that all of the plants have the highest standards of quality certificates and approvals. Regarding raw material, molasses is the main ingredient for yeast. Concerning production activities, yeast manufacturing requires high know-how and capability. Pakmaya has all those capabilities and aspects more than 45 years.
According to Perdar, Pakmaya has been existent in African markets since 30 years. From South to North, Central to East and West, a consumer can find Pakmaya in nearly every part of Africa continent.
“With its high quality, rich product selection and good service, our brand has become the favorite yeast of many Africans. On the other hand, our distributors in African countries are working very hardly and loyally in order to promote our products in their markets. After some time, we are becoming like families with our exclusive distributors in Africa and this enables both parts to work harder and keeps our product sustainable in market,” he said in an interview this week.
The yeast manufacturing giant made its way to Botswana market. The company has been smoothly working with Kamoso Distribution, a local distribution company. Perdar told BusinessPostthat two entities have been working hard to earn is market locally.
“At the moment we have a good market share with them in Botswana market. I’m sure during 2021 long, we will be increasing our sales and market position. Soon we are going to start a marketing campaign in Botswana, so that means Batswana will see and recognize Pakmaya more and more. Pakmaya wants to be the best friend of bakers in bakeries and ladies at homes in Botswana.”
As per global COVID-19 regulations to curb the spread of the COVID-19, Botswana just like other country closed borders. Providentially, the restrictions did not affect the company destructively.
Perdar says “Kamoso Africa is a very important and strong partner in Botswana territory. With Kamoso’s hard work and strict measurements, we have done a very good job. So as Pakmaya, we have not suffered any distribution problem. Our partner is doing the needful at the reaching our products to end users.”
He further said “We are doing well in Botswana market and hoping to make much more. Our aim is to enter every single corner in Botswana territory. With our new marketing campaigns, we are planning to be the most preferred yeast in Botswana market.”