Diamond-producing countries in Africa, including Botswana, in 2018 received a total of US$8.1 billion translating to 9.5 percent of the total global revenue of US$85.9 billion generated from the sale of diamond jewellery.â€¨â€¨
This was announced by the World Diamond Council (WDC) president, Stephane Fischler ahead of the 2019 Kimberley Process plenary meeting, which will be held in New Delhi, India next week.â€¨â€¨He said although some countries in Africa had considered the amount they received as insufficient, the economic potential of the diamond resource whose value increased by five as it travelled from the mine to the retail jeweler, was indisputable.â€¨â€¨
"Diamond deposits hold the promise of a better future for all African producing countries, and more specifically for the communities living in areas where they are located," Fischler said.â€¨â€¨He added; "To realise this promise, those mining the product need to receive fair value for their labour and capital investment, and an appropriate proportion of revenues generated must be used to create sustainable economic and social opportunities at the grassroots level.
"â€¨Fischler said the long-term developmental for the potential of the product to be realised, diamonds must continue to be an aspirational purchase for buyers.â€¨â€¨"Because they can live without diamonds, they will only buy them if they want to. There were 10 million Africans whose income depended on continuing demand for diamond jewellery in consuming countries. Reputation, therefore, is a key element, and defending that reputation is of paramount importance.
If the integrity of the diamond is undermined, so is the economic potential of the product," he said.â€¨â€¨Turning to the 2019 Kimberley Process plenary meeting to be held next week in India, Fischer stressed on the importance of progress being made in strengthening the scope of the Kimberly Process certification scheme, as part of the three-year review and reform cycle that was ending this month.â€¨â€¨"More specifically, we are talking about amending the definition of conflict diamonds so that it better enables us to provide an assurance that the trade in rough diamonds cannot fund the types of systemic violence being seen in certain diamond-mining areas today," he said.â€¨â€¨
The WDC president also announced that the WDC was rolling out a new System of Warranties (SOW), which "has scope that goes significantly beyond that of the Kimberly Process."â€¨â€¨"The new system will require members of the industry to include on all invoices and memo documents that they adhere to the WDC guidelines. The guidelines include reference to international conventions relating to human and labour rights, anti-corruption and anti-money laundering," he said.â€¨â€¨Organisers involved in to the build-up to the KP plenary meeting said they were experiencing 'whirlwind days' ahead of the event.
The meeting will start on November 18 and end on November 22. With a range of critical issues yet to be resolved, delegates to the plenary meeting are currently sharing and promoting last minute positions during bilateral meetings in different parts of the world and strategically scheduled conferences, attended by many of the key players in the diamond industry. Some of the meetings held to date include the Russia-Africa Summit which took place in Sochi, Russia last month and the diamond conference held in Gaborone early this month.â€¨
"The final minutes are on the clock for the Kimberley Process's three-year review and reform cycle, which began in 2016 and will end at the plenary meeting under chairmanship of India. Some tough discussions will take place, as difficult decisions need to be made – none more so than whether the scope of the Kimberley Process certification scheme will be strengthened," the WDC said in a statement released this week.â€¨"At the heart of the debate is the definition of what constitutes a 'conflict diamond'.
Currently, it is unchanged from the launch of the Kimberley Process certification scheme in 2003. This means that only diamonds whose proceeds are fuelling civil war against legitimate Governments are targeted. Recognising the outdated definition, the WDC, together with the civil society and many Government representatives, are insisting that it should be amended to include instances of unacceptable violence in the supply chain during peacetime as well," WDC said.â€¨â€¨Other proposals submitted by Botswana and Russia are on the table. â€¨â€¨
The Kimberley Process plenary meetings bring together under its umbrella, industry, human rights activists and Governments from both the developed and developing world. It has succeeded in enforcing tough policies in the past.â€¨â€¨"But will it be able to rise to the occasion once again, or will it be hamstrung by the Kimberley Process members' short-term political interests? While we are active on all committees and subcommittees, when the time comes to vote, only Government members have the right to do so," noted the WDC.â€¨â€¨
"While we do not have the final say on the future scope of the Kimberley Process certification scheme, we most definitely are able to set responsible industry standards for the goods reaching the market. This goes beyond the Kimberley Process' currently limited 'conflict diamonds' definition, expressly referencing international conventions relating to human and labour rights â€¨â€¨"The question is whether, after New Delhi, all participants in the tripartite coalition will be travelling together and at the same speed. One way or another, the 2019 Kimberly Process plenary will represent a watershed moment for the industry," said WDC.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”