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ALL EYES ON BOTSWANA- DE BEER NEGOTIATIONS

This week Botswana celebrated her 53 years of independence, a sterling economic marathon and democratic transition that began over 5 decades ago, anchored and pivoted on dedicated civil service and selfless leadership across the political divide.

Much credit goes to stalwarts in nation building, right from the immerse contribution of tribal leaders, politicians to early post-independence civil servants who started building the landlocked country’s economy from absolutely nothing. Fundamental to Botswana‘s rapid economic transformation is the discovery of what would later become one of the world’s key rough diamonds mining operation ,bolstering infrastructural development  and  birthing an upper middle income country widely celebrated across the globe today.

Immediately after independence was declared in 1966,British administration slowly  removed its aid and financial assistance, Botswana now , though still assisted on setting up was left by in large to fend for itself, however sooner than later a complete turnaround would emerge.
Three years post-independence, after over 10 years of immerse geological prospecting, Botswana‘s first diamond mine was found in Boteti District.  A team of De Beers’ geologists discovered what today is the largest diamond mine by area and one of the most important industrial diamonds mining operation in the world, the bold and magnificent Orapa mine, loosely translated to mean a resting place of lions in Sesarwa language.

This birthed what would later become the world’s leading rough diamond producer and a globally celebrated Private-Public Partnership, between Mining giants De Beers Group and Government of Botswana, De Beers Botswana Diamond Mining Company was formed in 1969. In 1971 Orapa Mine was officially commissioned, four years later a small gem pipeline discovered few kilometers from Orapa, Letlhakane Mine popularly known today as DK1 was commissioned. But behold a sparkling upswing came into light in 1972 when a  rare gem pipe was found beneath a 40 metre layer of sand and calcrete in the Naledi River Valley birthing Jwaneng Mine, the prince of mines , what is today believed to be the richest diamond mine by value.

FAST FORWARD TO 2019…

These two partners, Government of Botswana and De Beers Group are meeting to review and renew their vows, circumstances have changed, the global diamond industry has evolved, and various factors are at play.  Key to negotiations which are reported to be ongoing in discrete places at London and in Gaborone is the Sales Agreement. The Botswana-De Beers diamond sales deal was last renewed into a 10 year union in 2010 and it lapses next year September 2020.

Recently reports have been rife that Botswana is being ripped off along the way as the stones leave Debswana operations crossing borders to diamond trading centers across the globe. However De Beers Group has constantly denied these reports. Government is yet to clearly comment on the reports.

To date on the overall, the De Beers-Botswana marriage has birthed Debswana Diamond Mining Company, the partnership’s flagship entity. This year the company celebrated 50 years of existence. Debswana is Botswana‘s largest private sector employer, only government employs more people than Debswana. The company is directly owned by Botswana Government and De Beers on 50-50 shareholding.

Another offspring of the partnership is Diamond Trading Company Botswana (DTCB), also a 50 -50 venture between the two parties .DTCB sorts and values diamond from Debswana mines. If there are to be changes from these multibillion dollar serious negations it’s likely to be from DTCB going up the pipeline.

DTCB avails 85 % of their sorted and valued diamonds to De Beers Global Sight holder Sales (DBGSS) and 15 % to Okavango Diamond Company (ODC) which is wholly owned by Botswana Government .This was birthed by 2011 agreement with ODC established in 2012. Another key change in 2011 was the relocation of DBGSS from London to Gaborone, transferring De Beers’ operations consolidated rough diamond sales into Gaborone, bringing alongside professionals, skills, and the world’s biggest rough diamond transactions to Africa.

ANTICIPATED INCREASE IN ODC UPTAKE

One of the highly earmarked outcomes to possible emerge from the negotiations is increase in percentage volume of ODC‘s uptake from DTCB. The argument has always been that Botswana as one of the largest diamond producers in the world has the capacity and ability to develop its own price book through its own independent window outside De Beers’ channels. Before ODC was establishment in 2012 all diamond recovered from Debswana mines were made available to De Beers for dispatch into the sight holder market.

Currently ODC rakes in sales in the region of $500 Million annually (approximately P5 billion). This according to Minister of Mineral Resources Eric Molale demonstrates beyond reasonable doubt that Botswana has independent capacity and ability to be a major player in the sight holder space outside De Beers’ bracket.

 “The Marcus Te Haar led company was a great accomplishment for us a country, it ended a perception that we cannot sell our diamonds, and its sound performance since establishment will have direct impact in the current negotiation with a view to   potentially increase its uptake form 15 % to a larger percentage” he said last year at a mining conference in Gaborone

DTCB TO SORT AND VALUE DIAMONDS FROM NON DE BEERS OPERATIONS

In 2006 the then sales agreement before the 2011 deal, saw the setting up of the world largest and most sophisticated sorting and valuing operation in Gaborone, the Diamond Trading Company Botswana. DTC Botswana was birthed from Botswana Diamond Sorting & Valuing Company, an entity that operated for many years at the famous Orapa house. DTCB is now located in a magnificent high rise cube in the Diamond Hub along the Gaborone airport road, a state of the art infrastructure clinched between Debswana Corporate Centre & DBGSS Buildings .

In 2017 DTCB commissioned a new facility of unparallel global standards, a laboratory of sophisticated chemical processes of quantum physics operations and complex scientific techniques for cleansing and sorting the diamonds. In February last year then Managing Director of DTCB Tobake Kobedi said DTCB with this set up intends to be the world‘s number 1 by 2020. He said by 2020 when a new sales agreement is penned down, DTCB intends to have improved its efficiencies and effectiveness as a rough diamond sorting and valuing operation and thus desires not to only be limited to receiving Debswana rough diamonds.

“Currently our shareholder agreement dictates that we sort diamonds from De Beers mines in Botswana only, but we want to say let more from elsewhere come because we have the capacity” said Tobake when addressing members of the media last year. The DTCB plant has sorting and valuing full capacity of over 45 million carats of per annum but currently only receives around 22 million carats from Debswana mines annually.

“Why can’t we take rough diamonds from other mines locally and in the region?” Kobedi posed these questions explaining the intention of DTCB strategy 2020 and its vision towards ensuring that Botswana remains a Diamond Hub beyond depletion of the stones. Later in 2018 during Zimbabwean President, Emmerson Mnangagwa’s state visit to Botswana it was noted that talks would begin for Zimbabwe to process, sorts and value its diamonds in Botswana.

GOVERNMENT WANTS DEBSWANA TO RIGOROUSLY INVEST IN OTHER SECTORS

Sources close to the echelons of power have revealed to this publication that one of the issues to be posed at the negotiation table by Botswana is that Debswana; the country’s largest company should start investing in other sectors outside its core business of mining diamonds.
The argument suggested by this information is that Debswana has the necessary capital, technical capacity and shrewd corporate governance to do that “There are discussions that Debswana should lead economic diversification by investing in solar energy, plant and equipment assembly and machinery equipment amongst others” shared a source from the highest corridors of government enclave.

Debswana has over the years of its existence invested in other establishments outside diamond mining. Morupule Coal Mine was a wholly owned Debswana operation before it was disposed to government owned Mineral Development Company in 2017. 
Botswana Accountancy College, the country’s premier business academic institution was established as a joint venture between Debswana, Ministry of Finance and Economic Planning and the Botswana Institute of Accountants in 1996.Within its fold Debswana also wholly owns Sesiro Insurance Company, a bespoke insurance services outfit for its employees.

“ This is  clear evidence that Debswana should do more , it has done it before , so Government wants the shareholders being itself and De Beers to permit  Debswana to rigorously invest in more commercial viable sectors that this country desperately needs for employment creation and economic diversification like ICT , modern and innovative Agriculture amongst others” shared a source.

INFLUENCING FACTORS: BOTSWANA GENERAL ELECTIONS OUTCOME, GLOBAL ROUGH DIAMOND MARKET DOWNTURN, DE BEERS SYNTHETIC DIAMONDS

The negotiations usually comprise a team of 5 from the two parties. From Botswana side common picks are Attorney General, Bank of Botswana Governor, and Minister of Minerals amongst others. These highly anticipated negotiations will however have more influencing factors, experts observe that the global rough diamond market downturn will have an impact, in the main, it is said that the recent De Beers lab grown diamonds announcement will have a play. The Mining giant invested $100 million (Over a billion pula) in a manmade diamonds facility in the United States early this year.

After assuming power in April this year President Masisi noted that he would be eyeing more participation of Botswana in the diamond business, sentiment constantly reiterated his Minister of Minerals Eric Molale.  “We have had a wonderful relationship with De Beers and we expect that relationship to be even more cemented, there is a way of actually achieving a win-win for both, we want to participate more on cutting, polishing and retail,” Masisi said when talking to Bloomberg in May 2018.

In the bottom line government has reiterated that De Beers will remain its partner “As partners in this industry, it would shock the world if we were to part; the diamond industry would never be the same again,” Masisi said. Botswana is however going into one of the closely contested general elections in history of its democracy.  Since independence one party has ruled the country, It remains unclear what would happen to this partnership should government change. Government of Botswana is a direct Shareholder in De Beers Group, owning 15 % with the larger balance owned by Mining conglomerate Anglo American.

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Business

18th January 2021
10 Best Forex Brokers

10 Best forex brokers that accepts Botswana Traders ( 2021 )

The best handpicked forex brokers for Botswana traders revealed for 2021. Trade with confidence with any of these licenced and regulated brokers.
1.  Exness

Exness is a popular and well-regulated broker based in Cyprus and the UK which offers traders with a variety of account types, powerful trading platforms, competitive trading conditions and more.

 

PROS

CONS

1.      Globally recognized broker1.      US clients not accepted
2.      Negative balance protection offered2.      Limited tradable financial instruments
3.      MetaTrader offered
4.      Demo account and Islamic account option offered
5.      Adequate leverage and reasonable minimum deposit requirements

2.  AvaTrade

AvaTrade is a popular and multi-award-winning Market Maker and STP broker which is regulated to offer comprehensive trading solutions in several jurisdictions.

 

PROS

CONS

1.      Strict regulation1.      US clients not accepted
2.      Negative balance protection2.      Variable spread accounts not offered
3.      Optimum execution speeds
4.      Multiple trading platforms offered
5.      Social trading supported, hedging and scalping allowed

3.  XM

XM is a popular and reputable broker which has been in operation since 2009. XM is strictly regulated by several regulatory entities and offers traders from around the world with access to global financial markets.

 

PROS

CONS

1.      Strict regulation1.      US clients not accepted
2.      Negative balance protection2.      Fixed spread accounts not offered
3.      Competitive trading conditions
4.      Variety of accounts offered
5.      High leverage ratio of 1:888

4.  eToro

eToro is a reputable and popular Market Maker broker in addition to being the leading social trading platform in the industry. eToro caters for various traders and investors from 140 countries, offering comprehensive trading solutions to both beginners and experts.

 

PROS

CONS

1.      Strictly regulated1.      US clients not accepted
2.      Client fund security guaranteed2.      Limited leverage for retail traders
3.      Commission-free trading3.      Fixed spreads not offered
4.      Large online community4.      MetaTrader not offered
5.      Demo account and Islamic account option provided

5.  IC Markets

IC Markets is an ECN broker based in Australia and Seychelles with regulation and authorization through ASIC. Established in 2007, IC Markets is one of the largest true ECN brokers in the world that offers traders access to global financial markets.

 

PROS

CONS

1.      Well-regulated1.      US clients not accepted
2.      True ECN broker2.      Fixed spread accounts not offered
3.      Low trading and non-trading fees
4.      Tight and competitive spreads
5.      Hedging and scalping allowed, social trading supported

6.  FBS

Established in 2009, FBS is a strictly regulated and reputable STP and ECN broker which has around 16 million registered traders from 190 countries worldwide.

 

FBS offers traders with more than 75 financial instruments which can be traded through powerful trading platforms, competitive trading conditions, a variety of account types, and more.

PROS

CONS

1.      Ultra-low deposit requirement1.      US, UK, Japan, Israel and several other countries not allowed
2.      Social trading supported2.      High spreads and commissions on some accounts
3.      Multiple account types offered3.      Limited trading tools
4.      MetaTrader offered
5.      24/7 dedicated customer support

7.  FxPro

FxPro is a UK-based NDD broker which is regulated by FCA, CySEC, FSCA, and SCB in facilitating the trade of more than 260 financial instruments spread across six asset classes.

PROS

CONS

1.      Multi-regulated1.      US, Canada, Iraq and others not accepted
2.      Multiple trading platforms offered2.      Social trading not supported
3.      Premium trader tools3.      Not the tightest spreads
4.      NDD Execution4.      Not the lowest commissions
5.      Expert analysis and VPS offered5.      Managed accounts not offered

8.  Alpari

Alpari is a well-regulated STP and ECN broker with nearly two decades worth experience in offering comprehensive trading solutions. Alpari boasts with 2 million registered traders from more than 150 countries worldwide.

PROS

CONS

1.      Well-regulated1.      US, Japan, Russia, and several other countries not accepted
2.      MetaTrader offered2.      Limited financial instruments
3.      PAMM accounts offered3.      No fixed spreads
4.      Multilingual customer support

 

9.  FXTM

FXTM is a UK, Cyprus, South Africa, and Mauritius-based broker which offers traders with more than 250 financial instruments to trade.

FXTM caters for both retail and professional clients and has tailormade solutions despite the trading needs and objectives of traders.

PROS

CONS

1.      Strict regulation1.      US clients not allowed
2.      Variety of financial instruments2.      Restricted leverage for EU traders
3.      Multiple account types
4.      Commission-free trading offered
5.      Low minimum deposit

 

10.        Olymp Trade

Olymp Trade is based in St. Vincent and the Grenadines and offers traders with a wide range of tradable financial instruments.

Olymp Trade, as opposed to conventional brokers, offers traders with fixed time trades which can be done through a powerful proprietary trading platform.

PROS

CONS

1.      Low minimum deposit1.      High commission fees
2.      Training resources offered2.      Social trading not offered
3.      Controlled risks and rewards3.      Not regulated
4.      Market news and analysis4.      No support for automated trading
5.      24/7 dedicated customer support5.      MetaTrader not offered
6.

 

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Business

Diamond industry crises not over yet – De Beers Chief

13th January 2021
De Beers Group Chief Executive Officer: Bruce Cleaver

Following a devastating first half of the year 2020 due to COVID-19, the global diamond industry  started gaining  positive momentum towards the end of the year as key markets entered into  thanks giving and holiday season.

However Bruce Cleaver, Chief Executive Officer of De Beers Group cautioned that the industry is not out of the woods yet, citing prevailing challenges ahead into 2021.

The first half of 2020 was characterized by some of the worst challenges in history of global diamond trade.

The midstream, where rough diamonds are traded in wholesale and bulk to cutters and polishers, was for the most part of second quarter 2020, suffocated by international travel restrictions as countries responded to the contagious Corona Virus.

This halted movement of buyers and shipment of  the rough goods , resulting  in unprecedented decline of sales, in turn  ballooning stockpiles as the upstream  operations produced with little uptake by the midstream.

The situation was exacerbated by muted demand in the downstream where jewelry industries and tail end retailers closed to further curb the spread of COVID-19.

However towards the end of third quarter getting into the last quarter of the year, demand in both midstream and downstream started to steadily pick up as countries relaxed COVID-19 restrictions.

De Beers, the world’s largest diamond producer by value started reporting significant recovery in sales in the sixth and seventh cycle, figures began to reflect an upswing in sentiment as well as increase in uptake of rough goods by midstream.

Sales for the sixth cycle amounted to $116 Million, following a sharp downturn in the previous cycles, significant jump was realized during the seventh cycle, registering $320 million, an over 175 % upswing when gauged against the proceeding cycle.

De Beers noted that diamond markets showed some continued improvement throughout August and into September as Covid-19 restrictions continued to ease in various locations.

“Manufacturers focused on meeting retail demand for polished diamonds, particularly in certain product areas, accordingly, we saw a recovery in rough diamond demand in the seventh sales cycle of the year, reflecting these retail trends, following several months of minimal manufacturing activity and disrupted demand patterns in all major markets,” said De Beers Chief Executive, Bruce Cleaver in September last year.

The diamond mining behemoth continued to register impressive sales in the eighth and ninth cycle signaling the industry could end the year on a positive note.

The momentum was indeed carried into the last cycle of the year. The value of rough diamond sales (Global Sightholder Sales and Auctions) for De Beers’ tenth sales cycle of 2020 amounted to $440 million, a significant increase from the 2019 tenth sales cycle value.

Against what seemed like a positive year end that would split into the New Year Bruce Cleaver, CEO, De Beers Group, however warned the industry not to count eggs before they hatch.

“Positive consumer demand for diamond jewellery resulting from the holiday season is supporting the continuation of retail orders for polished diamonds from the diamond industry’s midstream sector. This in turn supported steady demand for De Beers’s rough diamonds at our final sales cycle of 2020,” Cleaver had said in December.

In caution the De Beers Chief noted that “While the diamond industry ends the year on a positive note, we must recognise the risks that the ongoing Covid-19 pandemic presents to sector recovery both for the rest of this year and as we head into 2021.”

All segments of the supply chain were severely impacted by the global lockdown measures introduced in response to the Covid-19 pandemic in the first half of 2020.

After a strong US holiday season at the end of 2019, the rough diamond industry started 2020 positively as the midstream restocked and sentiment improved.

However, from February 2020, the Covid-19 outbreak began to have a significant impact on diamond jewellery retail sales and supply chain, with many jewelers suspending all polished purchases and/or delaying payments to their suppliers.

Rough diamond sales were materially affected by lockdowns and travel restrictions, delaying the shipping of rough diamonds into cutting and trading centers and preventing buyers from attending sales events.

These resulted in significant decline in total revenue for the business in the first six months of 2020. Total revenue decreased by 54% to $1.2 billion from $2.6 billion registered in the prior half year period ended 30 June 2019.

For the entire first six (6) months of the year 2020 De Beers Rough diamonds sales fell drastically to $1.0 billion from $2.3 billion in the prior H1 period ended 30 June 2019. Sales volumes decreased by 45% to 8.5 million carats compared to 15.5 million carats registered in the prior period.

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Business

Gov’t coffers depleting to record low levels 

13th January 2021
Dr Matsheka

Next month Minister of Finance & Economic Development, Dr Thapelo Matsheka will face the nation to deliver Botswana‘s first budget speech since COVID-19 pandemic put the world on devastating economic trajectory.

The pandemic that broke out in late 2019 in China has put the entire world on unprecedented chaos ,killing over P1 million people across the globe , shattering economies and almost rendering  the year 2020 – a 12 months stretch of complete setback.

The 2021/22 budget speech will come at time when Botswana’s economy is still trying to emerge out of this.

National lockdowns and local travel restrictions have hit small medium enterprises hard, while international travel restrictions halted movement of both good and people, delivering by far some of the heaviest and worst catastrophic blows on the diamond industry and tourism sector, the likes of which this country has never seen before on its largest economic sectors.

As Minister Matsheka faces parliament next month, the reality on the ground is that Botswana’s national current cash resource, the Government Investment Account (GIA) is depleting at lightning speed.

On the other hand the COVID-19 economic mess is  prevailing,  the virus is reported to have taken a new dangerous shape of a deadly variant, spreading like fueled veld fire and causing some of the world’s super powers back to tough restrictions of lockdown.

According official figures released by Bank of Botswana, in October 2020 the GIA was running at P6 billion compared to the P18.3 billion held in the account in October 2019.

However reports indicate that the account could be currently holding just about P3 billion.  The draw down from the GIA has been by exacerbated by declining diamond revenue, the country‘s largest cash cow. The sector was experiencing significant revenue decline even before COVID-19 struck.

 

When the National Development Plan (NDP) 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at a 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.

Taking into account the COVID-19 economic mess in 2020/21 financial year, the budget deficit could add up to P20 billion after revised figures.

Drawing down from government cash balances to finance these budget deficits meant significant withdrawals from the Government Investment Account, hence the near depletion of this buffer.

Meanwhile  should Botswana’s revenue streams completely dry up to zero levels; the country would only have 11 months, before calling out for humanitarian  aids and international donors, because  foreign reserves are also on slow down.

During 2019, the foreign exchange reserves declined by 8.7 percent, from Seventy One Billion, Four Hundred Million Pula (P71.4 billion) in December 2018 to Sixty Five Billion, Three Hundred Million Pula (P65.3 billion) in December 2019.

The reserves declined further in 2020, falling by 2.3 percent to Sixty Three Billion, Seven Hundred Million Pula (P63.7 billion) in July 2020.  This was revealed by President Masisi during State of the Nation Address in November last year.

The decrease was mainly due to foreign exchange outflows associated with Government obligations and economy-wide import requirements.

However latest statistics(October 2020)  from Bank of Botswana reveal that Botswana’s foreign reserves are estimated at P58.4 billion, with  government’s share of these funds significantly low.

Government has since introduced several measures to contain costs and control expenditure with the most recent intervention being the halting of recruitment in government departments and parastatals.

Furthermore, Value Added Tax has been signaled to go up  from 12% to 14% in April this year with more hikes and service fees anticipated as government embarks on unprecedented domestic revenue mobilization.

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