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De Beers Q1 production increased by 15%

Diamond group De Beers has released a report indicating that its total production had increased by 15% to 8.5-million carats during the first quarter of this year (2018). This rise in output was largely credited by the Group to the ramp-up in production at the Gahcho Kué project in  Canada and greater production at the Orapa operation in Botswana.

Debswana, a 50:50 joint venture with the Botswana government saw production rise 12% to 5.8-million carats. Output at the Orapa operation jumped 26% to 2.8-million carats. This was the result of an increase in the amount of ore treated, which, in turn, was the result of, according to the Group’s statement, “sustained healthy trading conditions”. Debswana is the world’s number one diamond producer in terms of value and the world’s number two in terms of volume.

 In its 2017 results announcement the Anglo American subsidiary reported a production guidance of 34-million carats to 36-million carats, which compares with 33.45-million carats produced in 2017. "Improving global macroeconomic conditions remain supportive of consumer demand growth for polished diamonds in 2018," De Beers had said at the time. The company this week also announced that full year production guidance remains unchanged at 34-36 million carats, subject to trading conditions.

Although it noted that the degree of global economic growth would be dependent on a number of factors, including the extent of the positive impact on consumer spending growth from US tax cuts “Rough diamond production increased by 15% to 8.5 million carats reflecting the ramp-up of production from Gahcho Kué in Canada, which reached nameplate capacity in Q2 2017, and increased production from Orapa in Botswana (Debswana) in response to the sustained healthy trading conditions,” reads the De Beers statement.

Meanwhile in Namibia (Namdeb Holdings) production increased by 12% to 0.5 million carats as a result of accessing consistently higher grades at the land based operations. In South Africa (DBCM) production was in line with Q1 2017 at 1.1 million carats. Canada production increased by 69% to 1.1 million carats due to the ramp-up of Gahcho Kué, which reached nameplate capacity in Q2 2017.

Total rough diamond sales volumes in Q1 2018 were 8.8 million carats (8.4 million carats on a consolidated basis) from two Sights, compared with 14.1 million carats (13.7 million carats on a consolidated basis) from three Sights in Q1 2017.
In addition to the difference in the number of Sights over the period, Sight 1 2017 also saw an unusually strong demand for lower value goods following the effects of Indian demonetisation in Q4 2016, leading to higher than normal sales volume.

Anglo production report

In its Production Report for the first quarter ended 31 March 2018 Anglo American reports a 4% increase in total production on a copper equivalent basis in the first quarter of 2018, compared to the same period of 2017. Mark Cutifani, Chief Executive of Anglo American,said: “Our operations have made a solid start to 2018, delivering a 4% increase in total production. This reflects our consistent focus on driving efficiency across our portfolio and continuing our strong performance of Q4 2017 despite the suspension of operations at Minas-Rio.”

Copper production increased by 9% to 154,900 tonnes with strong operational performance and higher grade at Los Bronces and improved plant performance at Collahuasi. Platinum production increased by 7% and palladium by 9% due to improved operational performances across the portfolio. The sale of Union mine was completed on 1 February 2018. Kumba Iron Ore production increased by 4% to 10.9 million tonnes driven by improved productivity at Kolomela

Minas-Rio production decreased by 30% to 3.0 million tonnes primarily as a result of the suspension of the operation following a leak in the pipeline that carries iron ore slurry from the mine to the port. Metallurgical coal production increased by 6% due to performance improvements at Moranbah and the continued ramp-up of Grosvenor.

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P230 million Phikwe revival project kicks off

19th October 2020
industrial hub

Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status.  The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.

This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago.  In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.

However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced.  Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.

The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.

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IMF projects deeper recession for 2020, slow recovery for 2021

19th October 2020

The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.

On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April.  For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.

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Botswana partly closed economy a further blow of 4.2 fall in revenue

19th October 2020

The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.

Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.

Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).

“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.

Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.

This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.

For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.

Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers.  “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.

‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’

According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.

Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.

“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.

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