Debswana dug 6.1 million carats of diamonds in the third quarter; a 33 percent growth in production, the improvement comes after the miner had cut output last year in response to weaker trading conditions.
Orapa’s production increased 60 per cent mainly driven by the ramp-up of Plant 1, which was previously on partial care and maintenance in response to trading conditions in late 2015. Jwaneng’s production increased 23 per cent as a result of planned increases in feed to plant. According to shareholder, Anglo American, Rough diamond production for Q3 2017 increased 46 per cent to 9.2 million carats in line with the higher production forecast for 2017, reflecting stable trading conditions as well as the contribution from the ramp-up of Gahcho Kué in Canada.
Anglo American said the increase was a response to a rebound in demand for the precious stones following a downturn last year. The largest production increase was in De Beers South Africa where Production increased 41 per cent to 1.5 million carats largely as a result of higher grades at Venetia.
Owing to the mixed demand of diamonds in 2016, Debswana revised its production for 2016 to 20 million carats to match expected levels of demand for rough. In the first three months of the year Debswana dug up 5.33 million carats of diamonds a five percent reduction from the carats mined during that same period in 2015. But demand has since improved into Q3 2017.
According to Anglo American’s latest report consolidated rough diamond sales volumes in Q3 2017 were 6.5 million carats (6.9 million carats on a total 100 per cent basis) from two Sights, compared with 5.3 million carats (5.7 million carats on a total 100 per cent basis) from two Sights in Q3 2016. The increase was driven by a normalisation of demand for lower value goods in 2017. Production at Namdeb Holdings (Namibia) increased 12 per cent to 454,000 carats primarily as a result of higher mining rates from Debmarine Namibia’s Mafuta vessel. In Canada production increased five-fold to 1.1 million carats due to the ramp-up of Gahcho Kué, which reached nameplate capacity in Q2 2017. Gahcho Kué was officially opened on 20 September 2016.
Meanwhile, De Beers total rough diamond sales grew 77 percent by volume in the third quarter, reflecting improved trading conditions compared with a slump in demand a year ago.â€¨ De Beers’s Full year production guidance has been revised to ~33 million carats (previously 31 – 33 million carats). The shareholder, Anglo American which has been in the process of selling off mines and slimming down its portfolio, had chalked up better-than-expected production in commodities it is looking to exit, including iron ore used in steelmaking and coal. Since the restructuring was unveiled, the prices of iron ore and coal had rallied strongly, against all expectations, boosting Anglo’s cashflow from operations it had earmarked for disposal.
ANGLO’S OTHER PRODUCTION
Meanwhile Anglo American reports a 6% increase in total production on a copper equivalent basis in the third quarter of 2017, compared to the same period of 2016. For the first nine months of the year, copper equivalent production has increased by 8%. Mark Cutifani, Anglo American Chief Executive, said: “We have delivered another strong production performance across our business. Grosvenor production has materially stepped-up as the new operating procedures have been implemented, while Gahcho Kué and Minas-Rio continue to make positive contributions. We have further increased production guidance at Kumba Iron Ore as we continue to improve our broader productivity performance. In Platinum, we have taken necessary steps to remove unprofitable ounces from production as we focus on value over volume.”
An Anglo American production report indicates that thermal coal production decreased by 15% due to operating challenges at Khwezela, a 100-hour safety stoppage across all the South African coal operations in August and weather related stoppages at Cerrejón. Metallurgical coal production increased by 8% as Grosvenor delivered strong production through successful management of geological challenges and completion of its first longwall panel.
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”