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Lesedi La Rona sold for over 500 million Pula

Canadian based Lucara Diamond Corporation earlier this week announced the successful sale of the historic 1,109 carat diamond, Lesedi La Rona for US$53 million to a London based British multinational jeweller.

The lucrative stone is the third-largest diamond ever found and was recovered from Karowe mine in Letlhakane in the Boteti District of Botswana in November 2015. Only the non-gem black Sergio and the gem-quality Cullinan are larger.
 

Reports from Lucara reveal that Lesedi La Rona was priced at US$47,777 per carat hence the US$53 million tag price which is equivalent to approximately over BWP 500 million. Laurence Graff of Graff Diamond was quoted by media reports as saying that his company was thrilled and honoured to become the new custodians of the stone. “The stone will tell us its story, it will dictate how it wants to be cut, and we will take the utmost care to respect its exceptional properties, this is a momentous day in my career, and I am privileged to be given the opportunity to honour the magnificent natural beauty of the Lesedi La Rona.”
 

President and Chief Executive of Lucara Diamonds, William Lamb observed that the discovery of the Lesedi La Rona was a company defining event. “It solidified the amazing potential and rareness of the diamonds recovered at the Karowe mine,” he said adding that his company took time to find a buyer who would take the diamond through its next stage of evolution.
 

After discovery the exact value of the Lesedi Larona could not be determined until it was decided how it will be cut and more details about its colour were known. Former diamond-mining geologist Phil Swinfen estimated based on other previous similar sales that the stone could be sold for $40–60 million adding that the process of selling and cutting the diamond would likely take years to complete. In May 2016, Sotheby’s announced in London that the Lesedi La Rona diamond would be offered in a stand-alone auction on 29 June 2016.

It was expected to sell for around $70 million. After closer examination, the diamond was presented at the auction as weighing 1,109 carats. At the public auction at Sotheby's on 29 June 2016, the highest bid for the diamond was $61 million. However, this bid fell short of the undisclosed reserve price and the stone was not sold. The bidding opened at $50 million and the auction lasted for less than 15 minutes.
 

Lukas Lundin, whose family is Lucara Diamond’s largest shareholder, noted that the commission arrangement with Sotheby’s meant the stone would have had to reach $150 million for the auctioneer to make a large profit. At the time, David Bennett of Sotheby’s had revealed it was the first time the company held an exclusive auction for one single object. It was preceded by the sale of three smaller rough diamonds. The stones were also from Lucara and the proceeds, $140,000, were donated to charity. The Constellation had been found the day after the Lesedi La Rona in the same section of the mine.
 

Lamb has exclaimed that the price paid was also an improvement on the highest bid received at the Sotheby’s auction in June 2016. He further noted that t Graff Diamonds is now the owner of the Lesedi La Rona as well as the 373 carat diamond, purchased earlier this year, which formed part of the original stone. “We are excited to follow these diamonds through the next stage of their journey,” Lamb was quoted as saying.
 

The Lesedi La Rona is a colourless/white type IIa diamond. It weighs 1,111 carats (222.2 g; 7.84 oz) and measures 65 mm × 56 mm × 40 mm (2.6 in × 2.2 in × 1.6 in). In comparison, the Cullinan, discovered in 1905 in South Africa, weighed 3,106.75 carats (621.350 g). The Lesedi La Rona was mined using Large Diamond Recovery ("LDR") XRT machines, and is the largest diamond recovered using machines for automated diamond sorting.
 

It is estimated to be over 2.5 billion years old. In the months after its discovery the diamond was exhibited in a world tour in Singapore, Hong Kong, New York, and Antwerp, Belgium, a major centre of the world diamond trade.
 

THE PROPOSED AMENDMENTS TO PRECIOUS STONES TRADE
 

The Diamond Industry is Botswana‘s largest economic sector contributing over 30 % to the country‘s GDP alone. Botswana is currently proposing an amendment to the Botswana Precious and Semi Precious Stones (Protection) Act, regarding the Botswana Government's right to purchase diamonds that are unusually large or have unusual features at market prices. If amended, the government will have the first option to buy ‘unusual’ diamond finds such as the historic Lesedi La Rona.
 

A recently filed draft bill to amend the Precious and Semi-Precious Stones Act contains a new clause that compels any producer that comes into possession of an unusual rough or uncut diamond to notify the minister of mines within 30 days, following which the government shall have the right of first refusal to the stone. “The price to be paid by government for a rough or uncut precious stone offered for sale by the producer shall be agreed between the parties in accordance with the current market price of the rough or uncut precious stone,” the bill states. The bill did not give a precise definition of “unusual”.
 

This move by Botswana is the latest in a series of similar measures by African countries such as Lesotho, Tanzania and Zimbabwe to exert tighter control on their mineral resources. With regards to this Chief minerals officer in the Ministry of Mineral Resources, Green Technology and Energy Security, Moses Tshetlhane said that amendment of the law was motivated by recovery of some unusually large diamonds, namely: the Lesedi La Rona and Constellation.
 

Some of the amendments to the Act include stiffer penalties for illegal trade of diamonds, as well as false declarations of discovery of precious stones. Producers that make false declarations about the place they would have discovered a precious stone should also be liable to penalties prescribed by law for a crime of perjury, and all rights acquired by them in consequence of any such declaration shall lapse.

“Some of the key changes to the Act are to remove trade barriers and increase penalties to deter any potential illegal trade as well as improve facilitation in the sorting, valuing, aggregation and selling of rough diamonds. The Precious and Semi-Precious Stones Act is being amended to ensure that it stays relevant and applicable to the prevailing and ever changing environment in the diamond industry,” shared the Chief Minerals Officer.

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Mowana Mine to open, pay employees millions

18th January 2022
Mowana Mine

Mowana Copper Mine in Dukwi will finally pay its former employees a total amount of P23, 789, 984.00 end of this month. For over three years Mowana Copper Mine has been under judicial management. Updating members, Botswana Mine Workers Union (BMWU) Executive Secretary Kitso Phiri this week said the High Court issued an order for the implementation of the compromise scheme of December 9, 2021 and this was to be done within 30 days after court order.

“Therefore payment of benefits under the scheme including those owed to Messina Copper Botswana employees should be effected sometime in January latest end of January 2022,” Kitso said. Kitso also explained that cash settlement will be 30 percent of the total Messina Copper Botswana estate and negotiated estate is $3,233,000 (about P35, 563,000).

Messina Copper was placed under liquidation and was thereafter acquired by Leboam Holdings to operate Mowana Mine. Leboam Holdings struck a deal with the Messina Copper’s liquidator who became a shareholder of Leboam Holdings. Leboam Holdings could not service its debts and its creditors placed it under provisional judicial management on December 18, 2018 and in judicial management on February 28, 2019.

A new company Max Power expressed interest to acquire the mining operations. It offered to take over the Mowana Mine from Leboam Holdings, however, the company had to pay the debts of Leboam including monies owed to Messina Copper, being employees benefits and other debts owed to other creditors.

The monies, were agreed to be paid through a scheme of compromise proposed by Max Power, being a negotiated payment schedule, which was subject to the financial ability of the new owners. “On December 9, 2021, Messina Copper liquidator, called a meeting of creditors, which the BMWU on behalf of its members (former Messina Copper employees) attended, to seek mandate from creditors to proceed with a proposed settlement for Messina Copper on the scheme of compromise. It is important to note that employee benefits are regarded as preferential credit, meaning once a scheme is approved they are paid first.”

Negotiated estate is P35, 563,000

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Councilors’ benefits debacle-savingram reveals detail

18th January 2022

A savingram the Ministry of Local Government and Rural Development sent to Town Clerks and Council Secretaries explaining why councilors across the country should not have access to their terminal benefits before end of their term has been revealed.

The contents of the savingram came out in the wake of a war of words between counselors and the Ministry of Local Government and Rural Development. The councilors through the Botswana Association of Local Authorities (BALA) accuse the Ministry of refusing to allow them to have access to their terminal benefits before end of their term.

This has since been denied by the Ministry.  In the savingram to town councils and council secretaries across the country, Permanent Secretary in the Ministry of Local Government and Rural Development Molefi Keaja states that, “Kindly be advised that the terminal benefits budget is made during the final year of term of office for Honorable Councilors.”  Keaja reminded town clerks and council secretaries that, “The nominal budget Councils make each and every financial year is to cater for events where a Councilor’s term of office ends before the statutory time due to death, resignation or any other reason.”

The savingram also goes into detail about why the government had in the past allowed councilors to have access to their terminal benefits before the end of their term.  “Regarding the special dispensation made in the 2014-2019, it should be noted that the advance was granted because at that time there was an approved budget for terminal benefits during the financial year,” explained Keaja.  He added that, “Town Clerks/Council Secretaries made discretions depending on the liquidity position of Councils which attracted a lot of audit queries.”

Keaja also revealed that councils across the country were struggling financially and therefore if they were to grant councilors access to their terminal benefits, this could leave their in a dire financial situation.  Given the fact that Local Authorities currently have cash flow problems and budgetary constraints, it is not advisable to grant terminal benefits advance as it would only serve to compound the liquidity problems of councils.

It is understood that the Ministry was inundated with calls from some Councils as they sought clarification regarding access to their terminal benefits. The Ministry fears that should councils pay out the terminal benefits this would affect their coffers as the government spends a lot on councilors salaries.

Reports show that apart from elected councilors, the government spends at least P6, 577, 746, 00 on nominated councilors across the country as their monthly salaries. Former Assistant Minister of Local Government and Rural Development, Botlogile Tshireletso once told Parliament that in total there are 113 nominated councilors and their salaries per a year add up to P78, 933,16.00. She added that their projected gratuity is P9, 866,646.00.

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Households spending to drive economic recovery

17th January 2022

A surge in consumer spending is expected to be a key driver of Botswana’s economic recovery, according to recent projections by Fitch Solutions. Fitch Solutions said it forecasts household spending in Botswana to grow by a real rate of 5.9% in 2022.

The bullish Fitch Solutions noted that “This is a considerable deceleration from 9.4% growth estimated in 2021, it comes mainly from the base effects of the contraction of 2.5% recorded in 2020,” adding that, “We project total household spending (in real terms) to reach BWP59.9bn (USD8.8bn) in 2022, increasing from BWP56.5bn (USD8.3bn) in 2021.”  According to Fitch Solutions, this is higher than the pre-Covid-19 total household spending (in real terms) of P53.0 billion (USD7.8bn) in 2019 and it indicates a full recovery in consumer spending.

“We forecast real household spending to grow by 5.9% in 2022, decelerating from the estimated growth of 9.4% in 2021. We note that the Covid-19 pandemic and the related restrictions on economic activity resulted in real household spending contracting by 2.5% in 2020, creating a lower base for spending to grow from in 2021 and 2022,” Fitch Solutions says.

Total household spending (in real terms), the agency says, will increase in 2022 when compared to 2021. In 2021 and 2022, total household spending (in real terms) will be above the pre-Covid-19 levels in 2019, indicating a full recovery in consumer spending, says Fitch Solutions.  It says as of December 6 2021 (latest data available), 38.4% of people in Botswana have received at least one vaccine dose, while this is relatively low it is higher than Africa average of 11.3%.

“The emergence of new Covid-19 variants such as Omicron, which was first detected in the country in November 2021, poses a downside risk to our outlook for consumer spending, particularly as a large proportion of the country’s population is unvaccinated and this could result in stricter measures being implemented once again,” says Fitch Solutions.

Growth will ease in 2022, Fitch Solution says. “Our forecast for an improvement in consumer spending in Botswana in 2022 is in line with our Country Risk team’s forecast that the economy will grow by a real rate of 5.3% over 2022, from an estimated 12.5% growth in 2021 as the low base effects from 2020 dissipate,” it says.

Fitch Solutions notes that “Our Country Risk team expects private consumption to be the main driver of Botswana’s economic growth in 2022, as disposable incomes and the labour market continue to recover from the impacts of the Covid-19 pandemic.”
It says Botswana’s tourism sector has been negatively impacted by the Covid-19 pandemic and the related travel restrictions.

According to Fitch Solutions, “The emergence of the Omicron variant, which was first detected in November 2021, has resulted in travel bans being implemented on Southern African countries such as South Africa, Botswana, Lesotho, Namibia, Zimbabwe and Eswatini. This will further delay the recovery of Botswana’s tourism sector in 2021 and early 2022.”  Fitch Solutions, therefore, forecasts Botswana’s tourist arrivals to grow by 81.2% in 2022, from an estimated contraction of 40.3% in 2021.

It notes that the 72.4% contraction in 2020 has created a low base for tourist arrivals to grow from.  “The rollout of vaccines in South Africa and its key source markets will aid the recovery of the tourism sector over the coming months and this bodes well for the employment and incomes of people employed in the hospitality industry, particularly restaurants and hotels as well as recreation and culture businesses,” the report says.

Fitch Solutions further notes that with economies reopening, consumers are demanding products that they had little access to over the previous year. However, manufacturers are facing several problems.  It says supply chain issues and bottlenecks are resulting in consumer goods shortages, feeding through into supply-side inflation.  Fitch Solutions believes the global semiconductor shortage will continue into 2022, putting the pressure on the supply of several consumer goods.

It says the spread of the Delta variant is upending factory production in Asia, disrupting shipping and posing more shocks to the world economy. Similarly, manufacturers are facing shortages of key components and higher raw materials costs, the report says adding that while this is somewhat restricted to consumer goods, there is a high risk that this feeds through into more consumer services over the 2022 year.

“Our global view for a notable recovery in consumer spending relies on the ability of authorities to vaccinate a large enough proportion of their populations and thereby experience a notable drop in Covid-19 infections and a decline in hospitalisation rates,” says Fitch Solutions.
Both these factors, it says, will lead to governments gradually lifting restrictions, which will boost consumer confidence and retail sales.

“As of December 6 2021, 38.4% of people in Botswana have received at least one vaccine dose. While this is low, it is higher than the Africa average of 11.3%. The vaccines being administered in Botswana include Pfizer-BioNTech, Sinovac and Johnson & Johnson. We believe that a successful vaccine rollout will aid the country’s consumer spending recovery,” says Fitch Solutions.  Therefore, the agency says, “Our forecasts account for risks that are highly likely to play out in 2022, including the easing of government support. However, if other risks start to play out, this may lead to forecast revisions.”

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