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Lesedi La Rona: Lucara diamond named

The world’s second largest diamond has been named “Lesedi La rona” following a month long competition which saw Thembani Moitlhobogi’s entry clinching the winning name. Lesedi La Rona means “our light” and it surely shone light in Moitlhobogi’s account as he pocketed P25, 000 for coming up with the name.  The naming of the spectacular diamond comes three months after Lucara Diamond Company unearthed a 1,111carat gem quality, Type IIa diamond.

The white Type IIa diamond is considered the purest form of diamond.  The magnificent stone, which originated from the south lobe of Lucara’s Karowe Mine, is the world’s second largest gem quality diamond ever recovered since the discovery of the world largest diamond; the 3,106-carat Cullinan, found near Pretoria in South Africa in 1905.

“The outpouring of pride and patriotism shown by all the participants in the contest was incredible. The diamond industry has played a vital role in the country’s development, allowing for significant and ongoing investment in world-class healthcare, education and infrastructure. “Lesedi La Rona” symbolizes the pride and history of the people of Botswana,” beamed William Lamb, CEO and President of Lucara, in a press release.

While the naming of the diamond offers the latest information on Lucara’s three months old rare find, the value of the diamond remains speculative, with estimates now hovering around $60 million. It also appears Lucara is not in any hurry to sell the diamond, something that Lamb hinted to in late 2015.

“We need to see how best to get maximum value of the stone” he said. Instead the company has announced the dates for its first Exceptional Stone Tender (“EST”) of 2016. The tender will feature ten diamonds with a combined weight of 1,525 carats including a magnificent 296 carat Type IIa diamond. The tender does not include any of the three previously announced exceptional diamonds recovered in November 2015.

Karowe mine has been a rare source of exceptional diamonds with its consistent recovery of large high value diamonds. Although it produces less than 1% of world’s diamonds, the mine is recovering more than 50% of the world’s diamonds larger than 100 carats.

In January 2013, it sold a 9.46 carat blue diamond recovered from Karowe mine for $4.515 million. This was later followed by the mining of a 239 carat diamond, which at the time was the largest diamond ever to have been recovered from the highly prolific Orapa kimberlite in over 40 years of production. This set in motion more discoveries of valuable diamonds, a 257 carat gem stone was unearthed in September 2013 and in May 2014, Lucara had mined 13 diamonds greater than 100 carats, two of which were greater than 200 carats. Just earlier this year in April, Lucara’s prized jewel was the 342 gem quality diamond mined from the central and south lobe of Karowe. The diamond was auctioned for $20.55 million.

Lucara’s Exceptional Stone Tender will be a closely watched affair as it will offer glimpses on the trajectory of diamond prices. In a 2015 diamond prices review by Rapaport magazine; Diamond sector profitability came under the spotlight in 2015 due to sluggish consumer demand in emerging markets and high rough prices relative to the resulting polished. Consequently, the year was one the industry would rather forget as it was characterized by excess supply and consolidation. Polished prices fell as manufacturers held large quantities of diamonds that were difficult to sell. There were simply too many diamonds available for too few buyers.

The recent data on diamond prices this year leaves everything uncertain as to what direction the diamonds market might take. The Rapaport Monthly Report demonstrates that polished prices rose in January due to shortages rather than increasing diamond demand. Polished trading was driven by U.S. jewellers replenishing stock sold during the holiday season as well as some inventory purchases. The report further states that diamond market sentiment improved during January and dealers feel that the worst may be over.

Prospects for manufacturers’ profitability improved as De Beers reduced rough diamond prices by an estimated 7 to 10 percent at the January sight. The company’s sales surged 118 percent to $540 million during January, compared with $248 million in December. Rough demand increased as manufacturers started to raise polished production to fill gaps in supply. Shortages are expected to support diamond prices throughout the first quarter, as rough bought in January will take a few months to pass through the manufacturing process

However, uncertainty remains as consumer demand is sluggish in emerging markets. Prices for diamonds are at their lowest level in five years as demand declined sharply in China, India and other emerging nations. China is the world's second-largest consumer of the precious stones after the U.S. The rise in diamond prices for January 2016 does not reflect the overall market sentiments as the price increases were largely driven by Anglo American, decision to stimulate consumers’ appetites through large scale advertising. De Beers (owned by Anglo American), the largest supplier of rough diamonds by value, has poured millions of dollars into advertising in the US and China, trying to boost jewellery sales as part of a strategy to unclog the manufacturing pipeline and lift demand and prices for rough diamonds. The miner also closed two operations in 2015:   Damtshaa in Botswana. Just recently Ghaghoo Diamond mine, also in Botswana, had to downscale production due to weak diamond prices.

Lucara Diamond Corp which trades on the Botswana’s Stock Exchange foreign counter has made impressive gains since the discovery of Lesedi La Rona diamond. In November 2015, before the discovery, the stock was trading for P13.78, but quickly rose in the following months to trade at P17.69, marking a spectacular 28 percent in returns within 3 months. On December 17, Lucara paid out gross dividend of 0.1616 thebe per share to its shareholders

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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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