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Depressed diamond prices paints gloomy economic outlook

Botswana’s future economic outlook is still uncertain as Diamond suppliers remained under pressure as polished prices fell further in September, based on Rapaport Monthly Report – October 2015.  The authoritative diamond U.S. demand is steady as the holiday season approaches but Chinese buyers are restrained due to a slowdown in economic growth in China and Hong Kong.


But such negative sentiments were downplayed by ALROSA CEO, Andrey Zharkov who this week told Bloomberg that his company expects rough diamond prices to stabilize by the end of the year after falling 15 percent. The company will continue to focus on diamond mining and may review diamond polishing to see if it is beneficial for the company’s value, according to the report.


The Rapaport Group is an international network of companies providing added-value services that support the development of fair, transparent, efficient, and competitive diamond and jewelry markets. Established in 1976, the Group has over 20,000 clients in 118 countries.

Group activities include Rapaport Information Services providing research, analysis and news; Rapaport Magazine, the leading print publication for the diamond industry; RapNet® – the world's largest online diamond trading network; Rapaport Laboratory Services providing GIA and HRD gemological services in India, Belgium and Israel; and Rapaport Trading and Auction Services specializing in recycled diamonds and jewelry.



The ALROSA boss said the company may also start talks with clients on diamond sales in rubles. Diamond prices have declined by about 15 per cent in 2015 but are still stronger than other commodities, Zharkov said the company may pay back $500 million of debt this year and may keep dividends at the 2014 level, Bloomberg reported.



Rough & Polished website reported October 7 that ALROSA’s supervisory board had approved the possibility to settle payments in rubles under new export contracts, but that these will not be available before 2018 and will not affect current clients. The value of diamonds will still be calculated using the exchange rate set by Russia’s Central Bank and market prices will be in US dollars, according to the report.


Elsewhere, Rapaport reports that Belgium’s polished diamond exports fell 12 percent year on year to $1.39 billion in September. By volume, polished imports decreased 14 percent to 610,853 carats, while the average price increased 2 percent to $2,193 per carat, according to the Antwerp World Diamond Centre.



Total polished imports to Belgium were also down 12 percent to $1.34 billion during the month as net polished exports, representing exports minus imports, fell 4 percent to positive $47.6 million.

Among Belgium’s main trading partners, polished exports to the U.S. fell 8 percent and to Hong Kong slipped 1 percent, while exports to Switzerland dropped 4 percent. 

Rough imports decreased 35 percent to $870.4 million and rough exports fell 38 percent to $884.5 million.

Net rough imports, representing imports minus exports, increased 81 percent to negative $14.06 million during the month.

Belgium’s net diamond account, representing total polished and rough imports less total exports, decreased 51 percent to reduce the deficit to $61.7 million.



During the first nine months of the year, polished exports decreased 7 percent to $10.22 million, while polished imports fell 6 percent to $10.18 billion. Rough imports fell 25 percent to $8.61 billion and rough exports dropped 27 percent to $8.74 billion.

Belgium’s net diamond account for the year to date went from a $10.27 billion deficit to a $167.11 million surplus.


The RapNet Diamond Index (RAPI™) for 1-carat, GIA-graded diamonds dropped 3 percent in September. RAPI for 0.30-carat diamonds declined 2.7 percent, while RAPI for 0.50-carat diamonds slipped 2.2 percent. RAPI for 3-carat diamonds fell 4.8 percent during the month.

The third quarter saw RAPI for 1-carat diamonds decline by 6.3 percent while the index on October 1 was down 13.9 percent from a year ago. 


© Copyright 2015, Martin Rapaport

The Rapaport Monthly Report demonstrates that polished trading activity improved after the July / August vacation period but is still well below 2014 levels.

The Hong Kong Jewelry and Gem Fair signaled that the recent Chinese stock market slump and the government’s anti-corruption campaign are having a lasting negative impact on discretionary spending. Jewelry retail sales during the National Day Golden Week that began on October 1 were weak and expectations are low for the important Chinese New Year in February.


Continuation of depressed global diamond prices do not augur the country’s intension to diversify the economy within and away from diamond mining and to lure jewelers to invest in Botswana.


“We want people to go as far down the value chain as possible and that’s why we want to  start a new conversation about how can we help bring jewelers to Botswana,” Mokaila told a  Rapaport Breakfast at the JCK Las Vegas show. “How can we have a relationship that can be meaningful to them? We will listen and do what is necessary to ensure that we diversify our economy.”


For Botswana, economic diversification remains a panacea because the country remains highly reliant upon the diamond industry and, more specifically, diamond mining. Through its partnerships with De Beers, royalties and taxes, approximately 80 percent of royalties from diamonds mined in Botswana go to the government. 30 percent of the country’s budget and about 80 percent of its export revenue comes from diamonds.


Still, experts maintain, diamond mining has its limits, even if the country’s diamond mining resource will extend to around 2050, as Mokaila told the meeting diamond life span will continue well beyond the initial 2030 projection.

Debswana, which is an equal partnership between De Beers and the Botswana government, has the bulk of production yielding about 22 million carats a year from its four mines – Orapa, Letlhakane, Damtshaa and Jwaneng. The Ghaghoo development, the country’s fifth mine, is being readied for production by Gem Diamonds later this year.


While the country’s diamond resource is celebrated, the government is also acutely aware of the need to diversify. The country has come a long way to move downstream in a short time.


In the past year and a half, De Beers relocated its sorting and sales operations from London to Gaborone, and the state-owned Okavango Diamond Company launched its own rough sales.

In addition, a number of new diamond manufacturing companies have begun operations, bringing the number of DTC Botswana sightholders to 20. Significantly, a number of auxiliary services such as brokers, banks, shipping companies and grading laboratories have set up shop in Gaborone.


Mokaila told Rapaport that he sees “the next step as bringing jewelers to the country and expanding Okavango’s role.”


Similarly, the government is cautious to ensure that Okavango’s operations are sustainable. The company currently has access to 14 percent of Debswana production – approximately 3 million carats – which it sells via auction.

Mokaila stressed that he wants to make Okavango a major competitor on the global market, which he hints might include introducing rough contract sales, polished tenders and gaining access to a greater chunk of Debswana production.


As a result, Okavango, along with the Diamond Hub – which has overseen the project from the start, is central to the government’s diversification program.

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Business

Payless to partake in BSE’s Flagship Tshipidi program

28th June 2022
PAYLESS

Newly established wholly indigenous citizen owned retail chain Payless Retail (PTY) Ltd is set to partake in the first session of Botswana Stock Exchange (BSE)’s Tshipidi Mentorship Program (TMP) on Monday June 29th.

The TMP aims to train and capacitate SMEs so they can operate as corporates and eventually list on the local bourse. According to local bourse, BSE, the program aims to provide practical training to potential issuers through a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.

Payless Retail is a newly established supermarket chain whose mission is to become a convenient one-stop shopping destination as it is one of the Botswana oldest retailing brands.  It started off as Corner Supermarket in January 1976, and to date boasts of nine stores in, among others, Gaborone, Mochudi, Molepolole and Tlokweng. Payless was recently acquired by Ellis Retail Group, which is led by businessman Elliot Moshoke.

The takeover catapulted Ellis Retail to the envious position of being the first wholly indigenous owned major retail chain. “We jumped at this opportunity because it gave us a chance to prove to Batswana that the retail business is open and lucrative.”

The objective is to create a proudly Botswana retail chain that fully supports our national Vision, economic development and citizen economic empowerment ambitions,” Moshoke told BusinessPost.

He further emphasized that Batswana are capable and able to run large scale businesses hence they need to accept invite foreign investors who will come in to support us not take the business.
“Our win as Payless in the Fast Moving Consumer goods (FMCG) industry is a win for Batswana. We need their support in this difficult and challenging journey.

As you are aware, Payless is the only retail chain in the hands of Batswana ba Sekei. We need to take advantage of this to generate employment and create small businesses in retail and Agri businesses,” he explained.

The retailer has also partnered with Botswana Investment & Trade Center (BITC) on their #PushaBW campaign with a view to initiating earnest engagement with local producers to iron out bottlenecks and ensure seamless trading.

“Local producers have to be part of the phenomenal growth of the Payless brand. This will in turn facilitate employment creation and economic growth. We did this because we have the utmost respect for local manufacturers and producers,” he mentioned.

Payless is currently restocking all of its stores; a development that Moshoke says is testament to the retailer’s commitment to growing the brand and ensuring continuity of business. He further revealed that renowned retail suppliers like PST and CA Sales have reignited their trust in Payless, opening their doors for Payless as they have faith in the retailer’s new owners.

The takeover has reportedly saved more than 200 jobs and gave a new lease of life to the previously fledging Payless brand. According to a press release from the management team, the Payless work forces are also extremely excited about what the future holds. The TMP is a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.

The program is administered by experts within the listing ecosystem and seeks to bring the potential issuers closer to the listings advisers, investors and leaders of already listed companies.  “As a strategic initiative, the BSE decided to set up this mentorship program in a bid to assist SMEs to strategize, corporatize and acclimatize in order to list to access equity finance and expand operations,” said the BSE.

The TMP will avail to SMEs practical insights, knowledge and feedback from institutional investors, increased awareness of the BSE listing requirements as well as an intimate network of advisors and CEOs of listed companies. After training, Payless will graduate with improve governance structures and better knowledge of articulating its business strategy. The retailer will also gain increased visibility through BSE marketing platforms.

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Business

BITC assisted companies rake in P2.96 billion in export earnings

21st June 2022
BITC-CEO-Keletsositse-Olebile

Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.

In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.

The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.

With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.

Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.

BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.

During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.

BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.

As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.

In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.

BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.

Another tool used for export development by BITC is the Botswana Trade Portal, which has experienced some growth in terms of user acceptance and utilisation globally. The portal provides among others a catalogue of information on international, regional and bilateral trade agreements to which Botswana is a party, including the applicable Rules, Regulations and Requirements and the Opportunities for Botswana Businesses on a product by product basis.

The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.

BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.

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Business

Inflation up 2.3 percent in May

21st June 2022
Inflation

Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.

According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).

With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.

In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.

Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.

The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.

The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.

The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.

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