The De Beers Group Chief Executive, Philippe Mellier has said investment will be key in achieving a lasting success of the diamond industry.
“Maintaining success in the diamond industry is dependent upon investment to sustain supply, finance and demand,” said Mellier.
Mellier pointed to De Beers’ investment in mining projects in Botswana, South Africa and Canada to deliver sustainability of supply, in its distribution strategy to ensure the most efficient ways of bringing the product to market, and in the sustainability of demand through Forevermark.
“The product we mine is finite; the trade is capital intensive; and consumer attitudes and preferences continue to evolve. As such, maintaining success depends on the sustainability of supply, the sustainability of finance and the sustainability of demand. If we each play the right role in supporting these three areas, then all parts of the value chain will benefit”
“Whether focus is on economies of scale, improved use of technology or more efficient distribution, sustainably capturing value in the midstream requires ongoing investment so that customer’s demand remains strong and reflective of the true value of your product and service proposition,” said Mellier.
The reception marked the first anniversary of Global Sight holder Sales’ move from London to Gaborone, Mellier extolled “the seamless transition is testament to all the hard work put in by Government, the Sight holders, the local community, and the men and women at the De Beers Group of Companies.”
He added that in Botswana, DeBeers continues with its hugely important investment in the Cut-8 project at Jwaneng which is estimated to deliver over 100 million extra carats from one of the world’s richest diamond mines.
“We believe that the industry is approaching one of the greatest periods of opportunity in living memory, and we are committing to major investments across the pipeline so that we can unlock the full value presented by the industry’s outstanding fundamentals,” he said.
Highlighting on the falling oil prices, Mellier said the recent downtrend in oil prices is also expected to be important an important factor in 2015 for the diamond industry. US is expected to be a major benefactor of the falling prices.
“All of this shows that there is ample opportunity for the industry. The question for all of us to ponder is how we best unlock this opportunity for the benefit of our own businesses. One of the star performers in the global economy is expected to be the U.S., which is clearly good news for diamonds as this is the major destination for diamond jewelry sales,” he said.
Mellier revealed that in South Africa, the Venetia underground project will extend the life of South Africa’s largest diamond mine to 2044. “Significant progress has been made in the main constructions throughout 2014 and the project will deliver over 80 million further carats from this deposit,” said Mellier.
He added that in Canada, progress at Gahcho Kue, one of the largest new developments in the diamond world, is very positive and we are eagerly looking forward to receiving the first production from this leading new mine within a couple of years.
In Namibia, DeBeers has opened the Sendelingsdrif mine following the development work undertaken over the preceding two years. This mine forms an important part of the extension of the lifespan of Namibian operations and further bolsters our production capacity in the years ahead.
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”