Buyers fly in, out without leaving anything here
Business
According to several local dealers, the relocation of locally-mined diamond sales, from London to Botswana is yet to produce the envisaged benefits to the local economy.
The US$5 billion dollar injection to the economy through the rough and polished diamond sales, is seen by observers as having the potential for a ,multiplier effect of two and a half times itself; P130 billion into the local economy annually, if harnessed to its full potential.
In an interview with BusinessPost, Mmetla Masire of the Diamond Hub said that after the relocation of the De Beers Sales to Gaborone, Government is now looking at developing a jewellery industry. Government, through the Diamond Hub, has instituted an internal study that will inform the development of jewelry manufacturing industry.
“We are lucky to have Shrenuj Botswana, the sole jewellery manufacturer in the country, and they can provide a test model for how best we can develop manufacturing.”
However, local diamond dealers are crying foul at the lack of legislation that compels diamond buyers to transact through them.
One local dealer who preferred anonymity told BusinessPost that: “These diamond buyers pay brokers fees everywhere, except here,” saying the law in other world centres, empowers the local dealers to reap substantially from billion dollar industry.
“So basically what has happened is that sales from moved from overseas and there are no other benefits for us.”
The dealer cites larger brokers such as Rothschilds and Henning as having their own clients and thus setting up in the country to facilitate their trade.
“But of the 200 buyers that come to ODC every month, if I had just 10 of them, I would have hired close to 12 people,” said the dealer.
“We actually had a manager at ODC, (name withheld) who told one of our clients that they did not need us, that they can buy direct; needless to say the client was gone the following month.”
“Imagine you had ten licensed brokers all employing about 10 to 15 people minimum,” said the dealer.
“We organise some business for ourselves and then when they realise they don’t need, us they bail”
But Masire insists that the issue of dealers’ contribution to the trade should be put in the proper context. “Botswana’s diamond trade processes are much smaller and uncomplicated; in India, you will have 800 diamond cutting factories and it makes sense to have locals there who know the terrain better; same as in Antwerp,” said Masire.
Masire says that the conundrum is caused by the need for buyers to view their purchases, and this necessitates their visits to Botswana, where they find out that they don’t need to deal through the brokers and dealers.
He concedes that in Botswana, there is no law that compels diamond buyers to go through dealers when transacting for diamonds. He adds that some diamond producing countries in the region, such as South Africa and Namibia, have suffered from over regulation and this has to be avoided.
“Dealers and brokers have complaints but they must lobby Government and make Government understand their point of view; they must group themselves or form associations because a one by one approach cannot be as effective.”
DIAMOND SECTOR OPPORTUNITIES
Masire tells this publication that the opportunities in the diamond sector are infinite and the thinking that the sector is risky, is old thinking. He says that, perhaps Government has helped to perpetuate the perception that diamond business is low; on the contrary, the business is growing but not at pre recession levels.
“The industry changed post the recession and we have seen what used to be families now turning into companies that run the trade; banks have also become strict on the diamond trade, insisting that traders put up some of their own money when transacting, to share the risks involved,” said Masire.
Masire reveals that there are opportunities for training in the diamond sector, with only two institutions holding the fort, namely Afrimond Diamond Institute who teach broadly on issues surrounding the industry, and the GIA (Gemological Institute of America) who teach mostly about valuations.
He says the security sector also could hinge on the diamond industry, with Brinks and Malca-Amit, being the only significant players.
While only as much as 150 new jobs have been created with the relocation from London, the intention was to bring the diamantaire traffic to Botswana for multilier business and for Der Beers clients to access diamonds from other sellers; besides De Beers, other diamond companies are also holding their auctions in Botswana, with Lucara having held its first auction in November of 2014 and one to follow in two weeks.
ANTWERP VS BOTSWANA
Botswana still has some way to go in emulating or even surpassing Belgium as a diamond centre, but the stage is set for this development to possibly take place in future. Botswana has since asserted itself as one of the global diamond centres of repute, after the relocation of Der Beers Global Sight Sales, a move meant to facilitate the arrival of diamantaires.
The world’s largest diamond trading hub with 80 percent of the world’s rough diamonds and 50 percent of polished diamonds traded through Antwerp Yearly turnover with a turnover of over €42 billion in 2011.
1st Belgian export product outside the EU. The leading component of Belgian trade with India, China and Russia Diamonds Account for 5 percent of Belgian Exports. Leader in global diamond compliance and Corporate Social Responsibility and 1,850 registered diamond businesses in Antwerp.
Diamonds create an added value of €1500 million for Belgium with more than 34,000 jobs in Flanders, contributing to 70 percent of Belgian trade surplus with High-end niche manufacturing. The fiscal and parafiscal contribution of the diamond sector is €300-€800 million year. Antwerp has in its Presence of the world’s largest diamond mining companies; BHP-Billiton, Rio Tinto, Alrosa and De Beers. Diamonds are an iconic facet of Antwerp’
Though Antwerp is currently the largest hub in the world, it is not sitting on its laurels, considering the threat from Botswana and other centres.
Cathy Berx, Governor, Province of Antwerp, Belgium, in a foreword of the Antwerp diamond Masterplan document released in 2012, mentions that: “I was first approached by some key players of the diamond industry who expressed their concern about the future of their sector in Antwerp. Citing aggressive competition and an ‘uneven playing field’, they feared that without a clear vision and strategy, the sector’s prospects of survival were slim.
Despite its problems, I felt there was tremendous potential; with strong leadership, unity and vision combined with a sense of innovation, professionalism and openness, the sector was capable of creating a new and brighter future for diamonds and for Antwerp.”
“My office was happy to facilitate a repositioning exercise that the sector would own and take responsibility for.”
“In addition to the many ideas and initiatives put forward, problems were identified, solutions discussed and new business areas targeted to keep Antwerp as world-leader in diamonds. I am particularly glad to see the exercise has been honest in tackling important issues such as transparency, compliance, individual responsibility, CSR and innovation driven by new technology. There was also a strong plea for a competitive fiscal operating template, as without this, successfully competing with India, Dubai or Botswana in the future, will always remain an uphill struggle,” said Cathy Berx.
Business
CA SALES revenues rose to R9.5 billion
The Botswana and Johannesburg Stock Exchange listed distributor of fast-moving consumer goods
This content is locked
Login To Unlock The Content!
Business
Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Business
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.