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‘Buyers fly in, out without leaving anything here’


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.

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Business

Botswana records first trade surplus since January

7th October 2021
Botswana-records-first-trade-surplus-

Botswana has recorded its first trade surplus for 2021 since the only one for the year in January.

The country’s exports for the month of July surpassed the value of imports, Statistics Botswana’s July International Merchandise Trade data reveals.

Released last Friday, the monthly trade digest reports a positive jump in the trade balance graph against the backdrop of a series of trade deficits in the preceding months since January this year.

According to the country’s significant data body, imports for the month were valued at P7.232 billion, reflecting a decline of 6.6 percent from the revised June 2021 value of P7.739 billion.

Total exports during the same month amounted to P7.605 billion, showing an increase of 6.1 percent over the revised June 2021 value of P7.170 billion.

A trade surplus of P373.2 million was recorded in July 2021. This follows a revised trade deficit of P568.7 million for June 2021.

For the total exports value of P7.605 billion, the Diamonds group accounted for 91.2 percent (P6.936 billion), followed by Machinery & Electrical Equipment and Salt & Soda Ash with 2.2 percent (P169.7 million) and 1.3 percent (P100.9 million) respectively.

Asia was the leading destination for Botswana exports, receiving 65.2 percent (P4.96 billion) of total exports during July 2021.

These exports mostly went to the UAE and India, having received 26.3 percent (P1. 99 billion) and 18.7 percent (P1.422 billion) of total exports, respectively. The top most exported commodity to the regional block was Diamonds.

Exports destined to the European Union amounted to P1.64 billion, accounting for 21.6 percent of total exports.

Belgium received almost all exports destined to the regional union, acquiring 21.5 percent (P1.6337 billion) of total exports during the reporting period.

The Diamonds group was the leading commodity group exported to the EU. The SACU region received exports valued at P790.7 million, representing 10.4 percent of total exports.

Diamonds and Salt & Soda Ash commodity groups accounted for 37.8 percent (P298.6 million) and 6.2 percent (P48.7 million) of total exports to the customs union.

South Africa received 9.8 percent (P745.0 million) of total exports during the month under review. The Diamonds group contributed 39.9 percent (P297.4 million) to all goods destined for the country.

 

In terms of imports, the SACU region contributed 62.7 percent (P4.534 billion) to total imports during July.

The topmost imported commodity groups from the SACU region were Fuel; Food, Beverages & Tobacco, and Machinery & Electrical Equipment with contributions of 33.3 percent (P1.510 billion), 17.4 percent (P789.4 million) and 12.7 percent (P576.7 million) to total imports from the region, respectively.

South Africa contributed 60.1 percent (P4.3497 billion) to total imports during July 2021.

Fuel accounted for 32.1 percent (P1.394 billion) of imports from that country. Food, Beverages & Tobacco contributed 17.7 percent (P772.0 million) to imports from South Africa.

Namibia contributed 2.0 percent (P141.1 million) to the overall imports during the period under review. Fuel was the main commodity imported from that country at 82.1 percent (P115.8 million).

During the months, imports representing 63.5 percent (P4.5904 billion) were transported into the country by Road.

Transportation of imports by Rail and Air accounted for 22.7 percent (P1.645 billion) and 13.8 percent (P996.2 million), respectively.

During the month, goods exported by Air amounted to P6, 999.2 million, accounting for 92.0 percent of total exports, while those leaving the country by Road were valued at P594.2 million (7.8 percent).

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Business

The 2021/2022 Stanford Seed Transformation Program Begins

7th October 2021

Founders from twenty companies have been accepted into the program from Botswana, Namibia, and South Africa

The 4th Cohort of the Stanford Seed Transformation Program – Southern Africa (STP), a collaboration between Stanford Graduate School of Business and De Beers Group commenced classes on 20 September 2021. According to Otsile Mabeo, Vice President Corporate Affairs, De Beers Global Sightholder Sales: “We are excited to confirm that 20 companies have been accepted into the 4th Seed Transformation Programme from Botswana, Namibia, and South Africa. The STP is an important part of the De Beers Group Building Forever sustainability strategy and demonstrates our commitment to the ‘Partnering for Thriving Communities’ pillar that aims at enhancing enterprise development in countries where we operate in the Southern African region”. Jeffrey Prickett, Global Director of Stanford Seed: “Business owners and their key management team members undertake a 12-month intensive leadership program that includes sessions on strategy and finance, business ethics, and design thinking, all taught by world-renowned Stanford faculty and local business practitioners. The program is exclusively for business owners and teams of for-profit companies or for-profit social enterprises with annual company revenues of US$300,000 – US$15million.” The programme will be delivered fully virtually to comply with COVID 19 protocols. Out of the 20 companies, 6 are from Botswana, 1 Namibia, and 13 South Africa. Since the partnership’s inception, De Beers Group and Stanford Seed have supported 74 companies, 89 founders/CEOs, and approximately 750 senior-level managers to undertake the program in Southern Africa.

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Business

Minergy overcomes challenges – improves revenue and produces record breaking coal sales to date

7th October 2021
Minergy

Minergy, the coal mining and trading company with the Masama coal mine, this week released results for the year ended 30 June 2021. The company achieved revenue of P193 million (2020: P81 million) with significant improvement in sales volumes surpassing 415 000 tonnes sold for the year.

The performance was divided into two distinct periods with very different operating environments. The first eight-month period (July 2020 – February 2021), was negatively impacted by delayed funding, COVID-19 impacts and excessive rain; and the last four-month period (March – June 2021), was a more stable production environment moving toward nameplate capacity.

According to Minergy CEO, Morné du Plessis, production and sales initially recovered in July and August 2020 with the easing of COVID-19 restrictions and recoveries were further bolstered by the successful launch of the rail siding. Delays experienced in concluding the funding contributed to contractors limiting operations to manage arrears.

“However, the heavy rains we experienced from December 2020 through February 2021 flooded the mine pit making access difficult and impacting both production and sales. Fortunately, the rain subsided in March 2021, and we entered a more stable environment, with a positive impact on operations. Good recoveries in production and sales were experienced during the last four-month period of the year, with the mine moving closer toward a breakeven position.”

“Despite these operational constraints, including the effects of COVID-19 on logistics and manning of shifts, we expect to reach consistent nameplate capacity in the 2022 financial year,” du Plessis added.

FINANACIAL REVIEW

In addition to the revenue reported above, the company incurred costs of sales of P256 million (2020: P150 million) with operating costs of P23 million (2020: P31 million). This effectively resulted in an operating loss of P86 million (2020: P100 million). Finance costs of P51 million (2020: P17 million) were incurred, bringing the net loss before taxation to P136 million (2020: P117 million).

Du Plessis explains that the adverse conditions in the first eight-month period contributed to 86% of the gross loss, while the more stable four-month period alone contributed to 50% of total sales value, helping to decrease monthly gross losses, albeit below breakeven levels.

The company benefited from a strengthening in the South African Rand (“ZAR”) supporting higher back-on- mine sales prices.

“As announced, we’re pleased to have secured P125 million of additional convertible debt funding through the Minerals Development Company Botswana (Proprietary) Limited (“MDCB”). Minergy remains grateful for this support.”

He added that the first tranche of additional funding provided by the MDCB had been received in December 2020, which allowed Minergy to settle the majority of the contractor’s arrears and allowed their teams to be remobilised. The second and final tranche was paid post the financial year-end and will allow the business to reach nameplate capacity in the new financial year.”

COAL SALES AND MINE PERFORMANCE

Sales volumes increased by 110%, supported by increased sales in Botswana and internationally in South Africa and Namibia. Sales for June 2021 exceeded 56 000 tonnes, a record since the inception of the mine, with pricing increasing late in the financial year on the back of buoyant international prices and a strengthening ZAR.

Minergy also concluded a further 12-month off-take agreement to the existing off-take agreement, with a further agreement finalised post year end.

Overburden moved during the reporting period increased by 86% and extracted coal by 50%. Coal mined in June 2021 alone exceeded 100 000 tonnes. “This is a good performance considering the challenges faced such as sacrificing pre-stripping activities for a period to manage arrears, excessive rain and COVID-19,” du Plessis indicated.

“The wash plant was initially starved of coal due to the factors noted already. Despite this, overall plant throughput performance was 37% higher than 2020. Consistent output was supported by the completion of the Stage 2 rigid crushing section as well as the water saving dewatering screen with filter press contributing to a reduction in water usage of 60% per tonne of coal. A record throughput of more than 84 000 tonnes was achieved in March 2021 and this consistency has been maintained.”

OUTLOOK

According to du Plessis, the completion of Stage 4 of the Processing Plant, the rigid screening and stock handling section, remains a key optimisation step, which has associated benefits. “The completion was unfortunately delayed by a southern African wide shortage of structural steel but was commissioned post year-end.”

Minergy expects the positive momentum in international coal pricing for southern African coal to remain in place. Higher coal prices have resulted in coal being withdrawn from the inland market in favour of lucrative international markets. Du Plessis added that the regional market is currently under- supplied with sized coal, which supports higher pricing and new customer opportunities for Minergy.

“Our objective for the 2022 financial year is to achieve nameplate capacity by completing final ramp-up of operations. This will enable the company to generate sufficient cash flow to stabilise the business at breakeven or better. The bullish coal market is also providing support. COVID-19 will still be closely managed, and we look forward to the lifting of the State of Emergency, as announced, and trust that vaccination programmes will achieve herd immunity in Botswana during the next 12 months.”

Du Plessis expressed his excitement on prospects stating that, “The Eskom due diligence process is continuing, and we are hopeful of receiving feedback during the current financial year. In addition to this opportunity, Minergy is also investigating participation in the request by the Government of Botswana to provide a 300MW power station for which the company has been shortlisted.”

The approved process to issue shares for cash is showing positive leads and he concluded by saying that a listing in London is still being investigated.

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