Connect with us
Advertisement

How to ready for diamond depletion


Independent consultants have in a study commissioned by Botswana Institute for Development Analysis (BIDPA) come up with startling recommendations, in the event of depletion of diamond resources in Botswana.


Consultants, Rob Davies and Dirk van Seventer posit that indeed “Diamonds will one day run out not necessarily physically but will be more costly to mine not sure when, but around late 2020s.”


The study titled Life after Diamonds: The Economy Wide Consequences of Declining Diamond Production in Botswana, is a composite of a wide ranging economic report commissioned by BIDPA for private sector body, Botswana Confederation of Commerce Industry and Manpower (BOCCIM).  


They give three possible scenarios showing how the effects of depletion of diamonds will manifest and how they can be mitigated.


“We assume that the decline takes place between 2025 and 2027, although lessons we draw do not depend on this precise timing; here we report that the most significant and permanent decline assuming that by 2027, GDP in diamond mining declines by 75 percent below its 2024 level and remains constant; This decline leads to total GDP of 25 percent in 2028, below what would otherwise have been. Even after diamond production stabilises, the economy declines and ten years after the presumed reduction in diamond production started, GDP is 48 percent below what it would have been.”


The report states that the decline is largely driven by the impact it has on savings and by extension, investment. Non-diamond sectors initially expand slightly when diamonds decline, because of exchange rate effects; they quickly start to slow down and even contract as investment falls back because of lack of resources.


“These effects can be ameliorated by policy responses in the short to medium term,” the report states.


There are two broad policy questions to consider: Possible policy actions before depletion – mitigation or appropriate policy response after depletion – adaptation.


The consultants suggest a ‘Diamond OPEC’ that requires cooperation among major producers to reduce production by 25 percent – this will raise global revenue by at least 16 percent.


“One mitigation strategy is to get more out of diamonds before they run out; Report estimates elasticity of demand for diamonds (-0.45), suggests scope for raising revenue by reducing output; this not only raises revenue but also defers date of depletion.”


Meanwhile the drafting of Botswana’s National Development Plan 11 (NDP) will be informed by fully fledged economic study commissioned by BIDPA. This study was initiated in the wake of the global economic crisis, in 2009.


BIDPA commissioned some studies for the private sector collective body BOCCIM to assuage the ill-feeling that emanated from subdued economic activity that was sweeping across the globe.


Captains of industry from various public and private institutions, including BOCCIM, Botswana Innovation Hub, eConsult, Statistics Botswana, among others were treated to the revealing finding of the study which was Funded through a US$400,000 (P3,9 million) grant from the African Development Bank.


The central purpose of the study was to give a picture of what would happen in the event of the sudden depletion of mineral resources in Botswana, particularly diamonds.


The study entailed three components: Projections on mineral production, exports and revenue which was conducted by Dr Fichani and Mr. Freeman from the University of Botswana; CGE Modelling of the implications of changes in diamond revenue conducted by Dr. R Davies and Policy Response to the Decline in Revenue by BIDPA’s Professor Roman Grynberg.


Maria Machailo-Ellis told a conference held at Lansmore Hotel last week that the study went on to become a fully fledged policy advisory document that will help to inform major decisions about the economy of the country; “It is just in time for NDP 11,” said Machailo-Ellis, who added that “this study will help us to engage Government from a more informed position.”


Among many findings, the study found that: The private sector is moving to invest in extraction of base and energy metals, including Coal Bed Methane (CBM) but Industrial Policy appears disconnected from the range of developments occurring in the mining sector; economy reformation required a highly paid, highly motivated professional workforce; Botswana’s tax incentives are no longer competitive in relation to the region, requiring transformation;


The study recommends that Botswana reform its tax regime and create tax free Export Processing Zones; to build a new low cost railroad to the coast to monetize the coal and base metal sectors; conduct a selective low interest rate policy for projects of national importance; eliminate barriers increased.


The executive summary of the reports concludes that: “Botswana has a combination of vast potential energy resources and that are emerging as a substantial deposits of base metals. It needs to develop synergies between these resources in line with the sort of policies used in Malaysia, South Africa and other countries to provide strong incentives for firms to locate,” adding that “Botswana no matter how well it manages industrial policy, will always be disadvantaged by virtue of being landlocked but it can compensate investors for that disadvantage by providing electricity, the source of which it has in abundance, by pricing at marginal cost to strategic industries in its Export Processing Zones.”

Continue Reading

Business

China’s GDP expands 3% in 2022 despite various pressures

2nd February 2023
China’s Gross Domestic Product (GDP) expanded by 3% year-on-year to 121.02 trillion yuan ($17.93 trillion) in 2022 despite being mired in various growth pressures, according to data from the National Bureau Statistics.

The annual growth rate beat a median economist forecast of 2.8% as polled by Reuters. The country’s fourth-quarter GDP growth of 2.9% also surpassed expectations for a 1.8% increase.

In 2022, the Chinese economy encountered more difficulties and challenges than was expected amid a complex domestic and international situation. However, NBS said economic growth stabilized after various measures were taken to shore up growth.

Industrial output rose 3.6% in 2022 over the previous year, while retail sales slightly shrank by 0.2% data show that fixed-asset investment increased 5.1% over 2021, with a 9.1% hike in manufacturing investment but a 10% fall in property investment.

China created 12.06 million new jobs in urban regions throughout the year, surpassing its annual target of 11 million, and officials have stressed the importance of continuing an employment-first policy in 2023.

Meanwhile, China tourism market is a step closer to robust recovery. Tourism operators are in high spirits because the market saw a good chance of a robust recovery during the Spring Festival holiday amid relaxed COVID-19 travel policies.

On January 27, the last day of the seven-day break, the Ministry of Culture and Tourism published an encouraging performance report of the tourism market. It said that domestic destinations and attractions received 308 million visits, up 23.1% year-on-year. The number is roughly 88.6% of that in 2019, they year before the pandemic hit.

According to the report, tourism-related revenue generated during the seven-day period was about 375.8 billion yuan ($55.41 billion), a year-on-year rise of 30%. The revenue was about 73% of that in 2019, the Ministry said.

Continue Reading

Business

Jewellery manufacturing plant to create over 100 jobs

30th January 2023

The state of the art jewellery manufacturing plant that has been set up by international diamond and cutting company, KGK Diamonds Botswana will create over 100 jobs, of which 89 percent will be localized.

This content is locked

Login To Unlock The Content!

Continue Reading

Business

Investors inject capital into Tsodilo Resources Company

25th January 2023

Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.

According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.

The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.

Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.

Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.

Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana.  The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.

Continue Reading