De Beers nursing Asian Corona Virus infected markets
Business
The world leader in the sale of precious stones that dominates most luxury industries, De Beers, is also affected by the current Corona Virus phobia.
Currently, De Beers is in the Corona Virus scare like the rest of the world, albeit with all the fear it has, De Beers is willing to push through its fear and still brace the Asian markets, this comes after the reliable Asian demand markets continue to sneeze uncertainty on the global diamond business.
This week De Beers Chief Financial Officer Sussanne Swaniker-Tettery told the local media that recent brand sales at Asia fell by 30 to 40 percent, this could also include huge diamond sales fall, and this big plunge coincides with the outbreak of Corona Virus. She said people are no longer going shopping because of fear of the virus, hence a big setback is expected on diamond sales in Asia.
The Asian demand market is one of the biggest in the world after the US markets. The Asian markets where diamond sales are at its peak are; China, Macao and Hong Kong, these markets however have also been hit the hardest by the Corona Virus. The current outbreak of coronavirus disease (COVID-19) was first reported from Wuhan, China, on 31st December 2019, according to World Health Organization (WHO).
China consumers are no longer going to shop for jewellery, a huge “destruction” to the economy of China according to Swaniker-Tettery as the world also is shunning anything that comes from China or Asia due to fear of catching corona. De Beers is on the side of Asia as she battles COVID-19, as the diamond giant waits on China to heal her economy after she defeats the virus. De Beers is on the bedside of China sympathetically hoping that all gets well soon, as diamonds are no longer bought because people are now looking for health not luxury.
Swaniker-Tettery was hopeful that the USD 2 trillion which the Chinese government promised after the fall of the stock market would jumpstart the country’s economy hence recovery of the diamond demand. However she remains uncertain of what the future holds for the Chinese market, telling reporters “it is too early to know.” According to Swaniker-Tettery, it is premature for the diamond producer to calculate the effect of corona outbreak on diamond sales.
There is no direct translation of the economic effects of the corona virus to diamonds or Botswana stones, according to Swaniker-Tettery, but major retailers and brands have closed shop as a result of the outbreak of the currently feared virus. She said even banks are already shy to fund those in the diamond industry. The De Beers Chief Finance Officer gave a scenario that in the time of the SARS outbreak, the Chinese economy went into a sharp decline before the control of the disease which led to the economy going up again.
She sounded like she is waiting for China to heal, so the demand for diamonds can also heal. Another problem coming from the Chinese or Asian markets, and adding to the corona virus woes, is the latest fall of China’s currency, the Yuan and the impending China-US trade talks. This is not enough for the affliction of the diamond demands, Hong Kong is also going through political unrest adding another blow from the Asian demand pool. There is also the latest risk in the diamond business. The increase of in online purchasing which causes additional retailer destocking.
“Throughout the course of 2019, the midstream inventory position was under further pressure due to the closure of some US 'bricks and mortar' retail outlets, an increase in online purchasing (where inventory levels are lower), and retailers increasing their stock held on consignment. Tighter financing also affected the midstream’s ability to hold stock, all of which resulted in lower demand for rough diamonds,” Swaniker-Tettery read De Beers’ woes before the press this week.
De Beers fights on with huge marketing expenditure
Last year November, De Beers announced that its marketing spend in the entire 2019 will be totalling to $180 million (around P1.9 billion) the group Chief Executive Officer, Bruce Cleaver told BusinessPost that the dispatch was the largest marketing spend in 10 years. Swaniker-Tettery told journalists on Thursday that De Beers has survived all the winds against the diamond industry by marketing. She explained how they captured China markets which used to be a market not commonly infatuated by diamonds and the sentimentalism that comes with the precious stones. Right now De Beers is able to reach out to the middle class in China and India, not only the wealthy like in the past, said Swaniker-Tettery. She said this is because marketing developed the culture of diamonds as a big luxury.
Botswana
Botswana’s EBITDA is currently at P3.90 billion. In all what De Beers makes, according to the company Chief Finance Officer, Botswana will take away 80.2 percent of all the takings either profit, dividends or taxes. In Botswana, overall production was 4 percent lower at 23.3 million carats (2018: 24.1 million carats). This is despite production at Jwaneng increasing by 5 percent to 12.5 million carats (2018: 11.9 million carats) as throughput rose to partly offset a 12 percent decrease at Orapa to10.8 million carats (2018: 12.2 million carats), owing to a delay in an infrastructure project and expected lower grades.
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.
Business
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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