“As the situation around the world continues to evolve rapidly, we have been speaking with our customers to understand their requirements. While this is an extraordinary situation, our customers continue to express their desire for the Sight to proceed. We are therefore focused on standing with our customers, meeting their requirements and proceeding with Sight 3.”
This is the most functional paragraph in a De Beers release announcing that Sight 3 will proceed amid coronavirus fears. “The health and safety of our people, our partners and our communities is our overriding focus. Since the start of the COVID-19 outbreak, we have implemented measures as advised by the WHO, national governments and our pandemic response team at our operations and offices,” the statement further reads. The year 2019 was a tough trading year for the global diamond industry, predominantly due to US- China trade war.
The economic uncertainty generated by unstable geopolitical climate arising from the Washington –Beijing tensions led to widespread uncertainty and a global downturn in the diamond industry during the first half of 2019 spilling over to the entire year. These also fostered a heightened sense of caution among the banks that finance the trade, as well as diamond brokers and consumers of luxury goods, leading to significant decline in commerce across all segments.
During the last quarter of 2019, the industry showed signs of slight recovery with holiday season in China and United States thanksgiving opening up the market a bit. Positive sentiment and upward trajectory continued into first sales of the year 2020, with leading producers, Alrosa and De Beers registering an impressive upswing. But that was short lived, thanks to the outbreak of Corona virus in December 2019 which intensified in February this year. De Beers’ second sight fell by about 36 % from the first sales of the year and 25 % when gauged against the same sight in 2019.
This was mainly due to slow business in China where corona virus broke and was more pronounced. After the United States, most of De Beers’ rough diamonds end up in China. Business was also slow in India and Belgium, countries that house some of the world largest centers of diamond cutting and polishing industries. This week reports have also added Israel, another key diamond hub into the list of countries where cutting and polishing firms have closed shop amid COVID 19 global spread.
While that is looking to heavily affect De Beers third sales cycle of the year , travel bans by Government as part of measures to stop the spread of Corona into Botswana has directly caused a stir at De Beers Global Sight holders Sales(DBGSS). De Beers Global Sight Holder Sales sells diamonds from all De Beers operations, which are Canada, South Africa and Namibia. Botswana alone through Debswana produces over 2/3 of De Beers Global production.
DBGSS conducts 10 sales sights a year, where the world ‘s leading Sightholders from New York-United States, Antwerp- Belgium , Tel Aviv -Israel, Mumbai-India descend into Gaborone to inspect the rough diamonds offered to them, purchase and ship out to their various cutting and polishing firms in their respective countries. All this countries were on Monday put on travel ban by Government due to their already confirmed cases of corona virus.
According to American business media outlet, Bloomberg, De Beers is currently struggling with how to conduct diamond sales because key customers are blocked from travelling, let alone entre Botswana. The next sight is scheduled to start on the 30th of March. “Our intention remains to hold the sight, in line with the desire for it to go ahead as expressed by customers, but we are developing a suite of contingency plans in the event that it is not possible to hold the sight in the usual manner,” De Beers told Bloomberg this week.
Reports indicate that De Beers will next week hold an emergency meeting with the Government of Botswana with a view to come up with a remedy to the situation, mutual arrangement that would possibly strike equilibrium between health precautionary measures and trying to avoid catastrophic economic shocks from zero diamond trading. “The consistency and predictability of De Beers Group’s rough-diamond products enable customers to have the option to purchase products unseen, and our, our customers continue to express some demand for rough diamonds and have communicated their desire for the sight to proceed,” De Beers officials said.
“We are also looking at how best to meet each customer’s current requirements through other flexibility measures which will be communicated to them in the coming days” added the mining giant this week. Other option reported to be under consideration by the mining behemoth are arrangements such as holding a “blind” sight, where buyers don’t get to look at the goods they’re purchasing. De Beers’ customers could also send local staff to the sale, as many has representatives in either Botswana or South Africa.
Last year De Beers sold about $1.36 billion less worth of rough diamonds. In the year 2018 De Beers’s rough diamonds sales amounted to US$5.39 Billion, approximately P54 Billion, this was a slight pickup from the 2017 sales value of US$5.31 Billion. For the year 2019 the company‘s entire ten sights only gathered just over $4 billion in total sales, way below the 2018 value by about $1.35 billion (around P14 billion) mirroring a 25 % decrease.
Government is currently sitting on 4 400 vacant posts that remain unfilled in the civil service. This is notwithstanding the high unemployment rate in Botswana which has been exacerbated by the recent outbreak of the deadly COVID-19 pandemic.
Just before the burst of COVID-19, official data released by Statistics Botswana in January 2020, indicate that unemployment in Botswana has increased from 17.6 percent three years ago to 20.7 percent. “Unemployment rate went up by 3.1 percentage between the two periods, from 17.6 to 20.7 percent,” statistics point out.
Leading commercial bank, First National Bank Botswana (FNBB), expects the central bank to sharpen its monetary policy knife and cut the Bank Rate twice in the last quarter of 2020.
The bank expects a 25 basis point (bps) in the beginning of the last quarter, which is next month, and another shed by the same bps in December, making a total of 50 bps cut in the last quarter. According to the bank’s researchers, the central bank is now holding on to 4.25 percent for the time being pending for more informed data on the economic climate.
An audit of the accounts and records for the supply of food rations to the institutions in the Northern Region for the financial year-ended 31 March 2019 was carried out. According to Auditor General’s report and observations, there are weaknesses and shortcomings that were somehow addressed to the Accounting Officer for comments.
Auditor General, Pulane Letebele indicated on the report that, across all depots in the region that there had been instances where food items were short for periods ranging from 1 to 7 months in the institutions for a variety of reasons, including absence of regular contracts and supplier failures. The success of this programme is dependent on regular and reliable availability of the supplies to achieve its objective, the report said.
There would be instances where food items were returned from the feeding centers to the depots for reasons of spoilage or any other cause. In these cases, instances had been noted where these returns were not supported by any documentation, which could lead to these items being lost without trace.
The report further stressed that large quantities of various food items valued at over P772 thousand from different depots were damaged by rodents, and written off.Included in the write off were 13 538 (340ml) cartons of milk valued at P75 745. In this connection, the Auditor General says it is important that the warehouses be maintained to a standard where they would not be infested by rodents and other pests.
Still in the Northern region, the report noted that there is an outstanding matter relating to the supply of stewed steak (283×3.1kg cans) to the Maun depot which was allegedly defective. The steak had been supplied by Botswana Meat Commission to the depot in November 2016.
In March 2017 part of the consignment was reported to the supplier as defective, and was to be replaced. Even as there was no agreement reached between the parties regarding replacement, in 51 October 2018 the items in question were disposed of by destruction. This disposal represented a loss as the whole consignment had been paid for, according to the report.
“In my view, the loss resulted directly from failure by the depot managers to deal with the matter immediately upon receipt of the consignment and detection of the defects. Audit inspections during visits to Selibe Phikwe, Maun, Shakawe, Ghanzi and Francistown depots had raised a number of observations on points of detail related to the maintenance of records, reconciliations of stocks and related matters, which I drew to the attention of the Accounting Officer for comments,” Letebele said in her report.
In the Southern region, a scrutiny of the records for the control of stocks of food items in the Southern Region had indicated intermittent shortages of the various items, principally Tsabana, Malutu, Sunflower Oil and Milk which was mainly due to absence of subsisting contracts for the supply of these items.
“The contract for the supply of Tsabana to all depots expired in September 2018 and was not replaced by a substantive contract. The supplier contracts for these stocks should be so managed that the expiry of one contract is immediately followed by the commencement of the next.”
Suppliers who had been contracted to supply foodstuffs had failed to do so and no timely action had been taken to redress the situation to ensure continuity of supply of the food items, the report noted.
In one case, the report highlighted that the supplier was to manufacture and supply 1 136 metric tonnes of Malutu for a 4-months period from March 2019 to June 2019, but had been unable to honour the obligation. The situation was relieved by inter-depot transfers, at additional cost in transportation and subsistence expenses.
In another case, the contract was for the supply of Sunflower Oil to Mabutsane, where the supplier had also failed to deliver. Examination of the Molepolole depot Food Issues Register had indicated a number of instances where food items consigned to the various feeding centres had been returned for a variety of reasons, including food item available; no storage space; and in other cases the whole consignments were returned, and reasons not stated.
This is an indication of lack of proper management and monitoring of the affairs of the depot, which could result in losses from frequent movements of the food items concerned.The maintenance of accounting records in the region, typically in Letlhakeng, Tsabong, and Mabutsane was less than satisfactory, according to Auditor General’s report.
In these depots a number of instances had been noted where receipts and issues had not been recorded over long periods, resulting in incorrect balances reflected in the accounting records. This is a serious weakness which could lead to or result in losses without trace or detection, and is a contravention of Supplies Regulations and Procedures, Letebele said.
Similarly, consignments of a total of 892 bags of Malutu and 3 bags of beans from Tsabong depot to different feeding centres had not been received in those centres, and are considered lost. These are also not reflected in the Statement of Losses in the Annual Statements of Accounts for the same periods.