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Anglo American hints anxiety in talks such as ‘Renewal of Vows with Botswana’

President Mokgweetsi Masisi has coined the De Beers 50/50 partnership with Botswana Government as a “marriage” and at the last Diamond Conference he spoke of “renewal of vows” referring to talks between the two parties.

The Botswana-De Beers diamond sales deal was renewed into a 10 year union in 2010, it lapses this year in September. However there is a widespread concern that ever since the ongoing talks began, the talks have been taking place in secrecy in Gaborone and London boardrooms. But a lot of public curiosity is about the two parties publicly appearing to be diplomatic about their negotiations and promoting an unbreakable five decade bond.

Masisi borrowed all the metaphors of a long standing and flourishing love or romantic relationship while De Beers group CEO Bruce Cleaver last year, brandishing a huge smile before reporters at the Diamond Conference, spoke of not even dreaming of “any better partner than Botswana.” Antagonist see this with an eye of scepticism, some just sense a lot of flattery by lovers who would not talk about what happens when alone in private, in bedroom. Some observers or the opposition see this as just sweet nothings on public display, while a lot is happening behind closed doors.

Owner of De Beers, Anglo American, has recently indirectly released a hint red flagging on how dicey it is for the company to be in a business partnership with governments, like the deal with Botswana through their subsidiary. Anglo American owns 85 percent of De Beers while the Government of the Republic of Botswana owns the remaining 15 percent. On the other hand De Beers has a 50/50 venture with Botswana government which resulted in the birth of Debswana.

Another offspring of the partnership is Diamond Trading Company Botswana (DTCB), also a 50 -50 venture, DTCB avails 85 percent of their sorted and valued diamonds to De Beers Global Sight holder Sales (DBGSS) and 15 percent to Okavango Diamond Company (ODC) which is wholly owned by Botswana Government. In its recently released annual financial report and notice of AGM, Anglo American hinted that in a deal with Botswana through De Beers there could be, “uncertainty over future business conditions leads to a lack of confidence in making investment decisions, which can influence future financial performance.”

Anglo American wanted to highlight “principal risks” that come with the company’s business and political and regulatory concerns were in the basket, with a worry that a deal with government may bring unexpected and uncalculated future changes. There could be, “uncertainty and adverse changes to mining industry regulation, legislation or tax rates can occur in any country in which we operate.”

“The Group has no control over political acts, actions of regulators, or changes in local tax rates. Our licence to operate through mining rights is dependent on a number of factors, including compliance with regulations,” said Anglo American. Anglo American will be watching the De Beers-Botswana talks with hope that it does not end up in what many predict as “to bring shocking changes.” Masisi has told journalist last year that he wants more for Botswana in this deal, sitting next to Cleaver who maintained a diplomatic PR esque grin.

What is reported by those who eavesdropped the De Beers-Botswana talks from a distance are saying there has been a possibility to discuss the issue of Botswana being ripped off along the way as the stones leave Debswana operations crossing borders to diamond trading centres around the globe. Another issue expected inside the talks is the increase in percentage volume of ODC‘s uptake from DTCB. The argument has always been that Botswana as one of the largest diamond producers in the world has the capacity and ability to develop its own price book through its own independent window outside De Beers’ channels. It has been said that currently ODC rakes in sales in the region of $500 Million annually (approximately P5 billion).

The 2011 negotiations were seen to have brought the positive being the relocation of DBGSS from London to Gaborone, transferring De Beers’ operations consolidated rough diamond sales into Gaborone, bringing alongside professionals, skills, and the world’s biggest rough diamond transactions to Africa. The year 2011 also gave life to ODC which found its feet to move a year later in 2012.

Debswana is also expected to start investing in other sectors outside its core business of mining diamonds. Some see Masisi to be playing hard-ball on the deal despite his diplomatic talks with Bloomberg in May 2018 of, “we have had a wonderful relationship with De Beers and we expect that relationship to be even more cemented, there is a way of actually achieving a win-win for both, we want to participate more on cutting, polishing and retail.”

Veil of secrecy

Tax Justice Network -a tax watchdog- in its 2020 report portrays Botswana as too secretive and the country’s dealing with De Beers was attributed as “highly secretive.”  Tax Justice Network quoted a recent Open Society Initiative for Southern Africa (OSISA) study titled ‘Botswana’s Diamond Deception’ which says, “Botswana’s paper success does not translate to the kinds of gains the country should be receiving. Disclosure of key information and removal of De Beers’ monopoly would liberate the economy and its democracy.”

The study said initially Botswana held a 15 percent share, but several years later when exceptional diamonds were unearthed, Botswana’s share was increased to 50 percent. “De Beers wanted to ensure it could keep its monopoly and control production so this find would not disrupt market prices. Then in 2004, Botswana acquired a 15 percent share in De Beers itself, an unprecedented entangling of a sovereign country with a single private company.”

According to the OSISA paper, the exact structure of this deal between Botswana and De Beers is complex and confidential in a few key places, but it promises Botswana continued revenue while handing power of the diamond industry to De Beers. OSISA study alleges De Beers has “a relationship with the ruling BDP. “De Beers and the BDP have knit the political and corporate structures together in such a way that they undermine accountability and regulatory systems with a culture of secrecy (framed by De Beers as “confidentiality”).

As a private entity, De Beers’ dealings are largely protected from scrutiny. Unlike the EU and U.S., where governments once banned or prosecuted De Beers for price-fixing and other anti-competitive activities, Botswana’s government and its ruling party have been direct collaborators.”

Anglo American further uncertainties in politics staining a sparkling diamond business

In last year’s divisive national polls this country could have been dragged into what looked like a civil shake up with the former President fighting with his successor, the diamond industry was watching with crossed fingers. Anglo American in its recent annual financial report says: “Political instability can also result in civil unrest and nullification or nonrenewal of existing agreements, mining permits, sales agreements or leases. These may adversely affect the Group’s operations or performance of those operations.”

In the run-up to elections Botswana opposition was also posing serious threat, with an influential figure like the former President throwing his weight behind the block, this could have scared De Beers mother Anglo American as her child (De Beers) is only used to the red interior designs of the ruling BDP 53 year old walls. Opposition could have painted the walls with a different colour and worse enough chased away Anglo American’s De Beers. A new party might change laws and policies to be closer to its political ideology.

Anglo American in that situation envisage possible change in laws which might be unfavourable like; increased costs can be incurred through additional regulations or resource taxes, while the ability to execute strategic initiatives that reduce costs or divest assets may also be restricted, all of which may reduce profitability and affect future performance. This could lead to, “uncertainty over future business conditions leads to a lack of confidence in making investment decisions, which can influence future financial performance.”

Anglo American also explained of a scenario where global economic conditions can have a significant impact on countries whose economies are exposed to commodities, placing greater pressure on governments to find alternative means of raising revenues, and increasing the risk of social and labour unrest. These factors could increase the political risks faced by the Group, says Anglo American

According to the mining giant, as mitigation to deal with political uncertainties that may hamper the company’s progress, Anglo American has an active engagement strategy with governments, regulators and other stakeholders within the countries in which we operate, or plan to operate, as well as at an international level.

Business

Gambling Authority tender dangles as a jittery lottery quandary

30th November 2020
SEFALANA MD: CHANDRA CHAUHAN

Lucrative and highly anticipated national lottery tender that saw several Batswana businessmen partnering to form a gambling consortium to pit against their South African counterparts, culminates into a big power gamble.

WeekendPost has had a chance to watch lottery showcase even before the anticipated and impending national lottery set-up launches. A lot has been a big gamble from the bidding process which is now set for the courts next year January following a marathon legal brawl involving the interest of the gambling fraternity in Botswana and South Africa.

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The uncertainty of getting the next meal in Botswana

30th November 2020
uncertainty of getting the next meal

Households representing more than half of Botswana’s population-mostly residing in rural areas- do not know where their next meal will come from, but neither do they take into consideration the quality and/or quantity of the food they consume.

This is according to the latest Prevalence of Food Insecurity in Botswana report which was done for the 2018/19 period and represents the state of food insecurity data even to this time.
The Prevalence of Food Insecurity was released by Statistics Botswana and it released results with findings that the results show that at national level 50.8 percent of the population in Botswana was affected by moderate to severe food insecurity in 2018/19, while 22.2 percent of the population was affected by severe food insecurity only.

According to the report, this translates to 27 percent of the population being food secure that is to say having adequate access to food in both quality and quantity. According to Statistician General, Burton Mguni, when explaining how the food data was compiled, Food and Agriculture Organization of the United Nations (FAO), is custodian of the “Prevalence of Undernourishment (PoU)” and “Prevalence of moderate or severe food insecurity in the population based on the Food Insecurity Experience Scale (FIES)” SDG indicators, for leading FIES data analysis and the resultant capacity building.

“The FIES measures the extent of food insecurity at the household or individual level. The indicator provides internationally comparable estimates of the proportion of the population facing moderate to severe difficulties in accessing food. The FIES consists of eight brief questions regarding access to adequate food, and the questions are answered directly with a yes/no response. It (FIES) complements the existing food and nutrition security indicators such as Prevalence of Undernourishment.

According to the FIES, with increasing severity, the quantity of food consumed decreases as portion sizes are reduced and meals are skipped. At its most severe level, people are forced to go without eating for a day or more. The scale further reveals that the household’s experience of food insecurity may be characterized by uncertainty and anxiety regarding food access and compromising the quality of the diet and having a less balanced and more monotonous diet,” says Mguni.

The 50.8 percent of the population in Botswana which was affected by moderate to severe food insecurity are characterized as people experiencing moderate food insecurity and face uncertainties about their ability to obtain food. These people have been forced to compromise on the quality and/or quantity of the food they consume according to the report on food insecurity.

Those who experience severe food insecurity, the 22.2 percent of the population, are people who have typically run out of food and, at worst, gone a day (or days) without eating. According to the statistics, rural area population experienced moderate to severe food insecurity at 65 percent while urban villages were at 46.60 percent and cities/town were at 31.70 percent. Those experiencing the most extreme and severe insecurity were at rural areas making 33.10 percent while urban villages and towns were at 11.90 percent and 17.50 respectively.

According to a paper compiled by Sirak Bahta, Francis Wanyoike, Hikuepi Katjiuongua and Davis Marumo and published in December 2017, titled ‘Characterization of food security and consumption patterns among smallholder livestock farmers in Botswana,’ over 70 percent of Botswana’s population reside in rural areas, and majority (70%) relies on traditional/subsistence agriculture for their livelihoods.

The study set out to characterize the food security situation and food consumption patterns among livestock keepers in Botswana. “Despite the policy change, challenges still remain in ensuring that all persons and households have access to food at all times. For example, during an analysis of the impacts of rising international food prices for Botswana, BIDPA reported that food prices tended to be highest in the rural areas already disadvantaged by relatively low levels of income and high rates of unemployment,” said the study.

According to the paper, about 9 percent of households were found to be food insecure and this category of households included 6 percent of households that ranked poorly and 3 percent that were on the borderline according to the World Food Programme’s (WFP) definition of food security.

Media reports state that the World Bank has warned that disruption to production and supply chains could ‘spark a food security crisis’ in Africa, forecasting a fall in farm production of up to 7 percent, if there are restrictions to trade, and a 25 percent decline in food imports.

Food security in Botswana or food production was also attacked by the locust pandemic which swept out this country’s vegetation and plants. The locust is said to have contributed to 25 percent loss in production.

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Solid demand for diamonds towards the ‘gift’ season

30th November 2020
Diamonds

Global lockdown have been a thorn in diamonds having shiny sales, but a lot of optimism shows with the easing of Covid-19 restrictions, the precious stones will be bought with high volumes towards festive season. The diamond market is however warned of the resurgence of Covid-19 in key markets presents ongoing risks amid the presence and optimist about the new Covid-29 vaccines.

The latest findings published as De Beers Group’s latest Diamond Insight ‘Flash’ Report, which looks at the impact of the pandemic on relationships and engagements, has revealed that in the US that more couples than ever are buying diamond engagement rings. Bridal sales is mostly the primary source of diamond jewellery demand in recent months, De Beers said.

According to De Beers, interviews with independent jewellers around the US revealed that the rate of couples getting engaged has increased compared with the period when Covid-19 first had an impact in the US in the spring.

“In addition, despite challenging economic times, consumers were spending more than ever on diamond engagement rings – often upgrading in colour, cut and clarity, rather than size. Several jewellers speculated that with consumers spending less on elaborate weddings and/or honeymoons in the current environment, they had more to spend on choosing the perfect ring,” said De Beers.

According to De Beers, a national survey of 360 US women in serious relationships, undertaken in late October in collaboration with engagement and wedding website, The Knot. This survey is said to have found that the majority of respondents (54%) were thinking more about their engagement ring than the wedding itself (32%) or the honeymoon (15%), supporting jewellers’ hypothesis that engagement ring sales were benefiting from reduced wedding and travel budgets in light of Covid-19 restrictions.

When it came to researching engagement rings, online was by far the predominant channel for gaining ideas/inspiration at 86% of consumers surveyed, with 85% saying they had saved examples of styles they liked, according to De Beers. According to the survey, only a uarter of respondents said they had looked in-store at a physical location for design inspiration.

“For many couples, the pandemic has brought them even closer together, in some instances speeding up the path to engagement after forming a deeper connection while experiencing lockdown and its associated ups and downs as a partnership. Engagement rings are taking on even greater symbolism in this environment, with retailers reporting couples are prepared to invest more than usual, particularly due to budget reductions in other areas,” De Beers CEO Cleaver said.

According to De Beers Group, its Diamond Insight Flash Report series is focused on understanding the US consumer perspective in light of Covid-19 and monitoring how it evolves as the crisis evolves. Also, the company said, it is augmenting its existing research programme with additional consumer, retailer and supply chain touch-basis to understand the pain points and the opportunities for stakeholders across the diamond pipeline.

Demand for diamonds is as hard and resilient as the precious stone itself. De Beers pocketed US$ 450 million in its recently held ninth rough diamond sales cycle, and the company says it is more flexible approach to rough diamond sales during the ninth sales cycle of 2020, with the Sight event extended beyond its normal week-long duration.

“Steady demand for De Beers Group’s rough diamonds continued in the ninth sales cycle of the year, reflecting stable consumer demand for diamond jewellery at the retail level in the US and China, and expectations for reasonable demand to continue throughout the holiday season. However, the resurgence of Covid-19 infections in several consumer markets presents ongoing risks,” said De Beers CEO Bruce Cleaver recently.

High expectations are on diamonds being a sentimental gift for holiday season or as the most fetished gift. However the ninth cycle was lower than the eighth which registered US$ 467 million. For the last year period which corresponds with the current one, De Beers managed to raise US$ 400.

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