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Slow recovery of global diamond market extends ODC closure

The economic shock occasioned by COVID-19 on the global diamond market has delivered the heaviest blow to Botswana’s wholly state owned Okavango Diamond Company (ODC), the worst since its establishment in 2012.

While other diamond operations across the value chain gradually reopen, ODC will remain closed until diamond market conditions fully recover. This was revealed by Permanent Secretary in the Ministry of Mineral Resources, Green Technology & Energy Security, Mmetla Masire this week.

Following a slow year for the global diamond industry in 2019 owing to the US-China trade war, the industry realized a slight upswing in the first month of 2020, spilling over from recovery signs in late 2019.

However all that was reversed by COVID-19. The virus, which broke in late 2019 in the Wuhan province of China intensified in February, spreading across the world, curtailing movements and international travels.

With the diamond industry, global lockdowns and travel restrictions resulted in muted rough diamond trade, closure of cutting and polishing firms, jewelry outlets and other segments of trade across the value chain.

Mmetla Masire noted that key markets like India are still relatively closed with little demand for rough import for those in operation, as inventories are still swamped up with stock piles. “ODC will remain closed because demand of rough diamonds globally is still very low, so ODC management took a decision to remain closed until demand fully recovers,” he said.

Masire reiterated that major markets for Botswana diamonds such as United States are still on lockdown. He said, “ODC sells its diamonds through auctions; it is still very difficult to hold auctions as of now, so the company will remain closed, with management working from home.”

Okavango Diamond Corporation (ODC) is a wholly state owned diamond marketing and sales company established in 2012 to sell Botswana diamonds outside De Beers’s channels and price books.

ODC markets and sells 15 % of Debswana diamonds after being sorted and valued by Diamond Trading Company (DTCB), while 85 % is sold by De Beers Global Sightholder Sales (DBGSS). Debswana and DTCB are 50-50 ventures of De Beers Group and Botswana Government. DBGSS is wholly owned by De Beers Group.

Botswana Government has a direct 15 % stake in De Beers Group, the remaining 85 % of De Beers Group is owned by Anglo American. Over 60 % of De Beers global production comes from Botswana (Debswana). Meanwhile Debswana, Diamond Trading Company (DTCB), De Beers Global Sightholder Sales (DBGSS) have opened and resumed operations at 60- 70 % workforce.

Mmetla Masire further revealed that DBGSS has started shipping some diamonds to their sightholders in a bid to cultivate market and trading activity amid COVID-19 imposed new normal.

OKAVANGO BLUE YET TO SELL

Okavango Diamond Company has also deferred the sale of Okavango Blue, the magnificent oval shaped blue diamond weighing over 20 carats, unearthed at Debswana Orapa mine at over 40 carats rough weight in 2018.

The sparkling Type IIb ‘Fancy Deep Blue’ unveiled to the world in Gaborone as 20 carats polished last year is yet to sell as demand and prices are still very low to inspire purchase of such a magnificent gem.

The Gemological Institute of America (GIA), has graded the diamond as an Oval Brilliant Cut, VVS2 clarity making it one of the highest polished colour classifications attainable for any blue diamond and at 20.46 carats it sits in the very top bracket of all-time historical blue diamond finds.

Its unique and vibrant blue colour, is created by the molecular inclusion of the rare mineral boron which between 1-3 billion years ago was present in the rocks of ancient oceans during violent diamond forming volcanic activity. Okavango Blue will be showcased over the coming months to promote Botswana as a leading global producer of natural ethical diamonds with an anticipated sale toward the end of the year.

GLOBAL DIAMOND INDUSTRY CRISIS

A couple of months into serious measures to slow the spread of the virus, it has already squashed diamond miners’ dawning hopes of a recovery. Alrosa the world’s largest diamond producer by output, last week reported 95% decline in sales during April, when gauged against the same months last year. This resulted the Russian state-owned deciding to halt production at two of its mines, citing worsening market conditions.

De Beers, the world’s largest producer by value, cut 2020 production guidance by a fifth last month. It had earlier cancelled its April sales event. Canada’s Dominion Diamond Mines, the controlling owner of Ekati mine and a 40% partner to Rio Tinto in the Diavik mine, filed for insolvency protection in April.

Lucara Diamond another Canadian company, posted last week a net loss of $3.2 million, or $0.01 a share, for the first three months of the year. The figure was in sharp contrast with the $7.4 million in net income, or $0.02 in earning per share the miner reported in the same period last year.

South Africa’s Petra Diamonds has recently delayed interest payments to borrow $21 million in new debt, a crucial move to keep the company afloat. Investment banks are increasingly reluctant to extend credit to diamond producers, as inventory is not being sold and defaults are possible, analysts have warned.

“We are concerned about oversupply of rough diamonds following the reopening of economies, as a lot of inventory could potentially be flooded into the system and the market might not be able to absorb all of it, resulting in increased pricing pressure,” said leading European diamond industry think tank, Learnbonds in a statement early this month.

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.

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Business

Global CEOs Back Plan to Unlock $3.4 Trillion Potential of Africa Free Trade Area

23rd January 2023

African heads of state and global CEOs at the World Economic Forum Annual Meeting backed the launch of the first of its kind report on how public-private partnerships can support the implementation of the African Continental Free Trade Area (AfCFTA).

AfCFTA: A New Era for Global Business and Investment in Africa outlines high-potential sectors, initiatives to support business and investment, operational tools to facilitate the AfCFTA, and illustrative examples from successful businesses in Africa to guide businesses in entering and expanding in this area.

The report aims to provide a pathway for global businesses and investors to understand the biggest trends, opportunities and strategies to successfully invest and achieve high returns in Africa, developing local, sub-regional and continental value chains and accelerating industrialization, all of which go hand in hand with the success of the AfCFTA.

The AfCFTA is the largest free trade area in the world, by area and number of participating countries. Once fully implemented, it will be the fifth-largest economy in the world, with the potential to have a combined GDP of more than $3.4 trillion. Conceived in 2018, it now has 54 national economies in Africa, could attract billions in foreign investment, and boost overseas exports by a third, double intra-continental trade, raise incomes by 8% and lift 50 million people out of poverty.

To ease the pain of transition to its new single market, Africa has learned from trade liberalization in North America and Europe. “Our wide range of partners and experience can help anticipate and mitigate potential disruptions in business and production dynamics,” said Børge Brende, President, and World Economic Forum. “The Forum’s initiatives will help to ease physical, capital and digital flows in Africa through stakeholder collaboration, private-public collaboration and information-sharing.”

Given the continent’s historically low foreign direct investment relative to other regions, the report highlights the sense of excitement as the AfCFTA lowers or removes barriers to trade and competitiveness. “The promising gains from an integrated African market should be a signal to investors around the world that the continent is ripe for business creation, integration and expansion,” said Chido Munyati, Head of Regional Agenda, Africa, World Economic Forum.

The report focuses on four key sectors that have a combined worth of $130 billion and represent high-potential opportunities for companies looking to invest in Africa: automotive; agriculture and agroprocessing; pharmaceuticals; and transport and logistics.

“Macro trends in the four key sectors and across Africa’s growth potential reveal tremendous opportunities for business expansion as population, income and connectivity are on the rise,” said Wamkele Mene, Secretary-General, AfCFTA Secretariat.

“These projections reveal an unprecedented opportunity for local and global businesses to invest in African countries and play a vital role in the development of crucial local and regional value chains on the continent,” said Landry Signé, Executive Director and Professor, Thunderbird School of Global Management and Co-Chair, World Economic Forum Regional Action Group for Africa.

The Forum is actively working towards implementing trade and investment tools through initiatives, such as Friends of the Africa Continental Free Trade Area, to align with the negotiation process of the AfCFTA. It identifies areas where public-private collaboration can help reduce barriers and facilitate investment from international firms.

About the World Economic Forum Annual Meeting 2023

The World Economic Forum Annual Meeting 2023 convenes the world’s foremost leaders under the theme, Cooperation in a Fragmented World. It calls on world leaders to address immediate economic, energy and food crises while laying the groundwork for a more sustainable, resilient world. For further information,

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Business

Electricity generation down 15.8%

9th January 2023

Electricity generation in Botswana during the third quarter of 2022 declined by 15.8%, following operational challenges at Botswana Power Corporation’ Morupule B power plant, according to Statistics Botswana Index of Electricity Generation (IEG) released last week.

The index shows that local electricity generation decreased by 148,243 MWH from 937,597 MWH during the second quarter of 2022 to 789,354 MWH during the third of quarter of 2022.

This decrease, according to the index, was mainly attributed to a decline in power supply realized at Morupule B power station. The index shows that as a result of low power supply from the plant, imported electricity during the third quarter of 2022 increased by 76.3 percent (123,831 MWH), from 162,340 MWH during the second quarter of 2022 to 286,171 MWH during the current quarter and Statistics Botswana added that the increase was necessitated by the need to augment the shortfall in generated electricity.

In the index Statistics Botswana stated that Eskom was the main source of imported electricity at 42.0 percent of total electricity imports. “The Southern African Power Pool (SAPP) accounted for 38.4 percent, while the remaining 10.1, 9.1 and 0.5 percent were sourced from Electricidade de Mozambique (EDM), Cross-border electricity markets and the Zambia Electricity Supply Corporation Limited (ZESCO), respectively. Cross-border electricity markets are arrangements whereby towns and villages along the border are supplied with electricity from neighbouring countries such as Namibia and Zambia.”

The government owned statistics entity stated that distributed electricity decreased by 2.2 percent (24,412 MWH), from 1,099,937 MWH during the second quarter of 2022 to 1,075,525 MWH during the third quarter of 2022. The entity noted that electricity generated locally contributed 73.4 percent to electricity distributed during the third quarter of 2022, compared to a contribution of 85.2 percent during the third quarter in 2022 and added that this gives a decline of 11.8 percentage points. “The quarter-on-quarter comparison shows that the contribution of electricity generated to electricity distributed decreased by 11.8 percentage points compared to the 85.2 percent contribution during the second quarter of 2022.”

Statistics Botswana meanwhile stated that the year-on-year analysis shows some improvement in local electricity generation. Recent figures from entity show that the physical volume of electricity generated increased by 36.3 percent (210,319 MWH), from 579, 036 MWH during the third quarter of 2021 to 789,354 MWH during the current quarter. According to Statistics Botswana electricity generated locally contributed 73.4 percent to electricity distributed during the third quarter of 2022, compared to a contribution of 57.7 percent during the same quarter in 2021. This gives an increase of 15.7 percentage points.

 

The entity noted that trends also show an increase in physical volume of electricity distributed from 2013 to the third quarter of 2022, thereby indicating that there are ongoing efforts to meet the domestic demand for power. “There has been a gradual increase of distributed electricity from the first quarter of 2013 to the third quarter of 2022, even though there are fluctuations. The year-on-year perspective shows that the amount of distributed electricity increased by 7.2 percent (71,787 MHW), from 1,003,738 MWH during the third quarter of 2021 to 1,075,525 MWH during the current quarter.”

The statistics entity noted that year-on-year analysis show that during the third quarter of 2022, the physical volume of imported electricity decreased by 32.6 percent (138,532 MWH), from 424,703 MWH during the third quarter of 2021 to 286,171 MWH during the third quarter of 2022. “There is a downward trend in the physical volume of imported electricity from the first quarter of 2013 to the third quarter of 2022. The downward trend indicates the country’s continued effort to generate adequate electricity to meet domestic demand, hence the decreased reliance on electricity imports.”

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