Following a positive start to the year, the global impact of COVID-19 and the subsequent restrictions on the movement of both people and goods has had a major impact on wholesale demand for both rough and polished diamonds, and consumer demand for diamond jewellery, De Beers has indicated.
Briefing the media via a virtual platform on Thursday, Executive Vice President Diamond Trading, Paul Rowley and Executive Vice President- Corporate Affairs, David Prager gave a business update on the operations of the world leading diamond producing company, by value and volume.
“While lockdowns are now beginning to ease in some countries, a return to ‘normal’ activity appears some way off, as other countries have yet to see a peak, and concerns of further waves of infection persist,” said Rowley.
Rowley said the Covid-19 pandemic has been a challenge in the sense that it has affected the world in an unprecedented manner, having an overarching international impact, affecting multiple industrial sectors as well as impacting the entire value chain of mining business, from mine to retail.
“Unlike previous economic shocks, Covid-19 has a combination of health, social and economic challenges and considerations. International responses have led to difficulties not only with demand conditions, but several other factors,” Rowley told Botswana media.
“Such a challenge requires a unique response, traditional approaches to business are ineffective. A range of considerations must be balanced with commercial activity. Flexibility and adaptability are key.”
CONSUMER DEMAND IN KEY MARKETS DURING PANDEMIC
The United States lockdown has led to severely reduced consumer demands in the market representing around half of De Beers’ global demand. “Some States in the US are now relaxing lockdown restrictions but most stores remain closed and demand heavily impacted,” he said.
“Meanwhile China, which is the second biggest market for lockdown restrictions severely impacted retail sales in second largest global market. Most stores are now open again. Consumers returning are encouraging signs, but still below former levels.”
In India the ongoing lockdowns across the country continue to have a significant impact on demand. With the vast majority of the world’s diamonds being cut and polished in India, the lockdown there saw midstream demand grind almost to a halt.
Restrictions on international travel and shipping also saw trading activity dry up in key centres. Mines across the world have seen operations paused or stopped.
There are questions regarding whether some operations will return at all after the pandemic. With those mines that are operating, there remain significant logistical challenges and operations are at a reduced level, Rowley indicated.
Direct impact on De Beers Jewellers retail outlets as result of store closures and consumer demand impact, resulting in indirect impact through the value chain as impact on consumer demand ripples through pipeline. Forevermark business has been impacted as jeweller partners were impacted by store closures and consumer demand.
Meanwhile there has been a substantial impact on rough diamond sales; Sight 3 not held in light of logistical challenges related to lockdowns in Botswana, South Africa and India while Sight 4 was only attended by local beneficiation Sightholders as international customers were unable to travel.
Operations across the globe impacted due to requirements to implement different working practices and procedures to keep our people safe but mines are now operating again, albeit at reduced levels.
DE BEERS RESPONSE: FLEXIBILITY IS KEY
In response to the Covid-19 which has affected De Beers’ business, the mining giant has committed to implementing changes to regular customer commercial arrangements including; 100 percent deferrals, additional buybacks, extended sales windows beyond Sight Weeks.
De Beers will also work with partners in government to see how the company can generate revenue when international customers are unable to travel. The group considers focusing on viewings in other centres as a temporary measure
The company will also move to reduced global production guidance by 7m carats to reflect demand and support long-term value as well as refocusing and repurposing marketing plans to reflect changing situation – timing, targeting, product types and messaging.
On Thursday, company leadership indicated that it is impossible to provide a detailed outlook as so much depends on the progress of the virus and government responses. “However, early indications from places that have reopened suggest demand can recover quite quickly,” said Rowley.
De Beers said despite the challenges, the company continues to make major investments across the diamond value chain to ensure the industry’s continued success during these unprecedented times
The mining giant is making investments in production capacity expansion, rough diamond distribution efficiency, as well as downstream consumer marketing campaigns.
The company said it will be leading the recovery and reinforcing how diamonds will continue to have a key role to play in people’s lives after the lockdowns through our consumer engagement activities. “We are focused on returning to business as usual in our Botswana home as soon as is possible,” said Prager
During the questions and answers, De Beers declined to reveal the extent of financial losses during the imposed lockdown in key markets but indicated that the impacts were devastating across all business streams.
De Beers is 85 percent owned by Anglo American and 15 percent owned by the Government of the Republic of Botswana. De Beers’ two primary mines in Botswana, Jwaneng and Orapa represent 92% of the nation’s diamond output by value, with Jwaneng Mine being the most valuable diamond mine in the world.
Here is how one Permanent Secretary encapsulates the clear tension between democracy and bureaucracy in Botswana: “President Mokgweetsi Masisi’s Government is behaving like a state surrounded with armed forces in order to capture it or force its surrender. The situation has turned so volatile, for tomorrow is not guaranteed for us top civil servants.
These are the painful results of a personalized civil service in our view as permanent secretaries”. Although his deduction of the situation may be summed as sour grapes because he is one of the ‘victims’ of the reshuffle, he is convinced this is a perfect description of the rationale behind frequent changes and transfers characterising the current civil service.
The result of it all, he said, is that “there is too much instability at managerial and strategic levels of the civil service leading to a noticeable directionless civil service.” He continued: “Changes and transfers are inevitable in the civil service, but to a permissible scale and frequency. Think of soccer team coach who changes and transfers his entire squad every month; you know the consequences?”
The Tsunami has hit hard at critical departments and Ministries leaving a strong wave of uncertainty, many demoralised and some jobless. In traditional approaches to public administration, democracy gives the goals; and bureaucracy delivers the technical efficiency required for implementation. But the recent moves in the civil service are indicative of conflicting imperatives – the notion of separation between politicians and administrators is becoming blurred by the day.
“Look at what happened to Prisons and BDF where second in command were overlooked for outsiders, and these are the people who had sacrificially served for donkey’s years hoping for a seat at the ladder’s end. The frequency of the changes, at times affecting the same Ministry or individual also demonstrates some level of ineptitude, clumsiness and lack of foresight from those in charge,” remarked the PS who added that their view is that the transfers are not related to anything but “settling scores, creating corruption opportunities and pushing out perceived dissident and former president, Ian Khama’s alleged loyalists and most of these transfers are said to be products of intelligence detection.”
Partly blaming Khama for the mess and his unwillingness to let go, the PS dismissed Masisi for falling to the trap and failing to outgrow the destructive tiff. “Khama is here to stay and the sooner Masisi comes to terms with the fact that he (Masisi) is the state President, the better. For a President to still be making these changes and transfers signals signs of a confused man who has not yet started rolling his roadmap, if at all it was ever there. I am saying this because any roadmap comes with key players and policies,” he concluded.
The Ministry of Health and Wellness seems to be the most hard-hit by the transfers, having experienced three Permanent Secretaries changes within a year and a half. Insiders say the changes have everything to do with the Ministry being the centre of COVID-19 tenders and economic opportunities. “The buck stops with the PS and no right-thinking PS can just allow glaring corruption under his watch as an accounting officer. Technocrats are generally law abiding, the pressure comes with politically appointed leaders racing against political terms to loot,” revealed a director in the Ministry preferring anonymity.
The latest transfer of Kabelo Ebineng she says was also motivated by his firm attitude against the President’s blue-eyed Task Team boys. “The Task Team wants to own the COVID-19 pandemic and government interventions and always cry foul when the Ministry reasserts itself as mandated by law,” said the director who added that Masisi who was always caught between the crossfire decided on sacrificing Ebineng to the joy of his team as they (Task Team) were in the habit of threatening to resign citing Ebineng as the problem.
Ebineng joins the Office of the President as a deputy Coordinator (government implementation and coordination office).The incoming PS is the soft-spoken Grace Muzila, known and described by her close associates as a conformist albeit knowledgeable.
One of the losers in the grand scheme is Thato Raphaka who many had seen as the next PSP because of his experience and calm demeanour following a declaration of interest in the Southern African Development Community (SADC) Secretary post by the current PSP, Elias Magosi.
But hardly ten months into his post, Raphaka has been transferred out to the National Strategy Office in what many see as a demotion of some sort. Other notable changes coming into OP are Pearl Ramokoka formerly with the Employment, Labour and Productivity Ministry coming in as a Permanent Secretary and Kgomotso Abi as director of Public Service Reforms.
One of the ousted senior officers in the Office of the President warned that there are no signs that the changes and transfers will stop anytime soon: “If you are observant you would have long noticed that the changes don’t only affect senior officers but government decisions as well. A decision is made today and the government backtracks on it within a week. Not only that, the President says this today, and his deputy denies it the following day in Parliament,” he warned.
Some observers have blamed the turmoil in the civil service partly to lack of accountable presidential advisers or kitchen cabinet properly schooled on matters of statecraft. They point out that politicians or those peripheral to them should refrain from hampering the technical and organizational activities of public managers – or else the party (reshuffling) won’t stop.
In the view expressed by some Permanent Secretaries, Elias Magosi, has not really been himself since joining the civil service; and has cut a picture of indifference in most critical engagements; the most notable been a permanent secretaries platform which he chairs. As things stand there is need to reconcile the imperatives of democracy and democracy in Botswana. Peace will rein only when public value should stand astride the fault that runs between politicians and public managers.
Former Permanent Secretary to the President, Carter Morupisi, is fighting for survival in a matter in which the State has charged him and his wife, Pinnie Morupisi, with corruption and money laundering.
Morupisi has joined a list of prominent figures that served in the previous administration and who have been accused of corruption during their tenure in office. While others have been emerging victorious, Morupisi is yet to find that luck. The High Court recently dismissed his no case to answer application.
United States President, Joe Biden, is faced with a decision to make relating to the Covid-19 vaccine intellectual property after 175 former world leaders and Nobel laurates joined the campaign urging the US to take “urgent action” to suspend intellectual property rights for Covid-19 vaccines to help boost global inoculation rates.
According to the world leaders, doing so would allow developing countries to make their own copies of the vaccines that have been developed by pharmaceutical companies without fear of being sued for intellectual property infringements.
“A WTO waiver is a vital and necessary step to bringing an end to this pandemic. It must be combined with ensuring vaccine know-how and technology is shared openly,” the signatories, comprising more than 100 Nobel prize-winners and over 70 former world leaders, wrote in a letter to US President Joe Biden, according to Financial Times.
A measure to allow countries to temporarily override patent rights for Covid related medical products was proposed at the World Trade Organization by India and South Africa in October, and has since been backed by nearly 60 countries.
Former leaders who signed the letter included Gordon Brown, former UK Prime Minister; François Hollande, former French President; Mikhail Gorbachev, former President of the USSR; and Yves Leterme, former Belgian Prime Minister.
In their official communication, South Africa and India said: “As new diagnostics, therapeutics and vaccines for Covid-19 are developed, there are significant concerns [about] how these will be made available promptly, in sufficient quantities and at affordable prices to meet global demand.”
While developed countries have been able to secure enough vaccine to inoculate their citizens, developing countries such as Botswana are struggling to source enough to swiftly vaccine their citizens, something which world leaders believe it would work against global recovery therefore proving counter-productive.
Since the availability of vaccines, Botswana has been able to secure only 60 000 doses of vaccines, 30 000 as donation as from the Indian government, while the other 30 000 was sourced through COVAX facility. Canada, has pre-ordered vaccines in surplus and it will be able to vaccinate each of its citizens six times over. In the UK and US, it is four vaccines per person; and two each in the EU and Australia.
For vaccines produced in Europe, developing countries are forced to pay double what European countries are paying, making it more expensive for already financially struggling economies. European countries however justify the price of vaccines and that they deserve to buy them cheap since they contributed in their development.
It is evident that vaccines cannot be made available immediately to all countries worldwide with wealthy economies being the only success story in that regard, something that has been referred to as a “catastrophic moral failure”, head of the World Health Organisation (WHO), Tedros Adhanom Ghebreyesus.
The challenge facing developing countries is not only the price, but also the capacity of vaccine manufactures to be able to do so to meet global demand within a short time. The proposal for a patent waiver by India and South Africa has been rejected by developed countries, known for hosting the world leading pharmaceutical companies such US, European Union, the United Kingdom, and Switzerland.
According to the Financial Times, US business groups including pharmaceutical industry representatives, have urged Biden to resist supporting a waiver to IP rules at the WTO, arguing that the proposal led by India and South Africa was too “vague” and “broad”.
The individuals who signed the letter, including Nobel laureates in economics as well as from across the arts and sciences, warned that inequitable vaccine access would impact the global economy and prevent it from recovering.
“The world saw unprecedented development of safe and effective vaccines, in major part thanks to US public investment,” the group wrote. “We all welcome that vaccination rollout in the US and many wealthier countries is bringing hope to their citizens.”
“Yet for the majority of the world that same hope is yet to be seen. New waves of suffering are now rising across the globe. Our global economy cannot rebuild if it remains vulnerable to this virus.” The group warned that fully enforcing IP was “self-defeating for the US” as it hindered global vaccination efforts. “Given artificial global supply shortages, the US economy already risks losing $1.3tn in gross domestic product this year.”