De Beers Group says most of its net end consumers are still intact financially, and stand ready to demand its luxury and magnificent offerings in diamond jewellery.
A study conducted by the diamond mining global giant during COVID-19 lockdown suggests that over two thirds of jewellery buyers still have the financial capacity to purchase the sparkling downstream products.
De Beers, which sources most of its diamonds from Botswana, is present in all segments of the diamond business, Upstream where it mines diamonds in Botswana, South Africa, Namibia and Canada; Midstream where it sorts, values and sells rough diamonds, by in large in Botswana, at the Global Sightholder sales.
The company also has a strong presence in the downstream which comprises of retail. DeBeers operates in this space through Forevermark, a retail brand of jewellery made from natural, hand selected rare diamonds.
Following a promising recovery from slow year in 2019, De Beers Group and the entire diamond industry then faced a catastrophic down cliff as a result of the novel Coronavirus which put breaks on almost everything in the first half of 2020.
The novel contagious plague sprang out of China in December 2019, and then intensified in February, putting the entire world at a standstill, shutting down businesses and restricting movement of, people, goods and commodities whilst also caging people in their houses for months.
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 in the city of Wuhan.
After the United States, China is De Beers’ second biggest market. Business was also slow in India and Belgium, which houses some of the world largest centers of diamond cutting and polishing industries.
However findings from recent surveys by the diamond mining unit of Anglo-American suggests there might be some positive from the worldwide lockdowns. The London headquarters, once diamond business monopoly says consumers have introspected during these lockdowns.
According to De Beers the introspection at the need for things that matter, that represents love and values life more, something which diamond and diamond products stand for.
A research undertaken over a period of nine weeks by De Beers Group suggests that consumers in the US will reassess their purchasing behavior in light of the COVID-19 pandemic. It says gifts that are meaningful and that retain their value will be the priority as people emerge from lockdown.
The research demonstrated that lockdown had made many consumers feel grateful for things they used to take for granted, such as spending time with family, and that this would influence their purchasing and gifting behavior in future.
When it came to gifting and in particular looking forward to the holiday season, 56 percent of respondents from the survey felt gifts should be meaningful, over and above being practical, functional or fun.
This research which will make part of the upcoming diamond insights states that Diamonds were seen as the top gift for symbolizing intimacy, connectedness and love among both men and women, with the primary desire for purchasing being a reflection of gratitude and acknowledgement during the current crisis.
Ninety percent of respondents said that choosing gifts that hold their value over time would be an important consideration this holiday season, and more people chose diamonds as the top choice for a gift of this nature from a list of luxury items including designer clothing and accessories, electronic devices, a piece of furniture, or other jewellery.
The findings are the first in a series of Diamond Insight ‘Flash’ Reports that De Beers Group will publish to share insights regarding the evolving consumer perspective and what it means for diamonds as the world passes through the stages of the COVID-19 crisis.
The mining behemoth also found that around two-thirds of the consumers polled indicated their personal finances have not been affected by COVID-19. Three-quarters of consumers said that COVID-19 had not impacted their likelihood to purchase diamond jewellery and the majority of respondents continued to wear their diamond jewellery during lockdown because it made them ‘feel connected to someone’.
De Beers says consumers felt safest shopping for jewellery online; however, they clearly distinguished local independent jewellers as the best source for knowledge and product quality, as well as being considered the safest of all the physical outlets for jewellery shopping.
Forty-five percent of respondents said that they would seek to buy fewer, better things when considering clothing and jewellery purchases after the lockdown. Consumer preference for travel continues to show a declining trend, with 39 percent of consumers saying it will be seven to 12 months before their travel spending stabilizes.
Bruce Cleaver, CEO, De Beers Group, said: “The COVID-19 crisis and associated lockdowns have caused people all around the world to re-evaluate aspects of what’s important in their lives and have reinforced the value of personal relationships.”
The London based diamond industry gaffer said while consumer confidence and spending has been significantly impacted in the US diamonds will nonetheless have a unique role to play in people’s lives in a post-lockdown world as they seek to celebrate their most meaningful relationships
“While it will take some time for the market to recover fully, we hope these insights will assist large and independent jewellery retailers alike to understand the evolving consumer perspective as we move through and emerge from the crisis,” said Cleaver.
Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status. The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.
This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago. In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.
However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced. Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.
The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.
The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.
On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.
The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.
Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.
Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).
“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.
Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.
This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.
For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.
Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers. “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.
‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’
According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.
Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.
“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.