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Covid-19 steals diamond glitter

De Beers’ CEO Bruce Cleaver

One of the most powerful men in the diamond business, De Beers’ CEO Bruce Cleaver, last year in The Diamond Insight Report foresaw engagements and weddings as one of the boosters of the precious stone business.

That was before Covid-19 came and put the fear of God in people and confined them to their homes while borders around the world shut down including the borders of diamond producing and selling countries like Botswana. Botswana diamonds contributes 70 percent to De Beers’ production and 90 percent of the giant miner’s precious stones have been sold in Gaborone since 2013.

The recent survey by De Beers on US diamond consumers, the diamond customer benchmark market accounting for 45 percent of global diamond demand, taking 48 percent of global polished diamond share by geography, has all the hallmarks of uncertainty and uneasiness.

According to the mining group, as they emerge from lockdowns as per different states of the US, the Americans believe Covid-19 will go down or be controlled after six months. Cleaver’s last year customer psychology and 2020 positive projections by Botswana government did not see this year coming.

“As we head into the 2020s, with traditional marriage only one option for many couples, it’s vital for the diamond industry to understand the implications of, and opportunities that arise from, evolving social norms and traditions. Encouragingly, diamonds appear to hold the same relevance for couples, whichever way they choose to celebrate their commitment,” said Cleaver’s last year speech.

Cleaver had said that in the US, more than 70 per cent of brides acquire a diamond engagement ring. He said China has less than half, but that proportion has been growing rapidly, especially in large cities.  Cleaver last year said brands are increasing their share of sales of commitment jewellery in the US, and it now represents about two-fifths of those sales to track US consumers but widening the focus to include the experiences of retailers.

But this is the year of less luxury; social distancing, staying home, and wearing face masks which veiled all connections with aesthetics. Locally and internationally weddings and or any large gathering is banned.

According to the Diamond Insight flash report completed in June and released on Monday, at the US state re-openings, grew as a point of concern this week as 42 percent of Americans believe the COVID-19 peak is at least 6 months away.

“In an online study of the general population age 18+ in the US, we see Americans continuing to live in a heightened emotional state as they emerge from, and in some cases re-enter a second stage of, COVID-19 lockdown. Generally, consumers are showing increased unease,” said the recent diamond customer survey.

Now people in the US are growing strict in their spending and the survey sees Americans prioritizing buying cleaning products “at the strongest level.” This survey was done in a market with demand for diamond jewellery which increased by 5 percent to P360 billion, representing just under half of total global diamond jewellery demands.

De Beers also said since last month “increase in appreciation for the things I take for granted” has increased, from 20% to 26%. The diamond giant also said awareness of and gratitude for one’s life and relationships are ever more top of mind.

As the fetish of the precious stones endures in the major market of US, 62 percent of consumers prefer to buy diamond jewellery at their local independent jeweller over buying online, as the in-store experience allows them to get expert advice and personal attention. According to De Beers this is on the provision that the environment in store is safe.

“While consumers increasingly desire a diamond acquisition journey that blends the digital and physical, when it comes to making purchases, they still prefer the personalisation of the in-store experience, despite the pandemic.

Those retailers that are able to provide a safe and welcoming in-store environment for consumers in what is a strange and unsettling time will be best placed to benefit in the weeks and months ahead. It is heartening to hear initial reports of positive demand for diamond jewellery as consumers emerge from lockdown and the industry starts preparing for the important end of year sales season,” said Cleaver on Monday.

De Beers in March 2020 launched a weekly quantitative survey to collect data on the attitudes, behaviours and expectations of consumers in the US. This is also a way to highlight the evolving consumer perspective in light of COVID-19.

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P230 million Phikwe revival project kicks off

19th October 2020
industrial hub

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.

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IMF projects deeper recession for 2020, slow recovery for 2021

19th October 2020

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.

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Botswana partly closed economy a further blow of 4.2 fall in revenue

19th October 2020

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.

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