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.
A graphical picture or statistical publication shows that since 2018, Botswana’s trade balance has been on the lows if not fluctuating on the negatives-a bad economic health. This was shown in the latest International Merchandise Trade Statistics (IMTS), statistics which is one of the major contributing indicators of the performance of Botswana’s economy and its competitiveness in the world market.
This trade balance graphical picture is figuratively akin to that of a Covid-19 patient on life support; struggling to breathe while lying down on a sickbed gasping to salvage the last oxygen left on offer.
Botswana’s affair in foreign trade statistics -which is all about an account of all transactions of merchandise between this country’s domestic residents and the rest of the world- is on feeble health or life support status. The account measures the value and quantity of goods which add or subtract from the stock of material resources of a country, by entering (imports) or leaving (exports) its economic territory.
By introducing special regulatory, administrative and fiscal regimes, the Special Economic Zones Authority (SEZA) intends to improve the ease of doing business and re-position Botswana as a premier investment destination of choice, thereby ushering in a new era of robust economic growth.
This was revealed by SEZA Chief Executive Officer (CEO) Lonely Mogara, who further explained that the special regulatory, administrative and fiscal regimes will be implemented at the Authority’s eight SEZs in Pandamatenga, Francistown, Selibe Phikwe, Palapye, Tuli Block, Gaborone and Lobatse.
“These special regimes will ease doing business by addressing constraints that may hinder investment in the country like work permits, residence permits, building permits, Environmental Impact Assessment (EIA) permits, and tax incentives through a dedicated One Stop Service Centre (OSSC),” said Mogara.
SEZA was established through an Act of Parliament and mandated to establish, develop, manage and regulate a portfolio of SEZs. The Authority would then attract world class investors to set up mega factories and businesses in these SEZs, thereby growing and diversifying the Botswana economy through increased Foreign Direct Investment (FDI) and export revenue.
Mogara explained that SEZA intends to develop SEZs that are integrated into the domestic, regional and international markets; facilitate clusters development; and create backward and forward linkages anchored by targeted investors. The Authority will also rollout the red carpet for SEZ investors through its robust One Stop Service Centre (OSSC).
“In order to tap into existing resources and avoid duplication, we have initiated discussions with strategic organisations that will be appointed Zone Management Companies. Some of the potential Zone Management Companies that we have identified are Local Enterprise Authority (LEA), Fairgrounds Holdings, Botswana Innovation Hub (BIH), Selibe Phikwe Economic Diversification Unit (SPEDU) and Botswana Agricultural Marketing Board (BAMB),” said Mogara.
Going forward, SEZA will explore partnerships with these stakeholders to leverage on their strengths and optimise the country’s resources. To this end, said Mogara, SEZA has already signed agreements with BIH and Business Botswana; while negotiations with BAMB and LEA are in advanced stages.
In 2005, the Business Economic Advisory Council (BEAC) recommended the implementation of Free Zones to spur economic growth and diversification, create jobs and eradicate poverty post depletion of minerals. Free Zones were identified as suitable vehicles for introducing viable, new economic activities by providing attractive incentives for highly specific, strictly circumscribed investment ventures. Government later adopted the SEZ Policy of 2011, established the SEZA in 2016 and approved the SEZ Regulations and Incentives in 2018 and 2019 respectively.
Rough diamond production for global mining giant, De Beers Group declined by 54% to 3.5 million carats in the second quarter of 2021. This is primarily due to the Covid-19 lockdowns across the mining producer countries.
A production report released by Anglo American, De Beers parent company recently , reveals that Debswana, Botswana’s De Beers operation spearheaded the decline, registering 68 % drop in production for the second quarter of the year 2020.
Debswana is jointly owned by both Botswana Government & De Beers Group on equal shareholding. Botswana government has 15 % direct shareholding on De Beers Group, with the remaining 85 % owned by mining conglomerate Anglo American.
Debswana, which is De Beers‘s flagship rough diamond producer has only managed to deliver to 1.8 million carats in quarter 2, principally due to a nationwide lockdown from 2 April to 18 May in Botswana. In addition De Beers says the 68 % production drop is also attributable to curtailed output in both plant and human resource as a result of Covid-19 measures implemented to safeguard the workforce. Operations restarted from mid-May, with production targeted at levels to meet the lower demand.
Since COVID-19 pandemic engulfed the world beginning of the year, demand in polished diamonds significantly dropped as a result of closure of jewelry and retail outlets in the United States. This then disrupted the entire value chain from downstream backwards, leaving midstream businesses with full and dense inventories subsequently shrinking demand for rough goods from upstream producer entities.
In Namibia where De Beers operate a model similar to that in Botswana, production decreased significantly at NamDeb, the inland mining outfit jointly owned by Namibian Government and De Beers Group on 50-50 shareholding.
However the decrease was offset by Debmarine, a unique mining operation where De Beers recovers diamonds on the Namibian coast of Atlantic Ocean. In 2016 De Beers invested P5 billion on a new vessel of unprecedented sophistication for Debmarine to take coastal diamond mining to another level.
For the quarter under review, the magic was delivered by Mafuta crawler vessel which was under maintenance in Q2 2019. Overall production in Namibia increased by 7% to 0.4 million carats. In South African where De Beers operates Venetia Mine in Limpopo province, production decreased by 3% to 0.6 million carats primarily due to Covid-19 measures. The production shutdown was partly offset by higher grades from the open pit material prior to transition to the underground.
Production in Canada decreased by 27% to 0.8 million carats, primarily due to Victor reaching the end of its life in Q2 2019. At Gahcho Kué, production decreased by 11% to 0.8 million carats due to Covid-19 measures.
During Q2, the demand for rough diamonds was significantly impacted by a combination of Covid-19 restrictions impacting consumer demand and access to Southern Africa, as well as severely limited midstream cutting and polishing capacity due to lockdowns, particularly in India.
Rough diamond sales totalled 0.3 million carats (0.2 million carats on a consolidated basis) compared with 9.0 million carats (8.3 million carats on a consolidated basis) in Q2 2019. The third Sight of 2020 was cancelled due to Covid-19-related travel restrictions and, in response to the unprecedented industry conditions, De Beers also offered sightholders the option to defer up to 100% of their allocations at the fourth and fifth Sights.
Rough diamond consolidated sales in Q2 2020 decreased to $56 million, signaling a catastrophic decline from $1.3 billion raked in second quarter 2019. The sharp decline was driven by lower volumes and prices.
The H1 2020 average realized rough diamond price decreased by 21% to $119/carat (H1 2019: $151/carat), driven by a higher proportion of lower value rough diamonds sold and an 8% reduction in the average rough price index.
De Beers has however maintained their production guidance at 25-27 million carats (100% basis), subject to continuous review based on the disruptions related to Covid-19 as well as the timing and scale of the recovery in demand. The guidance was in the first quarter revised from the initial 32-34 million carats forecasted beginning of the year, slashed by 20 % to the current guidance in response to declining demand.