In the 24 months period ended December 2020 De Beers Group, the world largest diamond producer by value has cumulatively lost over P27 billion from its revenue earned when gauged against 2018 figure of $6.1 billion.
According to official figures contained in the Anglo American yearend financial report released this week De Beers has suffered another massive decline in revue in 2020 following another huge slump in 2019.
THE 2019 DOWNTURN
In 2019 , total revenue dropped by 24% from $6.1 billion (approximately P61 billion) to $4.6 billion (approximately P46 billion) with rough diamond sales falling by 26% to $4.0 billion from $5.4 billion in 2018.This in local currency mirrored a whooping P15 billion decline in De Beers total revenue for the year 2019.
This was due to an 8% decrease in consolidated rough diamond sales volumes to 29.2 million carats from 31.7 million carats in 2018 and a 20% reduction in average realized price to $137/ct from $171/ct in 2018. The reduction in realized price was driven by a 6% decline in the average rough price index and from a lower value mix of diamonds sold, in response to the weaker demand for higher value diamonds that year.
In response to the challenging midstream trading environment, De Beers offered increased supply flexibility to Sightholders and sold a lower value and volume of rough diamonds to the midstream, while increasing marketing expenditure to $178 million( over P1.8 billion from $166 million( over 1.6 billion) in 2018 to further drive consumer demand for diamond jewellery.
Underlying EBITDA decreased by 55% that year, to $558 million from $1,245 million in 2018 owing to lower sales volumes, a lower value sales mix which curtailed mining margins, and the lower rough price index which reduced margins in the trading business. This 2019 slump in De Beers’s revenue was due to a range of factors that created significant challenges for rough diamond demand during the year.
In late 2018, stock market volatility and US-China trade tensions resulted in lower than expected holiday retail sales, which led to higher than anticipated stock levels in the industry’s midstream at the start of 2019.
Throughout the course of 2019, the midstream inventory position was under further pressure due to the closure of some US ‘bricks and mortar’ retail outlets, an increase in online purchasing (where inventory levels are lower), and retailers increasing their stock held on consignment. Tighter financing also affected the midstream’s ability to hold stock, all of which resulted in lower demand for rough diamonds during the year 2019.
OVER P12 BILLION PULA DECLINE IN 2020
The year 2020 was another catastrophic year for De Beers Group and the entire global diamond industry. The lucrative business began the year on a high note with De Beers and Alrosa, both world’s leading producers, registering a significant upswing in rough diamond sales.
However that was short-lived as the COVID-19 pandemic which broke out of China in late 2019 spread across the world, halting international trade and restricting both movement of people and shipment of goods.
The onset of the Covid-19 pandemic, and measures taken by governments in response, had a profound impact on global diamond supply and demand. Much of the industry was temporarily unable to operate, with up to 90% of jewellery stores closed at the peak of lockdowns, first in China, then in Europe and the US.
Reduced demand from jewellery retailers due to store closures combined with the closure of diamond cutting and polishing factories in India from April to June, led to a substantial reduction in rough diamond purchases in the first six months of 2020.
In response, De Beers reduced production and offered significantly increased flexibility to customers. The gradual easing of restrictions across the globe led to improved trading conditions and an increase in demand throughout the supply chain in the second half of the year.
As a result of the difficult market conditions, lockdowns in India and associated flexibility offered to customers, De Beers total revenue decreased by 27% to $3.4 billion(around P34 billion) from $4.6 billion( over P46 billion) in 2019 with rough diamond sales falling by 30% to $2.8 billion from $4.0 billion in 2019.
Rough diamond sales volumes decreased by 27% to 21.4 million carats (2019: 29.2 million carats). The average realized price decreased by 3% to $133/ct (2019: $137/ct), with a 10% decline in the average rough index largely offset by an increased proportion of higher value rough sold in 2020, driven by midstream demand and inventory mix.
Rough diamond production decreased by 18% to 25.1 million carats (2019: 30.8 million carats) in response to lower demand due to the pandemic and the Covid–19-related shutdowns in southern Africa during the first half of the year.
In Botswana, where De Beers operates a 50-50 joint venture with Government , production decreased by 29% to 16.6 million carats (2019: 23.3 million carats), with volumes at Jwaneng reduced by 40% to 7.5 million carats (2019: 12.5 million carats), while production at Orapa decreased by 16% to 9.0 million carats (2019: 10.8 million carats).
This was largely due to a nationwide lockdown from 2 April to 18 May, and the planned treatment of lower grade material at both Jwaneng and Orapa, following their restart, as a production response to lower demand. Both mines substantially reconfigured their mining operations to preserve costs in light of the lower levels of production, thereby preserving the mining margin.
In Namibia, production decreased by 15% to 1.4 million carats (2019: 1.7 million carats), while next door in South Africa, production increased to 3.8 million carats (2019: 1.9 million carats). Across oceans In Canada, production decreased by 15% to 3.3 million carats (2019: 3.9 million carats) principally reflecting Victor reaching the end of its life in the first half of 2019. Gahcho Kué production decreased by 4% to 3.3 million carats (2019: 3.5 million carats) as a result of the implementation of Covid-19 workforce protection measures.
PROSPECTS ARE HOWEVER LOOKING GOOD
De Beers says recent consumer demand trends have been positive in key markets and industry inventories are in a healthier position, providing the potential for a continued recovery in rough diamond demand during 2021, subject to the ongoing impact of Covid-19.
The London headquartered diamond mining giant says consumer desirability for natural diamonds is set to remain high over the medium to long term despite the economic impact of the pandemic and increasing supply of lab-grown diamonds.
De Beers says in the longer term, the impact of Covid-19 has accelerated the transformation that was already underway across the industry and which is expected to continue at pace. This includes more efficient inventory management, increased online purchasing, and a growing consumer desire for products with demonstrable ethical and sustainability credentials, including an enhanced appreciation for the natural world.
The long term outlook for the sector remains positive as De Beers continues to focus on its business transformation to support the continued growth of its own business and the wider diamond value chain. For 2021, production guidance is 32–34 million carats, subject to trading conditions, the extent of further Covid-19related disruptions and ongoing operational challenges.
The higher production is driven by an expected increase in ore and improved grade performance at both Jwaneng and Venetia. Unit cost guidance is c. $55/ct, reflecting the increase in production volumes and the benefits of the restructuring undertaken in 2020.
With just four weeks to go, the Gambling Authority of Botswana has revealed that it is expecting a record attendance at the much anticipated International Association of Gambling Regulators (IAGR) Conference, which will be held in Botswana from 16 â€“ 19 October 2023.
According to a communique from the IAGR, the Gambling Authority will most probably break the record in the number of accredited countries that will attend the conference in Botswana.
â€śWe are on track to match and potentially exceed the incredible delegate turnout we saw in Melbourne last year,â€ť read a statement from IAGRâ€™s.
In its global reach alert, IAGR revealed a glimpse of jurisdictions that will be represented at the conference, among them Australia, Canada, Denmark, Japan, Jersey, Mauritius, United Kingdom, United States and Netherlands. African countries that have so far confirmed attendance include Zimbabwe, South Africa, Nigeria, Tanzania, Kenya and Burundi.
Commenting on the expected bumper attendance, IAGR said the amazing diversity elevates the conference to a whole new level, which will enrich discussions with a tapestry of regulatory perspectives and insights.
Botswana won the bid to host this yearâ€™s conference last year in Melbourne, Australia. The IAGR consists of representatives from gaming and gambling regulatory organizations from around the world; with a common mission to advance the effectiveness and efficiency of gaming regulation.
According to Gambling Authority Chief Executive Officer (CEO) Peter Kesitilwe, the Authority is a member of the IAGR by dictates of the Gambling Act; which compels it to align with international organizations whose objectives are to regulate gambling, and build collaboration among regulators.
â€śThe IAGR conference is held annually and hosted by different member jurisdictions. It provides opportunities for gambling and gaming regulators from around the world to engage, learn and network with industry peers through events, workshops, research, information sharing, and the development of best practices,â€ť explained Kesitilwe.
Funding requirements for the conference are shared between IAGR, the host country and conference participants. The government of Botswana has reaffirmed its commitment to supporting the Gambling Authority to host IAGR; as it is in line with its objectives of promoting the country as a Meetings, Incentives, Conferences, and Exhibitions (MICE) tourism destination.
According to Kesitilwe, the conference is coordinated by a Technical Committee of IAGR; together with a Local Organizing Committee (LOC) that comprises of representatives from the Ministries of Trade, Tourism, Foreign Affairs, Botswana Police Service and other stakeholders.
â€śWe promise to deliver this hugely important event and showcase the best that Botswana has to offer. In addition to the exchange of ideas and culture capital, the Organizing Committee will also ensure maximum benefits for the tourism, hotel and hospitality industry, entertainment, transport, telecommunications, vendors, hawkers of cultural artifacts,â€ť said Kesitilwe.
As part of preparations to host IAGR2023, the Gambling Authority recently went on a benchmarking mission to Great Britain.
â€śWhat we learnt there can assist the Gambling Authority as we enter a new era of growth and expansion. The meeting also provided a timely opportunity to catch up on preparations for IAGR2023. We are ready to host the conference and we look forward to meeting other regulators from across the world to share best practice, discuss common challenges and tackle illegal gambling,â€ť concluded Kesitilwe.
In recent years, diversity and inclusion have emerged as crucial aspects of the corporate sector. Recognising the importance of inclusivity, the Botswana Development Corporation (BDC) has taken significant steps to signal its commitment to the inclusion of all regardless of age, gender, background. By implementing a comprehensive Diversity and Inclusion policy, BDC aims to create an environment that fosters equality, attracts top talent, and promotes creativity and innovation.
BDC has demonstrated its commitment to inclusion by crafting and implementing a bespoke Diversity and Inclusion policy. This policy recognises and values the differences within its workforce, striving to create a culture of equality. By fostering an environment where all employees feel respected and supported, BDC aims to attract and retain top talent, which in turn contributes to the organisation’s overall success.
The Corporation has implemented policies and strategies that promote diversity and inclusivity in the workplace. The Diversity and Inclusion policy emphasises the value and respect for employees from diverse backgrounds, creating an inclusive environment where everyone can thrive. By having this policy in place, BDC ensures that all employees are treated fairly and have equal opportunities for growth and development within the organisation.
In the realm of inclusivity, leading firms and companies have emerged as trailblazers, championing diversity and equity by implementing progressive policies and initiatives. These organisations have made significant strides in demonstrating their commitment to inclusivity through actions that support individuals with disabilities and foster work-life balance for all employees.
Microsoft actively recruits individuals with disabilities and fosters an inclusive workplace through accommodations and a dedicated resource group. Netflix offers generous paternity leave, Unilever supports surrogate parenthood and gender-neutral caregiver benefits, while IBM provides comprehensive adoption support. Companies like Google, Apple, and Facebook establish employee resource groups to amplify underrepresented voices. Adobe prioritises inclusive workplace design, and Accenture and Deloitte focus on diverse leadership representation. These companies set a powerful example, demonstrating the value of diversity and fostering a more inclusive corporate landscape.
Rising to the challenge, BDC has also taken several measures to respond to the different needs of its work force. These measures include fostering open and respectful communication, encouraging the formation of employee resource groups or affinity networks, and promoting diverse perspectives and contributions. The Corporation has also shown its commitment to inclusivity by recruiting persons with disabilities, providing paternity leave benefits, and recognising and supporting surrogate parenthood, primary caregiver benefits regardless of gender, as well as the adoption of children. These efforts demonstrate BDC’s progressive approach to embracing diversity and supporting employees in all aspects of their lives.
By so doing, The Corporation exemplifies the essence of progressiveness, embracing inclusivity as a core value. By championing diverse talent, providing supportive benefits, and fostering inclusive cultures, BDC is part of a movement that is shaping a future where every individual is valued and empowered.
Inclusion and diversity are not only moral imperatives but also strategic investments for success. BDC’s commitment to fostering diversity and inclusion, sets an example for other organisations in Botswana and beyond. By implementing policies and strategies that create an inclusive environment, celebrating diversity, and supporting employees from all walks of life, BDC paves the way for a more equitable and inclusive corporate sector in Botswana. Embracing diversity is not only the right thing to do; it also drives innovation, boosts employee morale, and contributes to the overall success of organisations.
Choppies Enterprises Limited, a supermarket chain led by Botswana businessman Ramachandran Ottapathu, reported an increase in profit after tax which is up 3.4%, hence improving from P145 million realized in 2022, to P150 million in 2023.
The results demonstrate sustained increases in consumer demand, improved operational flexibility, efficiency, cost-effectiveness and despite stiff competition, the Group managed reduce its debt levels by paying off P263 million debt from the previous fiscal year.
The chain supermarket realized growth in Group retail sales which went up 6.5% to BWP6 433 million compared to P6 042 recorded in 2022. The growth is attributed to a broad presence across Botswana and a growing footprint in three other African countries, being South Africa, Zambia and Zimbabwe, according to a recently financial results statement.
In Pula terms, gross profit grew by 4.0% to BWP 1 359 million (2022: BWP 1 307 million) despite the challenging economic environment. Botswana and Namibia marginally grew gross profit rates while rates in Zambia and Zimbabwe declined.
During the period under review, the groupâ€™s Group net cash generated fromÂ operating activities rose by 4.5% to P484 million, this is a significant improvement when compared to P463 million recorded in 2022. This segment was boosted by strong showing from Botswana and Namibia, which performed exceptionally despite the challenging trading conditions. Furthermore, it was driven by sixteen new stores coupled with price growth of 6.8%.
As a result of the robust financial performance, the groupâ€™s total assets increased from P1 886 million to P2 177 million, while retained losses decreased from P811 million to P664 million.
Meanwhile, the Group faced a demanding economic environment characterised by stubbornly high inflation, higher interest rates and unemployment, all of which continue to constrain consumer spending and the consumerâ€™s ability to digest higher prices. Sales volumes were lower in many categories, exacerbated by competitor discounting, with cost pressures only partly recovered through price increases.
According to the audited results, the gross profit margin accordingly reduced to 21.1% from last yearâ€™s 21.6% due to higher supply chain costs, including fuel and managing prices in response to higher cost inflation and competitor discounting.
Furthermore, while expenses increased 5.1% excluding the depreciation restatement, expenses grew 9.8% partly due to new stores and inflation. Foreign exchange losses on lease liabilities of P31 million (against a gain of P28 million last year) were partly offset by foreign exchange gains on Zimbabwean legacy debt receipts of P18 million (2022: BWP15 million).
Operating profit (EBIT) reduced by 1.8% from BWP 279 million to BWP 274 million whilst Adjusted EBIT, which excludes foreign exchange gains and losses on lease liabilities, movements in credit loss allowances, Zimbabwean legacy debt receipts and the reassessment of depreciation, reduced by 7.5% as costs grew faster than gross profit.
According to the Choppies Enterprises financial statement commentary, the Group continues to manage its cash resourcesÂ and liquidity prudently with a reduction of P132 million in debt with P87 million paidÂ out of internally generated funds and the balance of P45 million paid out of the proceeds of the rights issue.
In addition, capital expenditure increased toÂ P185 million when compared to 2022 fiscal year which had recorded P122 million. This was a result of theÂ Group strategy to invest in new stores and maintaining theÂ distribution fleet.
Choppies Enterprises raised BWP50 million fromÂ leases to fund the fleet, an improvement because in 2022 only P36Â million was raised.
Despite the growth in sales, inflation and new stores, Choppies Enterprises inventory reduced by P20 million helped by more stable global supply and the benefits of implementing an inventory optimisation system.
Finally, commentary from the Choppies Enterprises Group observes that as the economies in which the Group operates recover and the new stores reach full potential, an improvement in margins is expected. â€śWith a value proposition that resonates with customers and with the cost of everyday items still stubbornly high in too many categories, more customers are choosing Choppies for the value and assortment we are known for. While we have strong and resilient brands, affordability is a growing constraint for consumers, limiting their ability to digest higher prices,â€ť reads a commentary on the Groupâ€™s Financial statement.
Choppies Enterprises Limited (â€śthe Companyâ€ť) isÂ aÂ Botswana-based investment holding company operating in the retail sector in Southern Africa. Dual-listed on the Botswana Stock Exchange (â€śBSEâ€ť) and Johannesburg Stock Exchange (â€śJSEâ€ť), its are food and general merchandise retailing as well as financial service transactions supported by centralised distribution channels through distribution and logistical support centres. Each week, approximately 2.0 million customers visit 177 stores under five formats in four countries. With annual revenue of more than BWP6 billion, Choppies employs 10 000 people and is the largest grocery retailer in Southern Africa, outside of SouthÂ Africa.
EVENTS AFTER REPORTING DATE
On 19 July 2023, Choppies acquired 76% (seventy-six percent) of the Kamoso Group for BWP2.00 (two Pula) and took cession of shareholdersâ€™ loans to the value of BWP22 million. The Botswana Development Corporation (BDC) will retain its 24% stake.
This acquisition will take Choppies to become a P8 billion business in revenue with 11 000 employees and 274 retail stores.
SNEAK VIEW: COUNTRY PERFORMANCESÂ
According to the financial results, Botswana experienced sales growth to BWP4Â 459Â million an improvement from P4 209 million recorded in 2022. This was supported by volume growth from new stores and double-digit price inflation. Sales from Botswana increased by 5.9% and like-for-like sales growth wasÂ 2.2%, as the business continued to show strongÂ resilience in an increasingly challenging economic environment. The Botswana economy continues to experience elevated inflation, high unemployment, and low economic growth.
EBITDA grew 5.8% and adjusted EBITDA was flat onÂ last year. The performance for the second half was much stronger than in the first half as our strategies, leadership and inventory optimisation system have started toÂ come to fruition.
As for the Rest of Africa being Namibia, Zambia andÂ Zimbabwe sales increased by 7.7% to PÂ 1Â 974 million, yet another improvement from 2022, which had realized P1Â 833 million sales. The increase was driven by the addition of nine new stores, inflationary increases in Zimbabwe and Zambia and volume growth in Namibia and Zambia. â€śHowever, this was offset by a very weak Zimbabwean Dollar resulting in Zimbabweâ€™s Pula sales declining by 48.3%.â€ť
Meanwhile Namibia has successfully turned around with sales growth of 60.0% and like-for-like sales growth of 14.4%. Five new stores were opened during the year. EBITDA grew 140% with EBIT loss reducing from BWP9 million to BWP2 million. Adjusted EBIT, excluding the depreciation reassessment, reduced from BWP9 million to BWP6 million.
Connectedly, Zambia continues to grow with sales up 44.7% and like-for-like sales growth of 33.3%. ThreeÂ new stores were opened during the year. While EBITDA declined by 26.4% due to the foreignÂ exchange loss on the lease liability, adjustedÂ EBITDA grew 27.1%. Adjusted EBIT declined marginally at 2.6%. Choppies Enterprises Directors are confident thatÂ Zambia will generate taxable profits inÂ theÂ foreseeable future.
Lastly in Zimbabwe, the Zimbabwean DollarÂ (ZWL) has significantly weakened especially in the last two months of the financial year. As a result of the above mentioned factors, Pula sales declined by 48.3%. EBIT and EBITDA declined by 151.6% and 125.5% respectively as cost inflation reduced margins. Adjusted EBIT and adjusted EBITDA declined 133.3% and 108.1% respectively.