Reporter KABELO ADAMSON puts questions to the Coordinator of the Diamond Hub, Mmetla Masire, on the back of a depressed diamond sector that threatens the resources-dependent Botswana economy.
Q: According to the information provided by Statistics Botswana, mining production decreased by 0.90 percent in the first quarter of 2015. What are the underlining reasons for the decline?
A: The main reason for the decline is due to low commodity prices and, as you know the closure of Discovery Metals (Boseto Copper Project).
Q: Kindly discuss the state of the diamond industry this year.
A: Since the last quarter of 2014 the diamond industry, especially the cutting and polishing, has been affected by global factors. The first being the reduced margin between Rough diamond prices and polished diamond prices, this means that those in the cutting and polishing industry saw their profitability affected negatively. The second issue is to do with the bank financing for the industry, they have changed their credit facilities and this impacted negatively on available liquidity.
Q: De Beers rough diamond sales by volume is said to have fallen by 26 percent year-on-year to 14 million carats in the first half of 2015 with the buyers are reportedly reluctant to buy more for various reasons. What impact does this have on Botswana which relies heavily on diamond sales for its revenue (budget)?
A: De Beers purchases its Diamonds from Debswana and other producers. This means that for the diamonds that they have purchased from Debswana, Botswana government will get what its portion. I am therefore not sure who the reduced sales impacted on Botswana government but it is reasonable to assume that some of this short-fall will have negative impact on the Government revenues.
Q: Does this mean that the overall diamond trade is in trouble?
A: I prefer to say that the diamond industry is going through difficult and challenging times. However, I want to remind you that this industry is cyclic and this is something that happens from time to time. I am confident that we will turn things around. This current downturn has taken longer than expected but a lot is being done by various stakeholders to turn it around.
Q: Do we foresee a turnaround in this situation – growth in diamond sales?
A: As per my previous comments, we are forecasting a turnaround. We expect the market to recover and expect to see our rough sales improve and our cutting and polishing becoming more profitable.
Q: Kindly add any valuable information about the diamond trade in its current state.
A: What is encouraging is that during these challenging times, we have seen all the producers of rough diamonds selling goods as scheduled via sights, tenders or auctions. We have also seen two new cutting and polishing companies start in Botswana. This shows confidence in Botswana and in the diamond industry.