A leading Mining company, Anglo american, the major shareholder of De beers- holding an eighty-five percent (85%) of the stake, the remaining fifteen percent (15%) held by the Government of Botswana, reports a distraction in diamonds revenue sales since the start of 2019.
Reporting on the company’s annual financial report for the year ended 31st December 2020, the company reveals the challenges they are facing as a result of the pandemic and how they are/have mitigated the situations.
“The diamond industry started the year on a positive note as a result of improved consumer demand and retailer stocking at the end of 2019, but as Covid-19-related business and movement restriction led to store and factory closures, the diamond value chain came to a halt in the second quarter. In response, De Beers offered customers flexibility on their pre-agreed allocations which, in turn, led to a decrease in purchases and manufacturing levels at cutting centres. As the year progressed, this action helped to balance inventory levels, as polished diamond manufacturing resumed, cutting and polishing recommenced gradually and the trade prepared for the end of year holiday selling season. These developments supported an improvement in midstream sentiment and rough diamond purchases in the final quarter, as well as firmer polished and rough diamond prices. Overall, these developments contributed to the average rough price index for De Beers diamonds decreasing by 10% in 2020.”
The diamonds are a primary interest of any Motswana as Botswana survive mostly on the revenue from diamonds and as such affects the Gross Domestic Product (GDP) to a great extent. Anglo american indicates that in the previous year, of the countries of operation, Botswana recorded a high drop in GDP by 9.6%, behind, US, with an estimated 3.4%; the Eurozone by 7.2%; Latin America by 7.4%; and India by 8.0%; South Africa contracted by 7.5%; Chile by 6.0%; Brazil by 4.5%; and Australia by 2.9%. “
One of the challenges that were faced include the low product prices caused by “government imposed lockdowns to manage the Covid-19 pandemic and associated increased levels of public debt”. This may affect cash flow and profitability. To mitigate this “regular updates of economic analysis and product price assumptions are discussed with executive management and the Board.”
