No job losses anticipated at Damtshaa

Debswana Diamond Company is to place Damtshaa Mine, which is part of the Orapa, Letlhakane and Damtshaa Mines, under the care and maintenance programme for up to three years, BG Business can reveal.

The company this week indicated in a statement that the care and maintenance programme is part of its response to the downturn in the diamond market. “Orapa Mine Plant 1 will run at a reduced production level of approximately one million carats per year in order to maintain plant readiness to ramp up production quickly should it be required. As a result Debswana has revised its production for 2016 to 20 million carats to match expected levels of demand for rough diamonds,” reads the statement.

During this period, Debswana will produce more from Jwaneng Mine which is a high value, low cost asset and reduce production from Orapa, Letlhakane and Damtshaa Mines. Jwaneng Mine will produce an average of 12 million carats per year while production at OLDM will average eight (8) million carats per year.

Similarly, De Beers group which gets about 75 percent of its annual supply from Botswana through its joint venture with government, Debswana, has also revised its production targets. The company recently lowered its full-year production guidance to between 29 million carats and 31 million carats from its previous forecast of between 30 million and 32 million carats due to projected weak sales.

Debswana’s Head of Corporate Affairs, Esther Kanaimba-Senai said, “All efforts are being made to preserve jobs by re-deploying affected employees to other parts of the business. At this juncture, we do not anticipate any job losses.”

Diamond market trends
Since the second quarter of 2015, Debswana has been experiencing a significant reduction in the sale of rough diamonds due to weak demand as a result of a global macro- economic slowdown and the strengthening of the US dollar which have put liquidity pressures on cutting and polishing centres. This is an unprecedented situation which has impacted the entire diamond pipeline from rough producers, cutting and polishing companies and the retail sector.

Moreover in the third quarter of 2015, the diamond output to the economic growth declined by 5.7 percent. Motswedi Securities analyst, Tlotlo Ramalepa however indicated to BG Economy that it is tough to predict the trend for the next quarter and going forward. Ramalepa explained that, “unlike copper, for instance which is an industrial commodity, if large consumers deteriorate you are likely to face a decline, but as for diamonds they are luxurious products and there is no market for market price.”

Some experts previously argued that, the country is in a recession as was the case in 2008. However, Ramalepa disagrees and instead argues that the economy is just in a slowdown not a recession. “We are experiencing a slowdown because of the volatility in the diamond market, as well as the negative growth in electricity and water which bears a negative growth to the GDP,” he said.

De Beers, one of the world’s largest producers of rough diamonds, has indicated that it remains hopeful on the US Christmas period for the recovery of diamond sales. In a teleconference address to the Botswana media in October this year, Bruce Cleaver, De Beers Executive Head of Strategy and Corporate Affairs, indicated that consumer demand for diamonds is likely to increase due to the US Christmas season, which usually begins from late November.

Cleaver said Christmas in the US is a very important occasion as it sets the tone for the rest of the coming year. De Beers, he said sells about 35 percent of all the goods that are sold in the US in that one month, which is very critical for the company.

As a result, the group has lined up a number of initiatives to stimulate the market for consumers including a new marketing campaign focused on both the US Christmas and the Chinese New Year. According to Cleaver, if the Christmas period is not good then one must expect the slowdown in diamonds sales to carry on much longer.

Cleaver anticipates 2016 to be a little better than 2015, however noting that it is very much predicated on the recovery of the global economy.