TMC crumbles on weak demand
A slump in demand for commodities is threatening the local diamond industry with a major Diamond Trading Company (DTC) sightholder shutting down and shedding over 300 jobs.
Diamond export hit a record low of P659 million in December 2014 from over P4 billion recorded in the previous month according to figures from the central bank. The drastic decline has prompted some analysts to conclude that a gloomy global economic outlook driven by a sluggish growth in Asian market is affecting demand for rough and polished diamonds. Botswana is the world largest producer of valuable diamond. Economists fear that the trend might be the beginning of doom as major consumers of diamond such as the Euro area, Japan and the US are all expected to experience sluggish or even negative growth. Advanced economies were expected to grow 1.8 percent in 2014 and debt accumulation to remain high.
Chief economist at FNB, Sizwe Nxedlana, urged Sub Saharan economies to be prudent saying lower growth rate in China had a significant influence in the drop of commodity prices. “Diamonds have been able to be stable over the years despite the volatilities, hence that gives hope,” he said. Head of Corporate Affairs for DeBeers Botswana Pat Dambe-Hansen said the industries have been affected by a number of factors such as some pressures on cutting centre liquidity, higher stocks of certain types of polished diamonds and delayed demand from retailers to restock inventories. “However we believe that these issues are short term as consumer demand for diamond jewellery continues to grow.” She further indicated that they expect to see an improvement in demand throughout the first half of the year as retail demand begins to gain traction and this leads to improved liquidity and profitability in the cutting centres.
Dambe-Hansen said that the opportunity for the diamond industry is very positive. Weighed down by declining demand for stones, one of Botswana’s largest diamond factories Teemane Manufacturing Company (TMC) shut down this week, shedding over 320 jobs. Manager, Marvin Lifshitz said their operations have long indicated that there is no hope for the 20 years old diamond polishing company. “The move to close was purely informed by the company’s performance,” said Lifshitz in a measured tone. In 2003, the company injected about P40 million as part of investment to prop up the Serowe-based polishing outfit. Despite that the technologically advanced and experienced market player was unable to survive the competitive pressure.
Despite the brief details Lifshitz admitted that the highly competitive, dynamic and volatile global diamond business might have played a role in the business operations. He pointed out their operations have long experienced challenges for the last two years. “We had concerns for the past two years but we still persisted nevertheless.” Even the biggest diamond mining giant, Debswana continues to emphasise belt tightening in the face of uneven market conditions. Latest Bank of Botswana figures show that the value of rough diamonds mined in Botswana and exported in 2014 stood at P4.3 billion in September and October P4. 3 billion in November and P4. 08 billion in December and dropped drastically to P659 million in December, signaling weak demand for stones during the festive season.
