Diamond sales rebound ahead of Monday�s budget
Brian Benza | Wednesday January 27, 2016 15:10
De Beers, which is entitled to sell 86 percent of Debswana’s annual production, and hand 80 percent of that revenue to government, sold $540 million (P6.3 billion) worth of diamonds last week.
This represented a 117 percent leap with De Beers having recorded sales of $248 million in its last sale of a challenging 2015.
De Beers holds 10 sales a year — called sights — for handpicked buyers called sightholders.
“Rough diamond demand broadened across the entire product range as cutting and polishing factories began to increase their activity.
“A positive holiday season in the US from a retail perspective, low levels of diamond purchases by the midstream in fourth quarter 2015 and a subsequent reduction in manufacturing saw polished diamond stocks pull through the pipeline,” De Beers said yesterday.
Rough diamond sales hit rock bottom in 2015 due to an ‘indigestion’ in the diamond pipeline as cutters and polishers, who suffered from low polished prices, pooled rough diamonds.
As a result, Botswana, which gets 40 percent of its revenues from diamonds and 20 percent of GDP, slashed down its 2015 growth forecast while the budget was seen swinging into a deficit.
While De Beers Group CEO, Philippe Mellier says they are encouraged by the results of the first sales cycle of 2016, for Botswana, a clear picture of the initial state and shape of diamond market for 2016 will likely be drawn from Thursday’s first auction of the year by Okavango Diamond Company (ODC).
ODC, which is entitled to sell 15 percent of Debswana’s projected 20 million carats this year, will look to gauge rough buyers’ appetite in 2016 at tomorrow’s auction.
Sales for ODC, which was established in 2011 as part of government’s efforts to independently verify market trends outside of De Beers’ marketing channels, dropped 45 percent in 2015 to $303 million due to sluggish market conditions.
Government gets 80 thebe from every pula worth of diamonds that Debswana sells to De Beers and ODC.
In a revised 2016-2017 Budget Strategy Paper (BSP) released in September last year, before pronouncements of the Economic Stimulus Package (ESP) were made, the Ministry of Finance and Development Planning said the proposed budget for 2016-2017 financial year projects total revenues and grants to reach P55.69 billion, an increase of 3.1 percent from the 2015-2016 original budget estimates. Mineral revenue was estimated to amount P23.10 billion driven by receipts from mineral royalties and dividends while non-mineral revenue was projected to record the highest growth of 10.4 percent to P10.32 billion. After a rough 2015 in which diamond manufacturers heavily criticised De Beers for a pricing structure which they claimed was driving cutters and polishers out of business, Mellier has promised to change the system the diamond giant uses to sell its rough diamonds to accommodate volatile market conditions.