Govt set to lose over P16 billion in diamond revenue
In response to the impact of Covid-19, De Beers has drastically reduced its production guidance for the year.
Initially, De Beers had set a target of mining between 32-34 million carats for 2020. The figure has since been scaled down to between 25-27 million carats due to the outbreak of the novel Coronavirus, which has led to a temporary shut down of virtually all industries.
Having suffered a disastrous 2019, the industry appeared to be gaining momentum in the early stages of 2020.
However, these roots of recovery have now ground to a complete halt.
From the two sights held this year, rough diamond sales totaled 8.9 million carats, a notable increase from the 7.5 million carats garnered at the same stage last year.
The lower demand of 2019 was largely due to the higher availability of polished stocks.
In an update to stakeholders, Anglo American – De Beers’ parent company – says sales volumes increased year-on-year despite adverse demand impacts on Q1 of 2020 from Covid-19. Customers were also given the option to defer some allocations in the second sales cycle, offset by a shift in demand towards lower value goods.
De Beers did not hold its third sight – scheduled for April – as movement of people has been restricted both locally and abroad. Instead, the company has provided its customers with flexibility to defer all their allocations from Sight 3 to later in the year.
Meanwhile, the latest developments regarding the diamond industry are expected to hit government coffers hard.
For decades, Diamonds have been Botswana’s biggest revenue earner, accounting for a large portion of the country’s exports in terms of value.
With no diamonds currently being sold due to the pandemic, Botswana stands to lose a massive amount of money.
When addressing the media recently, Minister of Finance and Economic Development, Dr. Thapelo Matsheka predicted the country could lose well over P16 billion in revenue from diamonds.
The Minister revealed government originally expected to receive around P20 billion from diamond sales for the 2020/2021 financial year. The revised figure now stands at P6.7 billion.
Additionally, government will lose more on taxes and levies from the mining industry. According to Matsheka, government now forecast making P12 billion instead of the envisaged P14 billion.
Government are set to miss out on a further billion in Value Added Tax (VAT), which is expected to fall from P8.6 billion to P7.6 billion.
The poor performance is anticipated to cause serious harm to the economy, which earlier in the year was projected to register growth of 4.2 percent.
Instead, it is now forecast to shrink by a mammoth 13.1 percent owing to the drop in diamond sales and other sectors of the economy, including transport and communications as well as hotel and restaurants.