Debswana emerges from a freezer

03 Apr 2018

Balisi Bonyongo is a realist - exceedingly bullish but also awake to possible pitfalls ahead.

His demeanour is a perfect blend of ebullience and caution.

For a leader of a company that has spent a good amount of its recent history in the deep end, Bonyongo speaks with clear confidence and unmistakable boldness.

In a big way, his presentation is a lesson in history - but also an art in hope, optimism and persuasion.

The audience is an army of anxious entrepreneurs, uneasy suppliers, battered bankers, wounded industrialists and a hurting business tribe, all of them immensely worried by the ugly prospect of losing a comfort blanket that Debswana has unfailingly provided them and the country for the last fifty years.

As has been the case with Debswana, the last few years have not been among their best.

And more than everybody outside the hall, this audience knows so well that their fate and fortune are intrinsically linked to what ultimately happens and becomes of Debswana.

For them it's a scary existence.

Today's presentation, a business performance update by Bonyongo is finely tuned for the occasion.

For business people worried about the future, the presentation is about hope and confidence building.

Debswana is back. We are in the business of getting this company back on its feet and with that the entire country - is how Bonyongo's presentation can at best be summarised, broadly.

The Managing Director of Debswana Diamond Company has seen it all.

For all his boldness and optimism he has also not forgotten how difficult the recent history has been for his company.

Thus every major sub-topic of his presentation is prefixed with a short narration of how far deep the company he leads has emerged.

While the future is cast as promising, it is also clear from his cautious tone that it is a fragile future.

Debswana is by far easily the most powerful and most important company in Botswana.

In a big way the presentation is tuned to allay fears but also to subtly push home the hard realities of a future ahead.

"Public interest on Debswana is understandable and most welcome. We exist to turn dreams into reality," as an opener.

It is a somewhat loaded statement, perfectly delivered to underscore the importance of his company to the country and its citizens.

Debswana is literally Botswana's economic mainstay, providing around 70 percent of the country's foreign currency earnings.

Since the early seventies, and significantly growing in the eighties, Debswana, through its diamond sales and earnings has always played an oversized role in Botswana's economic story - during both the boon and lean years.

After a protracted period of suppressed diamond demand, Bonyongo says there is now light at the end of the tunnel.

The whole of 2017 showed a peep of growth. It was a continuation of signs that started the year before.

China's growth, though marginal has continued to cement that country's place as an upcoming powerhouse in the world's diamond market.

"Sentiment is coming back in the mid-stream. The United States economy has stabilized. China is a very strong and growing economy."

That trend, says Bonyongo has been encouraging if not for anything else, then certainly for reducing excessive dependence on the United States.

With reference to India, he says stability is coming back, after demand suffered a setback in response to reforms.

In here he is referring to massive currency reforms that were introduced in India during that same time.

The United States has continued to be by far the biggest diamond consumer market, comprising of over 50 percent of the diamond sales.

"Everything that Donald Trump does matters a lot. Donald Trump has been very good for diamonds, I don't know for other things," says Bonyongo to bouts of laughter from his audience.

To drive home his point he highlights that over the past year the Debswana carat production has been up 11 percent, with Orapa adding an extra 2 percent while Jwaneng was slightly under.

As is the case with all of his presentation, Bonyongo laces this bullish outlook with a bit of caution; diamonds, he reminds his audience remain a discretionary purchase.

Yet again this is a loaded statement meant to tamper underlying excitement with hard truths ever lurking on the horizon that people will buy diamonds not because they need to, but because they feel good and confident about it and only when they have extra cash to do so.

Over the last few years Debswana has had quite a good share of the tough times.

Mines had to close down. The world economy collapsed under turmoil and seemed to take forever to make a turn around. And when it finally turned around, the diamond market was not quick to follow.

Bonyongo says with recovery, Debswana has become a first world leader of global benchmark standards - a go to company when it comes to standards.

All these achievements have not come about easily.

They are a result of hard-won battles, key of which has been squeezing out wastage.

Bonyongo says going forward, with mines and plants getting older earnings will be driven more and more by efficiencies.

This means achieving cost and operational efficiencies. This will mean cutting on such key production inputs like fuel and truck tyres.

One tyre of a big truck that goes into the mine costs no less than half a million Efficiency, agility, cost-cutting and productivity have become routine.

But he was not done yet with the feel-good story of a resurgent Debswana.

Following a difficult spell that led to the closure of Damtshaa, the mine has now resumed production.

The over 250 employees that had been re-deployed elsewhere during that closure are now back at the mine.

Letlhakane Mine remains closed but work has started to treat the tailings.

And according to Bonyongo the tailings, with a lifespan estimated to be 20 years are proving as good as was the case with the mine before it was closed, thus mitigating against a possible shortfall in carat output.

"The Letlhakane tailings plant, at a cost of over P2 billion has ensured that the Botletli social fabric has remained intact."

For him the Debswana turnaround has been a massive triumph; for the country whose upkeep depends on the company but also for him personally.

And a deliberate decision has been taken that inside the company, nobody will be left behind.

As important as is mining the diamonds efficiently is also enhancing gender diversity and inclusion.

There used to be a time when Debswana had no women working inside the mines.

That has changed dramatically over the past few years. Henceforth, gender diversity has become a major strategic undertaking of the company.

The proportion of women in management as a percentage of the whole currently stands at 24 percent. The new target is 30 percent by the end of the year.

Bonyongo readily admits that this is still too low. "But then we have to remember that we come from a very low base."

To compliment what has been achieved a strategic decision has been taken to increase the proportion of women at all levels, especially in the technical fields.

The health of Debswana is intrinsically linked to that of Botswana's economy. The two are like Siamese twins.

In the same way the company's performance is vulnerable to ever vacillating shifts of the international economy.

Every other four to six weeks, Debswana produced diamonds go on sale.

And that money is immediately passed to the shareholder - De beers and Botswana Government.

At the height of the turmoil there were times when Debswana would go for weeks and weeks on end without sights - as those rounds of sales are called in the diamond talk.

Not all is not as clear as it seems. Notwithstanding a formidable rebound, the future is fraught with pitfalls.

Bonyongo is abnormally alert to the risks that the world diamond market faces.

And the economic stakes could hardly be higher. The ongoing pressure on the fiscus directly rubs off Debswana.

While to a very large degree much of the country's political leadership is oblivious to these hard facts, Bonyongo is overly cautious of the future dynamics under which Debswana will operate.

Immense as those difficulties might sound, for Bonyongo and his team, they only tell half the story.

Plans for Debswana open pit mines to all go underway will be giving him sleepless nights.

Literally all of Debswana engineers have not had any experience underground.

There will be a  need for massive sea change in re-training.

And given its importance to the country, such large scale apprenticeship is a luxury Debswana can ill-afford.