DTC Botswana confirmed this week that it will be shutting-down its operations next month, as part of the cost cutting measures, and will postpone the transfer of the much exalted aggregation process from London to Gaborone due to the punitive fallout affecting it from the global economic crunch.
In answer to a list of Sunday Standard questions submitted to it before the budget speech about its impending suspension of operation the company said that the global crisis “is impacting on production and demand level across the industry” and is taking such action to conserve cash and jobs.
“The world economic crisis is affecting most businesses in the same wayÔÇöDTC is no exception.
“The crisis is impacting on production and demand levels across all industries, and it is inevitable that this trend will continue until the global economy begins to recover. Some of the actions being taken by DTC Botswana, to position the company to reflect client demand and reduced production levels, will affect our operational schedule. It is anticipated that DTC Botswana will shut-down operations from March 2-13, 2009, in a bid to conserve jobs and save cash,” DTC Botswana said Friday.
As part of the plan to save cash, DTC is also expected to cut the daily working hours and slash working day from five to four day. The short term measures will come into operation starting from next week and will be reviewed every three months.
The company started to feel the effects of the global credit crunch starting from the last quarter of last year as sight holders turned a blind eye to the goods that were on offer as their lines of credit with the banks started to dry up.
Prices of goods fell in the process by as much as 20 percent and further expected to go down by a margin of 15 percent during the course of this year.
Further, the situation was made worse by the fact that the United States of America, which is the largest diamond jewellery market ÔÇô accounting for 50 percent of world productionÔÇögot a double whamming from the crush, first from the sub-prime mortgage lending then followed by the collapse of the financial sector. The USA problems, the world’s largest economy, suddenly spread across the world with banks reluctant to lend to each other.
Added to that, DebswanaÔÇöa 50/50 joint venture between De Beers and Botswana governmentÔÇö the sole supplier of DTC Botswana, closed down two of its mine operations, the Damtshaa mine and Orapa number two plant leading shortage of supply.
The developments, according to Finance and Development Planning Minister, Baledzi Gaolathe, during the national budget speech on Monday, Botswana will be able to get about 50 percent of revenue that it used to get.
“The shut-down will affect all our employees,” DTC said, adding that the November and December sales were the worst both in Gaborone and London pointing out that the situation is expected to continue for the rest of the first quarter of this year.
“In line with this reduced demand from clients, Debswana has scaled back its production for 2009. This is being constantly reviewed and may be scaled up or down according to demand,” DTC Botswana added on Friday.
However, it said De Beers, an equal shareholders in DTC Botswana is still committed to moving aggregation to Botswana but was quick to state that it will not be according to the original plan of having it here by 2009.
“Engagement with the Government of Botswana to ensure conditions are “right for success” are ongoing and while we expect these to all be resolved in time, it is unlikely that aggregation will move in 2009.
“We believe it is essential that this initial stage is completed prior to beginning the transition of aggregation activities. This will allow the aggregation function to remain fully focused on their task, which is particularly important in this difficult trading environment. We will be working with our teams to ensure the impact of this deferral is minimised,” DTC Botswana added.
The aggregation process was expected to transfer some of the most highly technical skills to Botswana and help in the creation of new jobs in support of the cutting and polishing industry. Under the plan, all De Beers mined diamonds, from Canada to South Africa, were to start to be mixed in Gaborone together with the Botswana produce. That was to change the decades old tradition of having London as a centre of diamond trade.