The Diamond cutting and polishing industry in the country is mulling its operational plan that might lead to further job cuts as the world’s leading diamond mining company, De Beers, pleads with the industry to remain stead fast amid the international financial crunch.
“The diamond business has certainly been affected by the global crisis. Liquidity is important to any business; as soon as the flow of fresh capital into our business slows, there will be some knock-on effect,” Diamond Manufacturers in Botswana, Mervin Lifshitz, told the Sunday Standard.
The credit squeeze in the diamond business resulted in massive retrenchments during the months of November and December last year and the extended festive holidays for most of the 16 sightholders who are based in Botswana.
The entire diamond beneficiation plan was estimated to employ close to 3000 people by mid this year and that ambition has been blighted by the international credit crunch, sparked by sub-prime mortgage lending in the United States of America during the reign of former President George W. Bush.
People with no permanent jobs, no fixed permanent fiscal addresses were given loans even when they did not qualify under normal market conditions. The result was that most of them failed to repay their loans exposing the banking and insurance businessesÔÇöultimately leading to their collapse or near collapse.
Lifshitz said, currently, diamond cutting and polishing are taking stock of what happened and mapping out a way forward, which might result in some more retrenchment being carried out.
One industry player told Sunday Standard that he expects the ‘picture to be clearer’ by next month, adding that he would rather remain with a leaner operation than remain with a big operation that will eventually collapse.
“As we are tied to the global economy, it is difficult to predict when this crisis will pass. The general thinking is that 2009 will be challenging,” Lifshitz said.
The problems of the diamond business are expected to have direct negative impact on Botswana’s real economy as it the world’s largest diamond producer of diamonds by value. The situation is made worse by the fact that the United States of America, which is the largest world diamond consumer, is faced with the worst financial crisis since the Great Depression of 1930s.
However, in London this week, De BeersÔÇöthe world’s leading diamond minerÔÇöurged its sightholders to soldier on in the midst of the gloomy financial situation saying those who will see through their business beyond this crisis will be more like heroes of our times.
“I recall the tales with which my father and grandfather used to caution me. As a result, two things are clear to me. First, our industry has survived previous downturns, including the Great Depression. However long the recovery may take to arrive, recovery will inevitably follow a downturn. Secondly, the industry only survives because we were willing to be courageous in the face of those uncertainties,” the Chairman of De Beers, Nicky Oppenheimer, said at the annual reception hosted for the company’s sightholders.
Gareeth Penny, on the other hand, was more blunt: “Make no mistake; the near term will be difficult. Nobody knows how long the recession will last or how deep it will go. But it will be difficult for nearly every industry in the world over, and, if given a choice, I know what product and which partners I’d bet on for the long term.
“Level headed leadership gleaned from generations of experience, treating mother nature’s natural treasure as it deserves to be treated, and taking bold action in the short term with unflinching confidence in the long, will help define diamonds for years to come and will see us through this crisis and leave us standing stronger for the future,” Penny said.