Thursday, May 6, 2021

Rising costs cause diamond beneficiation scare

“I have just spent less that a week here and transport prices have risen by 20 percent. Power prices have also been increased lately.” That is how the Chief Financial Officer (CFO) of Dalumi Diamonds Group, Menashe Keren, observed in an interview with The Sunday Standard this past week.

The Dalumi Diamonds Group is one of the 16 cutting and polishing firms from Israel that government has licensed in the country.

The Group has other operations in the United States of America, Hong Kong, Japan, Belgium, Spain, France, China, Thailand, Taiwan and Israel.

The Group’s CFO was touring the Botswana subsidiary for the first time this week since it opened last year and already has mixed feelings about the Botswana venture.
Keren, the man who devices the Group’s financial roadmap, is particularly concerned by recent upward price increment in some of administered prices. He reckons such increment would have negative financial implications on their balance sheet.

“The increment in transport fares would have a profound impact on our employees and that means we might have to adjust their earnings. But we are already incurring high production costs such as in electricity and you are well aware about power cuts,” he said.

He is worried that sustained high costs might ruin what might be “Africa’s future”.

“It was good that government embarked on diamond beneficiation. First, it was Israel that was the centre of diamonds and then Belgium. Hong Kong nearly got the nod but it was good that the beneficiation was brought here,” he said before adding, “we believe this is Africa’s future. The good part of it is that we are near the source.”

The rising costs are, however, an impediment to that future dream.
“We are fully aware that the market here has to develop but in the process of development, as stakeholders, we also need some form of certainty about the future. The problem is that the market is now very competitive,” he explained.

Giving a case study of how it is done in other jurisdictions, he said the level of competitiveness helps them ameliorate factor input costs.
“In other countries, you’ll find that cities or provinces compete amongst themselves to have cutting and polishing firms located in their area so that they can have their people employed. When they bid, they come up with a number of incentives, some may even
provide transport for employees,” he said.

One other gripe is that of taxation, which he said the Botswana application is somewhat hefty.
He argues that in Israel and Belgium, for instance, the government

went against the tide to establish what is known as Special Tax Regime for the industry, something they are accustomed to. The tax structure is that government levies tax on turnover of not more than 3% (depending on the country) as opposed to Botswana which charges tax on profits.

Regarding the tax incentives government accorded to the industry, he said “exemptions are a norm in a lot of countries”.

However, Dalumi Diamonds Group said raising these concerns does not in anyway imply that they are contemplating jumping ship.

“We understand the process of development but we are only saying this is a strong economy that can afford to make some sacrifices for the purpose of developing the industry. Our interest is not that of making quick money and exiting,” he assured.

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