Mining rumbles back to life
Pauline Dikuelo | Friday May 15, 2020 13:13
Debswana, the country’s economic mainstay and majority employer, has been cleared to operate at 30% workforce capacity but BusinessWeek is informed mining operations there are still on care and maintenance.
Authoritative insiders at the diamond giant said discussions were still ongoing at the highest levels on when mining operations would restart, after they were suspended several weeks ago at the start of the lockdown.
Debswana, which falls under the essential services, has been operating with a skeletal staff since the lockdown, in first full suspension of mining operations since the 2009 recession.
Mineral Resources, Green Technology and Energy Security permanent secretary, Mmetla Masire told a media briefing on Sunday that government had cleared 9,300 mining workers to return to work this week. This is out of a total of about 17,000 for the sector.
“In Phase 2 mines other than Debswana will continue at 60% of workforce capacity and this includes their contractors as well,” he said.
“Debswana will operate at 30% and prospecting companies which were not allowed to operate during the lockdown, will operate at 50% of workforce.
“The quarries will also operate at 50%.”
Even though they have been cleared to resume operations, Debswana and other mines face a quandary of offtake or markets, as the coronavirus has dampened demand across the world.
Debswana, in particular, follows a policy of keeping diamonds in the ground rather than producing for inventory, during a period of weak demand or similar challenges.
Lucara, the other major local diamond player, has suspended its production guidance for 2020 due to the uncertainties around the impact of the pandemic. In November, the company had said it expected to produce up to 410,000 carats and sell up to 390,000 carats in 2020.
“Demand for our product continues to be weak and Lucara is necessarily focused on cost management and capital discipline through this period of uncertainty,” Lucara CEO, Eira Thompson told investors recently.
The resumption of mining activities, even though gradual, will still be a ray of hope for government, which banks on mineral revenues for a significant proportion of budget revenues.
In February, government had projected that mineral revenues in the 2020-2021 fiscal year would reach P20 billion. Finance and Economic Development minister, Thapelo Matsheka recently revised the figure down to P6.7 billion when also announcing the widening of the 2020-2021 budget deficit to P10.8 billion from P5.2 billion due to the pandemic.
Meanwhile, local economists expect that the global diamond industry may take 12 to 18 months to fully recover from coronavirus (COVID-19).
Leading economic consultancy, Econsult said with many countries having effected lockdowns and travel restrictions, retail stores had closed and limited diamond sales were taking place.
The local economy would feel a sharp pinch, the economists said.
“Mining diamonds that cannot be immediately sold means that they have to be stockpiled; GDP is boosted by the ongoing production, but lack of sales means export earnings and government revenues are impacted until sales recover,” said Econsult managing director, Keith Jefferis.