Govt earns P3.3 billion in diamond royalties, taxes

MBONGENI MGUNI
Staff Writer | Friday May 21, 2010 00:00

Released on Wednesday, De Beers' Report to Society (RtS) 2009 details the diamond giant's contribution to governments, communities, the environment and its performance across several other non-financial indicators over the year. Before the recession, Botswana, Namibia and South Africa earned P8.4 billion in royalties, taxes and other charges on mines either wholly or 50 percent owned by De Beers. Generally, Debswana accounts for about 70 percent of this revenue.

But last year, governments in Botswana, South Africa and Namibia collectively earned P4.8 billion from royalties, taxes and charges stemming from De Beers' mining operations.

'In 2009, our ability to generate revenues was severely impacted by a worldwide fall in consumer demand for polished diamonds and a consequent drop in sightholder demand for our rough diamonds,' reads the Report to Society. 'This operating environment necessitated a swift and significant reduction in production from the De Beers Family of Companies.'  Besides the P3.3 billion in royalties and taxes, the Government of Botswana also earns 80 percent of the profits from Debswana.

The Report to Society 2009 also reveals that the value of gemstones sold to sightholders in Botswana dropped to P1.35 billion for 2009, compared to P2.56 billion in 2008. The reduction reflects both lower production from Debswana and also lower uptake by the sightholders. 'During the course of 2009, many sightholders operating out of our producer countries suspended the purchase of rough diamonds from the DTC to work through existing inventories,' the report states. 'The severe test posed by the recession has demonstrated the robust and sustainable foundation of sightholder operations in our producer countries. This validates the joint beneficiation strategy we share with our government partners in southern Africa and Canada and bodes well for future success.'

De Beers is targeting to supply sightholders with P3.85 billion worth of rough diamonds for 2010. The diamond company's sales and marketing wing, the Diamond Trading Company (DTC), also plans to establish the long awaited aggregation activities in Botswana this year. Aggregation activities were to be established under the same suite of agreements from 2006 that established the cutting and polishing industry as well as the Diamond Trading Company Botswana.

'The DTC intends to move diamond aggregation activities from London to Gaborone, which will see the creation of about 50 posts, representing a valuable transfer of skills to Botswana,' the report adds. 'It will also significantly contribute to Government's concept of a thriving 'diamond hub' and move it further towards the critical mass needed for long-term sustainability.'