Japanese tsunami hit Botswana where it hurts most

MONKAGEDI GAOTLHOOGWE
Staff Writer | Friday May 20, 2011 00:00

Japan's markets are reputed for buying bigger higher value stones compared to the rest of the diamonds market in the world. The higher value stones are only mine at Jwaneng, the world's most valuable diamond mine.

According to a De Beers 2010 Report Japan last year consumed 11 percent of the 33.5 million carats sold worldwide. This year, De Beers had projected to up production to 38 million carats, a situation that would have seen 4.2 million carats consumed in Japan alone.

The announcement that Japan is in recession has sent fears that 4.2 million carats of diamonds consumed by that market is headed for losses; driving the Botswana economy into a slowdown as profits from the diamonds, the mainstay of Botswana's economy, plummet again, since the 2008 and 2009 global downturn.

However, at the time of going to press De Beers spokesperson Chipo Mrara would not immediately say how the Japanese recession would affect De Beers' strategy both here and abroad. When the Botswana government last month offered a conditional five percent salary increase to its over 90, 000 public service workforce through their trade unions, it was reported that government wanted to assess the impact the tsunami has had on the Japanese economy, one of the chief consumers of Botswana diamonds.

The British Broadcasting Corporation (BBC) reported that Japan has slid back into recession after the devastation caused by the earthquake and tsunami that rocked the country in March.

Naomi Fink, Japan strategist at Jefferies, is quoted by the BBC as saying the most worrying part of the latest data was the decline in private consumption as people cut their spending after the earthquake. Private consumption accounts for almost 60 percent of the Japanese economy and  diamonds fall under the category.

After the tsunami and earthquake, Japan announced Tokyo needed over  US$ 300 billion to rebuild its economy.

Even before the Tokyo could announce the economy is in recession, last week Paradigm Capital analyst David Davidson predicted in an interview with Miningweekly.com in Toronto, Canada, has indicated that the diamond market in Japan is going to be hit drastically for a couple of years due to the tsunami and earth quake.

However, government officials in Japan say the economy has now contracted for two quarters in a row, the generally accepted definition of a recession. Japan sank into a recession during the global financial crisis, but had emerged from it in 2009.

In 2008 De Beers and jewellers, Swarovski opened flagship stores in Tokyo in a bid to lure customers in the highly lucrative but increasingly saturated Japanese luxury market. Other De Beers stores in Japan include the Hakata-Daimaru, Boutique, Kobe, Daimaru, Kyoto-Daimaru Osaka-Shinsaibashi Daimaru, Osaka-Hankyu Umeda, Tokyo-Nihonbashi Takashimaya, Tokyo-Seibu Ikebukuro, and Tokyo-Shinjuku Isetan.