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De Beers nursing Asian Corona Virus infected markets

Publishing Date : 24 February, 2020

Author : TSAONE SEGAETSHO

The world leader in the sale of precious stones that dominates most luxury industries, De Beers, is also affected by the current Corona Virus phobia.


Currently, De Beers is in the Corona Virus scare like the rest of the world, albeit with all the fear it has, De Beers is willing to push through its fear and still brace the Asian markets, this comes after the reliable Asian demand markets continue to sneeze uncertainty on the global diamond business.


This week De Beers Chief Financial Officer Sussanne Swaniker-Tettery told the local media that recent brand sales at Asia fell by 30 to 40 percent, this could also include huge diamond sales fall, and this big plunge coincides with the outbreak of Corona Virus. She said people are no longer going shopping because of fear of the virus, hence a big setback is expected on diamond sales in Asia.


The Asian demand market is one of the biggest in the world after the US markets. The Asian markets where diamond sales are at its peak are; China, Macao and Hong Kong, these markets however have also been hit the hardest by the Corona Virus. The current outbreak of coronavirus disease (COVID-19) was first reported from Wuhan, China, on 31st December 2019, according to World Health Organization (WHO).


China consumers are no longer going to shop for jewellery, a huge “destruction” to the economy of China according to Swaniker-Tettery as the world also is shunning anything that comes from China or Asia due to fear of catching corona. De Beers is on the side of Asia as she battles COVID-19, as the diamond giant waits on China to heal her economy after she defeats the virus. De Beers is on the bedside of China sympathetically hoping that all gets well soon, as diamonds are no longer bought because people are now looking for health not luxury.


Swaniker-Tettery was hopeful that the USD 2 trillion which the Chinese government promised after the fall of the stock market would jumpstart the country’s economy hence recovery of the diamond demand. However she remains uncertain of what the future holds for the Chinese market, telling reporters “it is too early to know.” According to Swaniker-Tettery, it is premature for the diamond producer to calculate the effect of corona outbreak on diamond sales.


There is no direct translation of the economic effects of the corona virus to diamonds or Botswana stones, according to Swaniker-Tettery, but major retailers and brands have closed shop as a result of the outbreak of the currently feared virus. She said even banks are already shy to fund those in the diamond industry. The De Beers Chief Finance Officer gave a scenario that in the time of the SARS outbreak, the Chinese economy went into a sharp decline before the control of the disease which led to the economy going up again.


She sounded like she is waiting for China to heal, so the demand for diamonds can also heal. Another problem coming from the Chinese or Asian markets, and adding to the corona virus woes, is the latest fall of China’s currency, the Yuan and the impending China-US trade talks. This is not enough for the affliction of the diamond demands, Hong Kong is also going through political unrest adding another blow from the Asian demand pool. There is also the latest risk in the diamond business. The increase of in online purchasing which causes additional retailer destocking.


“Throughout the course of 2019, the midstream inventory position was under further pressure due to the closure of some US 'bricks and mortar' retail outlets, an increase in online purchasing (where inventory levels are lower), and retailers increasing their stock held on consignment. Tighter financing also affected the midstream’s ability to hold stock, all of which resulted in lower demand for rough diamonds,” Swaniker-Tettery read De Beers’ woes before the press this week.


De Beers fights on with huge marketing expenditure


Last year November, De Beers announced that its marketing spend in the entire 2019 will be totalling to $180 million (around P1.9 billion) the group Chief Executive Officer, Bruce Cleaver told BusinessPost that the dispatch was the largest marketing spend in 10 years.  Swaniker-Tettery told journalists on Thursday that De Beers has survived all the winds against the diamond industry by marketing. She explained how they captured China markets which used to be a market not commonly infatuated by diamonds and the sentimentalism that comes with the precious stones. Right now De Beers is able to reach out to the middle class in China and India, not only the wealthy like in the past, said Swaniker-Tettery. She said this is because marketing developed the culture of diamonds as a big luxury.


Botswana

Botswana’s EBITDA is currently at P3.90 billion. In all what De Beers makes, according to the company Chief Finance Officer, Botswana will take away 80.2 percent of all the takings either profit, dividends or taxes. In Botswana, overall production was 4 percent lower at 23.3 million carats (2018: 24.1 million carats). This is despite production at Jwaneng increasing by 5 percent to 12.5 million carats (2018: 11.9 million carats) as throughput rose to partly offset a 12 percent decrease at Orapa to10.8 million carats (2018: 12.2 million carats), owing to a delay in an infrastructure project and expected lower grades.

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