Debswana Diamond Company, Managing Director, Mr. Andrew Motsomi has said the Debswana strategy seeks to tackle dynamics of the challenging business environment to create a better future for Botswana while ensuring the company optimize value to its shareholders.
Motsomi said this at the inaugural annual Business Seminar on the 7th of September 2022 — which replaces the annual MD Stakeholder Business Update — a new format that aims to expand the scope of engagement beyond reporting performance to stakeholders.
The new format is the brainchild of the new Debswana MD, who assumed the reins at the beginning of June this year. The annual Business Seminar initiates interactive and meaningful conversations around issues that affect Debswana, its stakeholders and the industry, for wide appreciation through knowledge-sharing and feedback.
When giving his maiden speech at the seminar, Motsomi underscored the good performance that the company has recorded recently, as the world emerges from the Covid-19 pandemic. Motsomi said Debswana had an exceptional production year to date with a favorable revenue outturn, but highlighted that the business confronts various challenges which are posed by global hyperinflationary environment.
“Our business, is such that, our mines are very intense in terms of consumption of fuel. The trucks that haul ore consume a lot of fuel, the shovels that are used to pick up the ore, from the pits consume a lot of fuel,” he said.
“The tyres for these trucks are now costing much higher than they were last year. The explosives that are used essentially to blast in the pits have risen primarily because of global inflationary woes that are basically affecting the entire globe.”
He indicated that Debswana operates within a globally unpredictable diamond market, which is primarily impacted by the global conflicts and market volatility, and therefore it is necessary to protect and persevere the communities and environment.
“We are currently experiencing the adverse impact of the Russian-Ukraine conflict, the global dynamics of pandemics such as Covid-19, the rise in the cost of doing business as a result of hyperinflation,” he said.
Motsomi highlighted that, in response to the foregoing challenges, Debswana strategy seeks to tackle the dynamics of the challenging business environment. He said the strategy, termed Debswana 2024, represents and reflects the understanding of its shareholders outlook and endeavour to deliver the P10 billion to its shareholders.
“The end strategy is of course to create a better future for Botswana, at the same time ensuring that we optimize the value to our shareholders,” Motsomi said.
SAFETY, SUSTAINABILITY AND EFFICIENCY
According to the MD, in 2022, the shareholders allocated to Debswana a total of capital and operation budget of P13.4 billion for the delivery of 23.6 million carats. He said this is delivered through progressing the breakthrough initiatives which are aligned to Debswana key performance indicators.
“In the year to date, as at July, carats sold stood at 4% in excess of the budget, and this performance was largely delivered against the backdrop of safety, sustainability as well as efficiency,” Motsomi said.
“In terms of safety, our conviction is that, zero harm is possible, as indicated by improved total recordable injury frequency rate over the years.”
Jwaneng Mine won the Albert Milton Safety Leadership Award, which is a De Beers Group Award.
The MD said productivity, as well as efficiency is critical to Debswana operations, indicating that now the company is mining at about one pula (P1) cheaper than the budget, our plants at both Orapa and Jwaneng have won the Anglo Golden Plant awards for productivity, and efficiency across operations.
As at this year July, Motsomi said tonnes mined were about 70.5 million, which is plus 8 percent favourable to the budget, the sales were 32 percent favourable to the budget, while carats sold were 16.2 million, again plus 4 percent favourable to the budget.
GREEN ECONOMY AND SUSTAINABLE DEVELOPMENT
Motsomi said the company sees the green economy making a bigger contribution to the country’s sustainable development and to the future.
“As you will be aware, most of our mines are becoming deeper, assets are ageing, and as a result, that leads to obviously adverse impact on costs. This obviously calls for innovative solutions that allow for profitable mining, leveraging on technologies, as well as the Fourth Industrial Revolution (FIR) with the minimal impact on the environment, consistent with the environmental social governance (ESG) principles,” Motsomi said.
He added that reimaged mining through Future Smart Connected Mines is the concept that is still under development, but it is a way forward given ageing assets, the cost of going deep underground as well as the impact on the environment.
Motsomi said Debswana is committed to mining safely and optimally as profitability levels is under pressure as costs escalate, assets age, and mines get deeper. He is resolute that the way forward is the concept of smart mining which will be more efficient, more cost-effective and will be more environmentally friendly, and consistent with ESG principles.
“Our efficiency and productivity initiatives at our mines are yielding results. And of course, we have major projects that are in the planning stage. To mention just the two of this is; Cut 3 and Jwaneng Underground. The studies on these particular major projects are in progress,” he said.
DEBSWANA RISING OPERATIONAL COSTS
Jwaneng Mine General Manager Mr. Koolatotse Koolatotse said operating costs have significantly gone up past what was initially budgeted.
“We have been confronted with a situation where we have had to make serious and tough decisions because the economy of Botswana is anchored by diamond mining. We are supporting over 12 000 jobs, both direct and indirect and the industry is facing challenges of escalating operating costs,” He said.
Koolatotse said Debswana operates some of the largest and biggest machines in the world; 244 earth moving equipment. He said a single earth moving tyre without a rim costs, P350 000.
“A truck rides on 6 tyres, after the Ukraine-Russia war the cost has now gone up to P500 000, 42 percent more than what we had budgeted for,” he said.
The Jwaneng Mine GM went on to explain that in terms of fuel, Debswana now needs an extra P1.1 billion because last year the budget was P8.00 per litre, costs have now gone up to P16.00 per litre.
“That is P8 more, you multiply that by the 128 million litres of fuel that Debswana consumes per annum, that’s P1.1 billion. All this equipment is extremely expensive to buy, to operate and to maintain. The costs of parts and spares have also gone high,” he said.
VOLATILE, UNCERTAIN, COMPLEX AND AMBIGUOUS WORLD
De Beers Group, Vice President – Diamond Trading, Mr Paul Rowley said businesses are required to find the right ways, not only to adapt, and be flexible, but also to anticipate the changes ahead of them, and to be prepared to be fit for the future.
Rowley said De Beers has been dealing with the notion of change over the world in the past years and how to respond to it. He referred to the notion as volatile, uncertain, complex and ambiguous (VUCA) world.
“We are on VUCA world on steroids. The last two years we have seen a fundamental shift, in many different events. Global events such as the pandemic, freak weather events, geopolitical tensions, are reshaping attitudes and high profile social movements have seen perhaps new priorities emerge,” he said.
“Societies are recognizing that we have a shared, and increasingly urgent responsibility to ensure that we prioritize sustainability. We have to remember that our product ‘s value is generated through our consumer desire,” he said.
Rowley stated that consumers have started to reframe their perspective, on what really matters to them, and this is undoubtedly impacting their purchasing decisions, as they start to align to this new reality. He said consumers now consider product’s sustainability credentials as much as its price.
ENDURING GoB – DE BEERS PARTNERSHIP
When introducing the Motsomi, De Beers Group, Chief Executive Officer (CEO) Bruce Cleaver who is also Debswana Board Chair said the partnership between De Beers and Government of Botswana (GoB) has endured for more than 50 years, and it has seen both parties enjoying success.
“Examples of such mutually beneficial outcomes are rare in a business world, which is why partnerships of lengthy are also rare,” Cleaver said.
“However, by working closely together, understanding each other’s perspective, and making sure that we adopted each other’s objectives as our own, we have found a formula to make us fit for the future.”
Cleaver said the success for De Beers and GoB in navigating the most difficult period in living memory, is now facing new challenges, but said they also know that their spirit of collaboration coupled with a focus on insights, innovation, and investment, will stand them in good stead.
Cleaver singed praises of the new Debswana MD as he indicated that: “Andrew joined Debswana in recent months, but he is already making his mark in Debswana, helping to crystallize the benefit of a resilient, innovative, and safe culture. With his keen insights into both the needs of the nation and the needs of the business, we all look forward to take the company to even greater heights, as Debswana team helps him to deliver the Botswana Diamond dream.”
