De Beers 2008 Report to Society

by NationTalk on April 29, 20091032 Views

22nd April, 2009

Introduction from the Chairman

In our 2007 Report to Society I wrote of how, across the De Beers Family of Companies, our understanding of sustainability is shaped by the societal imperatives of the countries in which we work and the vision of an ever-more prosperous Africa we share with our host and partner Governments. As we reflect on 2008 and plan to meet the numerous challenges of the forthcoming year, these words have lost none of their resonance. Indeed, the continuing fallout of the global financial crisis that emerged in the fourth quarter of 2008 has, if anything, underlined the importance of a holistic sustainability model and reaffirmed the historical value of our partnerships in Africa as a framework for sustainable development.Our continuing commitment to Africa’s sustainable development converges with two clear business imperatives. The first of these relates to maintaining consumer confidence through ensuring that the way we do our business measures up to the integrity of our product. We call this “living up to diamonds” and do this through ensuring that our major suppliers, our contractors and our clients‘ operations meet a range of standards on issues ranging from labour to environment.

The second relates to ensuring our longterm access to supply and, correspondingly, the sustainability of our mining operations. Diamond mining is a long-term and capital intensive enterprise. With mines requiring significant front-end investment and having a lifespan of up to a century, the stability, security and predictability of the environment in which we operate is a critical factor for success. In these circumstances it makes good business sense to work on the basis of a partnership model that contributes energetically to the growth, sustainability – and hence stability – of local and national communities. In other words we not only seek to secure social licence to operate in our producer countries, but also work to foster social and economic conditions that are conducive to long-term economic and social development and hence business success.

Historically, our partnerships with producer country governments have contributed to local economic growth and development almost exclusively through mining activities. However, with the launch of the Namibia Diamond Trading Company (NDTC) and the Diamond Trading Company Botswana (DTCB) we took a significant step towards maximising the benefits derived from downstream diamond activities in our producer countries. Through the progressive transfer of our sorting and selling operations into our producer countries we anticipate the development of a robust downstream diamond cutting and polishing industry in what were once regarded solely as production centres. In Botswana, for example, it is hoped that this programme of beneficiation will create employment and raise Botswana’s manufacturing capacity. While the speed of southward migration of the downstream diamond industry’s centre of gravity will doubtless be impeded by the economic crisis, the positive long-term outlook for the diamond industry suggests that the positive impact of beneficiation will be lasting.

The global economic crisis The unprecedented scale and reach of the 2008 economic crisis differentiates it from other economic shocks we have experienced in recent decades. While its overall impact is yet to be revealed we can be sure that it will be felt as keenly in many developing economies as in those countries where the crisis originated. The commodities boom that fuelled rapid economic growth in mineral rich sub-Saharan Africa has lost momentum. This in turn has led to diminished Gross Domestic Product (GDP) and growth forecasts for many states dependent on mining royalties and has effected an inevitable contraction in the revenues available to governments.

While the value of diamonds has not been subject to the same degree of volatility as commodities, the global diamond industry has not been unaffected by the downturn. High levels of inventory and debt amongst our clients in cutting and polishing centres coupled with the challenging trading conditions in key markets has required that we prepare for a challenging 2009. As the scale of the global financial crisis’ potential impact on the diamond industry became apparent in the final quarter of 2008, De Beers reacted quickly by taking steps to ensure that production levels are aligned to diminished client demand.

However, what differentiates our key producer partners from many other resource-rich states in sub-Saharan Africa is the extent to which their management of historical revenues that they have derived from diamonds and other resources has empowered them to weather the downturn. In Botswana, for example, the Government has husbanded a proportion of their historical diamond revenues accrued through dividends, royalties and taxation in a foreign currency reserve valued at over US$9 billion and equivalent to 28 months of goods and services. This fund provides the Government a cushion with which to maintain short-term spending on critical development and welfare programmes despite reduced income. As importantly, the diamond industry’s historical investment in building Botswana’s social and human capital base has meant that Botswana will be relatively well positioned to capitalise on opportunities that will arise when the green shoots of economic recovery emerge.

Download full report; Report to Society 08 – Full Report (PDF, 8.0MB)

Other Downloads:

> Report to Society 08 – Chairman & MD Statements (PDF, 111KB)
> Report to Society 08 – Approach (PDF, 1.3MB)
> Report to Society 08 – Economics (PDF, 868KB)
> Report to Society 08 – Ethics (PDF, 792KB)
> Report to Society 08 – Employees (PDF, 2.1MB)
> Report to Society 08 – Communities (PDF, 1.0MB)
> Report to Society 08 – Environment (PDF, 1.1MB)
> Report to Society 08 – Assurance (PDF, 292KB)

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