Economic disaster

 Massive job losses are looming at Debswana Diamond Company, who are facing awful cashflow challenges due to a huge decline in diamond sales globally caused by multiple factors. The strain on Debswana operations is felt multiple fold downstream on their suppliers and sub-contractors, forcing them to send part of their workers home to await recovery and resumption of production at the

 mines. Fears of retrenchment within Debswana and among their suppliers have been growing in recent months as production ground to a standstill. 

The Patriot on Sunday is reliably informed that some of Debswana suppliers have suspended operations after the mining company stopped production, citing low demand for rough diamonds in the global market. According to sources, suppliers and contractors have been told by Debswana that production capacity was lowered as an effective costs’ containment measure, forcing

the companies to work with skeletal staff at the mines. 

Rough diamonds are going through a very difficult time globally, a development that economists say will further push the economy to the brink of collapse, given that the government revenues have also contracted sharply. 

The gloomy situation on the ground was confirmed in an internal memo to staff, signed by Senior Finance Manager, Naiko Carol Ralebala on Wednesday announcing that Debswana will start executing cost containment measures as the company is making losses. 

In a memo dated 16th October 2024, addressed to all Debswana employees Ralebala said: “As you are aware, we are facing subdued markets and depleted cash balances, which necessitate immediate and collective action to ensure the sustainability of our company.” 

She highlighted that cost effective measures will be put in place and include a recruitment moratorium noting that Debswana will not be hiring for any positions unless they are critical to production or safety. She also said all travel requests will be put on hold until further notice, adding that there will be no purchases of food for meetings. 

“We will not be allowing any purchases of branded corporate wear during this period. There

will be no purchase requisitions, whether capital or operational, will be approved unless they are directly related to production or safety,” wrote Ralebala. 

Commenting on the developments, local Economist Lame Bothata said the situation at Debswana is very bad for an economy which is heavily reliant on diamonds being the main source of government revenues. He said government coffers are drying up forcing government departments to embark on cost saving exercises, marking the significance of Debswana to the economy. 

“It is said that things have turned out to be this bad. Debswana is the biggest employer and an important contributor to the economy. Diamonds are backbone of Botswana economy and now we can say that we are in serious economic meltdown,” he said, adding that job losses are unfortunate thing in an economy but unavoidable when the chips are down. 

GABS woes 

Meanwhile, the technical glitches encountered by the Government Accounting and Budgeting System (GABS) has negatively affected local businesses, particularly those doing business with government as payments have been delayed for many months. 

One prominent businessman in the retail and logistics sector, who preferred anonymity

said GABS is affecting business productivity and drags businesses into debts by borrowing from banks due to pressure to meet supply demand. 

According to him, a lot of businesses are still being owed millions by the government and the delays in payments are being attributed to GABS breakdown. “The situation is very bad on the ground. We local businesses who rely on government business are at a disadvantage as compared to the international companies who leverage for finances from their branch networks outside the country. They do far better than us in service delivery while we still await GABS payments ,” he said. 

Outgoing Minister of Finance, Peggy Serame has since admitted that suppliers are paid late because of the underperformance of GABS. Responding to a question in Parliament in August, Serame said the delays by government to pay suppliers on time had the potential to cause cashflow problems for Small Micro and Medium Enterprises (SMMEs). 

She also said the apparent cost or impact to the economy was that the late payment of suppliers resulted in dire cash flow constraints that may ultimately collapse some businesses, resulting in huge costs to shareholders and job losses