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DEBSWANA PAYMENTS TO BOTSWANA GOVERNMENT IN 2012 TO DROP BY 35%
02 December 2012

The Botswana government faces a 35-percent reduction in revenues from national diamond miner Debswana due to a cutback in output caused by lower global demand, according to the company's Managing Director Jim Gowans.

Initial data show that as of October, Debswana paid the government around US$1.09 billion (8.8 billion pula) in revenues for the year up to that point. That figure is only slightly more than half the US$2.03 billion (16.3 billion pula) the company paid the government for the same the same period of 2011.

Lower demand for diamonds, along with production disruptions at the flagship Jwaneng mine due to a slope failure in June, would likely mean the miner, jointly owned by the state and De Beers, would pay the government US$1.12 billion to US$1.24 billion (9 billion pula to 10 billion pula) for all of 2012.

Work at Jwaneng was brought to a standstill for four weeks in June this year after a slope failure accident which led to the death of a worker.

As at October, we have distributed close to 8.8 billion," Gowans tells Business Week. "Our November sight is usually the smallest of the year, so I would estimate the total figures for the year to end at around (10 billion pula)," Gowans said.

The country's diamond industry is hugely important to the national economy, providing the government with around 40 percent of its income.

Debswana produced 16.3 million carats as of October, down more than 20 percent from output of 20 million carats for the same period of last year.

Debswana has slashed its production target for this year by 16 percent to 19.9 million carats from 23.9 million in 2011 due to lower demand for diamonds.

"There is uncertainty in the global economic outlook," Gowans says. "However, consumer demand has been reasonable even though better quality goods are moving more slowly. The sluggish market resulted in the company reducing production by 2.6 million carats, as well as the impact on production by 1.4 million carats due to a slope failure incident."

Production from Debswana has fallen steadily since production of 34 million carats in 2007, with 22.8 million carats produced in 2011.

Botswana's economy is seen expanding at a lower pace this year from eight-percent growth in 2011 largely as a result of falling production from the mining industry, and the diamond sector in particular.

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