Introduction from the Chairman

Introduction from the Chairman

Introduction from the Chairman Our continuing commitment to Africa’s Historically, our partnerships with producer Nicky sustainable development converges with two country governments have contributed to Oppenheimer clear business imperatives. The first of these local economic growth and development Chairman relates to maintaining consumer confidence almost exclusively through mining activities. De Beers through ensuring that the way we do our However, with the launch of the Namibia business measures up to the integrity of our Diamond Trading Company (NDTC) and product. We call this “living up to diamonds” the Diamond Trading Company Botswana and do this through ensuring that our major (DTCB) we took a significant step towards suppliers, our contractors and our clients‘ maximising the benefits derived from operations meet a range of standards on issues downstream diamond activities in our ranging from labour to environment. producer countries. Through the progressive transfer of our sorting and selling operations The second relates to ensuring our long- into our producer countries we anticipate term access to supply and, correspondingly, the development of a robust downstream the sustainability of our mining operations. diamond cutting and polishing industry in Diamond mining is a long-term and capital what were once regarded solely as production intensive enterprise. With mines requiring centres. In Botswana, for example, it is hoped significant front-end investment and having that this programme of beneficiation will a lifespan of up to a century, the stability, create employment and raise Botswana’s In our 2007 Report to Society security and predictability of the environment manufacturing capacity. While the speed I wrote of how, across the in which we operate is a critical factor for of southward migration of the downstream De Beers Family of Companies, success. In these circumstances it makes diamond industry’s centre of gravity will good business sense to work on the basis doubtless be impeded by the economic our understanding of sustainability of a partnership model that contributes crisis, the positive long-term outlook for the is shaped by the societal energetically to the growth, sustainability – diamond industry suggests that the positive imperatives of the countries in and hence stability – of local and national impact of beneficiation will be lasting. which we work and the vision communities. In other words we not only seek to secure social licence to operate in our The global economic crisis of an ever-more prosperous producer countries, but also work to foster The unprecedented scale and reach of the Africa we share with our host social and economic conditions that are 2008 economic crisis differentiates it from and partner Governments. As we conducive to long-term economic and social other economic shocks we have experienced development and hence business success. in recent decades. While its overall impact reflect on 2008 and plan to meet is yet to be revealed we can be sure that it the numerous challenges of will be felt as keenly in many developing the forthcoming year, these economies as in those countries where the crisis originated. The commodities boom that words have lost none of their fuelled rapid economic growth in mineral rich resonance. Indeed, the continuing sub-Saharan Africa has lost momentum. This fallout of the global financial in turn has led to diminished Gross Domestic crisis that emerged in the fourth Product (GDP) and growth forecasts for many states dependent on mining royalties and quarter of 2008 has, if anything, has effected an inevitable contraction in the underlined the importance of revenues available to governments. a holistic sustainability model While the value of diamonds has not been and reaffirmed the historical subject to the same degree of volatility as value of our partnerships in commodities, the global diamond industry Africa as a framework for has not been unaffected by the downturn. High levels of inventory and debt amongst sustainable development. 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. 2 De Beers Family of Companies Report to Society 2008 However, what differentiates our key Unquestionably the most important element Looking to the future producer partners from many other of our business model is its emphasis on Over 2008 we saw the significant maturation resource-rich states in sub-Saharan Africa is “partnership”, a concept that frames our of systems and processes to ensure that our the extent to which their management of stakeholder relationships at a national and Values and Principles are embedded in our historical revenues that they have derived local level. In southern Africa in particular, business. As a result we can be confident that from diamonds and other resources has the process of sharing wealth through the actions we undertake now to ensure the empowered them to weather the downturn. joint-venture partnerships with, in the long-term sustainability of our industry will In Botswana, for example, the Government case of Namibia and Botswana, national neither compromise our relationships with our has husbanded a proportion of their governments, creates a framework for taking local communities nor undermine the equity historical diamond revenues accrued through a shared responsibility for success. This of our product. In practice this will mean dividends, royalties and taxation in a foreign commitment to partnership is manifest ensuring that we understand and mitigate currency reserve valued at over US$9 billion not only at a national level but also on a wherever possible the potential human and equivalent to 28 months of goods and local scale through our focus on citizen costs of the exercise. Thus, for example, any services. This fund provides the Government employment (at every level of the business), HIV positive staff that are retrenched or their a cushion with which to maintain short-term our support for local enterprise development dependents reliant on our anti-retroviral spending on critical development and welfare and our strategic, needs-responsive, programmes will suffer no interruption in programmes despite reduced income. As corporate social investment. treatment either through remaining within importantly, the diamond industry’s historical our programme, or in states like Namibia, investment in building Botswana’s social and The second critical element is the integration transferring into state-run programmes. human capital base has meant that Botswana of a holistic approach to sustainability into the will be relatively well positioned to capitalise very heart of our business. This involves taking During times of adversity it is sometimes on opportunities that will arise when the shared responsibility with our neighbours difficult to see beyond the immediate green shoots of economic recovery emerge. and communities to meet the societal and challenges that lie before us. To overcome environmental challenges that will ensure these, however, it is critical to keep an eye on Botswana’s ability to cope with diminished our collective sustainability. Examples of the future. Doing so not only provides vital short-term revenues relative to other sub- this include our commitment to the health context to some of the painful steps necessary Saharan African states suggests that if a and education of our employees and our to expedite a strong recovery, it also ensures silver lining is to be found in the current sustained contribution to biodiversity around that those steps are in the right direction. Over economic crisis, it lies in the opportunity to our operations now linked together through 2009 we will work closely with our partners apply lessons drawn from past and present our Diamond Route. to ensure the health of the diamond industry, successes to the process of rebuilding, its ability to serve as a development catalyst recovery and future growth. Collectively these elements are captured in our producer countries and ultimately its eloquently in the challenge of transforming capacity to deliver long-term sustainable Business in Africa natural assets into shared national wealth. value to all of its stakeholders. Responsible Somewhat unsurprisingly those elements of This challenge remains front of mind in business can and should be a driver for our business model that have simultaneously Africa where, the recent crash in commodity Africa’s development and, as painful as it is, we contributed to the stability and prosperity values notwithstanding, natural resources believe that the current economic crisis offers of the local and national communities in remain the key national assets and the likely an opportunity to apply the lessons of the our producer countries have been the most catalyst of sustainable, long-term social and past to help define the most productive role critical to ensuring our success. This simple economic development. While to be sure for business in this process. equation underwrites our unfailing support our perspective has been positively tinted for beneficiation initiatives and likewise our by our partner governments’ exemplary plans as we look to securing future access commitment to good governance, there is no to supply. question that our experience demonstrates that responsible business can be a powerful force for good in the developing world. Nicky Oppenheimer Chairman De Beers De Beers Family of Companies 3 Report to Society 2008 Performance overview from the Managing Director The final quarter of 2008, by contrast, Safety Gareth Penny was defined by the rapid deterioration in It is with much sadness that we report the Managing trading conditions brought about by the deaths of six people at our operations in 2008 Director global economic downturn. In response, as a result of individual industrial accidents.

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