Finance: Economic Slowdown Affects De Beers Operations
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Since the end of last year, De Beers has been evaluating the new business environment in which the company mines will operate. We have taken account of the world’s economic situation and its effect on the general economy and on the luxury product market, which will not be immune from the effect of this dynamic in the short term.
During this period a number of initiatives to reduce operating costs, maximise cash flow and alleviate impacting on employment have been taken. Together with the actions taken to manage the effects of the economic downturn De Beers has revised its mining plans for 2009, and built into those plans the capacity to change production to meet demand in the market. The strong position diamonds hold amongst consumers has been validated in recent research and by being proactive now we will be prepared to expand the business when the economic recovery begins.
De Beers Consolidated Mines (DBCM) has already taken steps to delay, and attempt to avoid, having to reduce the number of employees on its six mining operations, and in offices in Kimberley and Gauteng. The company has 3 500 employees in South Africa.
In the light of the economic down-turn the company now has to consider the number, and the configuration of shifts worked on the mines, as well as optimising the corporate headquarters so staffing levels are aligned to the new business requirements. DBCM has therefore begun a consultation process about possible retrenchments with the representative Union and has already briefed employees. The company will be issuing a Section 189 Notice and is engaging in a full consultation process with the Union and the employees. As a start the company will reduce all vacant positions (over 400), and take all steps possible to reduce the number of people who may be affected. Voluntary retrenchment and early retirement’s packages will be offered to moderate the impact on employees. We will only have a greater degree of certainty on the number of employees affected once formal consultations are underway at each site.
David Noko, managing director of DBCM commented: “As difficult a time as this may be, the actions now contemplated do reflect DBCM’s commitment to ensure that the company has a secure future in the years to come. We address these challenges with the long term business, employee, client and national interest in mind. It is with great reluctance that we take this step which we have delayed for as long as possible. We have started the consultation process with the unions and with government, and begun actively engaging with all employees on ways to mitigate potential job losses. The company will prioritise the placement of those affected in appropriate vacancies in associated companies, and make available support in the areas affected.”
The company is confident that the long term outlook for diamonds is positive as there is a steady trend indicating a growing consumer demand, and a limited supply of known diamond resources available. The global economies will recover and those diamonds that remain in the ground today will find a ready market in the future.
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