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"Outages"

By Charles Wyndham.

The ability of some to invent new words seemingly deliberately to obscure or tone down any real meaning is becoming quite alarming.

In my recent trip to South Africa the Classic FM programme was constantly being interrupted with the news of ‘pre-emptive’ power ‘outages’, which translates into my language of ‘power cuts’ and why spoil the Mozart piece?

‘Pre-emptive’ is I supposedly used to soften the blow of the fact that there is a set programme of power cuts which are only likely to get worse and disguise that there is a real and substantial shortage.

In fact, I definitely left South Africa with a clear impression that things are going to get a great deal worse.

A view that may be a contributory reason why there were newspaper reports that the level of emigration of skilled labour has reach epidemic proportions.

There seems to be some corollary, to me at least, in this situation and the soon to be announced list of DTC sightholders.

It is late but unlike the Zimbabwe election result there is no reason to believe that it will not be coming sooner rather than later.

The interesting point that crossed my mind is just how relevant this announcement will feel in a couple of years.

DTC has most carefully dipped its toes into the cold waters of tendering production using its wholly owned subsidiary Diamdel to do the experimentation.

The second tender, or rather auction in Diamdel’s case, has highlighted again the disparity in DTC prices and market prices; well that is what the Sightholders fear will be the outcome for the next sight with prices expected to be jacked up sharply to reflect the prices achieved in the auction.

As I have argued before it is good news that DTC is moving down the tender route. I am not however so comfortable with the apparent purpose and the actual methodology chosen for what I believe to be the purpose.

The auctions are being used for price discovery.

That is not a bad idea and given just how out of control the DTC price book is hardly surprising.

But the prices paid in a small auction to be used to price the bulk is potentially dangerous.

Much safer is to tender the bulk.

As the DTC is inevitably driven faster and faster down the road of tendering or auctioning or whatever it is called, what this brings into question is the whole raison d’etre of Supplier of Choice.

It was the EU competition authorities who wanted DTC to tender its production.

SoC was specifically devised by the DTC to prevent itself from having to do this; instead this preposterous and overly bureaucratic and unwieldy system of SoC was forced fed onto the market.

It has failed and even now it is making a laughing stock of DTC.

The sooner they grab the nettle and work out ways to tender or auction that achieve transparency, top prices, provide levels of continuity for its customers and cut away the worst of the historical appendages, the better for all especially the DTC / De Beers.

Clearly one of its goals must be to slash its cost base but doing it in a way that does not deskill the organisation.

It will be in everyone interests to have the DTC as a reasonably profitable, or very profitable so long as it is not at other expense, company and not one grabbing at straws and threatening to drag others down with it as its bottom line earnings sink like a stone.

Lets get away from the euphemisms of words such as ‘outages’, SoC, PoC etc etc and get on with making money from our commodity.

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