Letšeng Diamonds slashes jobs

Move political, say critics

RETHABILE MOHONO

MASERU – Letšeng Diamonds (Pty) Ltd has rolled out a set of operational and cost management measures in response to severe global economic challenges impacting the diamond industry.

In a press statement released Tuesday, the company cited a combination of factors – including a prolonged slump in global diamond prices, a weakened US dollar, and tariff uncertainties – as the basis for its decision to restructure operations to conserve cash and protect shareholder value.

“While the company has met its production targets, it has not been immune to the sustained pressure on rough diamond prices and adverse exchange rate movements,” the company stated.

As part of its short-term cost-saving strategy, Letšeng has reviewed its mine plan and reduced waste mining volumes in both its main and satellite pits, while keeping existing treatment volumes steady.

“The mine will continue to operate both plants at existing treatment volumes whilst waste mining volumes have been reduced to a minimum for an initial 12-month period without compromising the longer-term life of mine plan,” the company confirmed.

The restructuring also includes a controversial move: a possible 20 percent reduction in the workforce. Letšeng expressed regret over the potential layoffs and said it had begun consultations with employees and stakeholders.

“The Company regrets that an approximately 20 percent reduction in workforce may be necessary . . . Engagement with employees and relevant stakeholders has commenced and is ongoing to ensure that the rationalisation process is managed responsibly and transparently,” it said.

Despite the tough decisions, the company maintains a long-term outlook rooted in quality and resilience.

“The company remains committed to its long-term strategy of producing exceptional quality diamonds and is confident that the measures being implemented will position the company for a strong recovery when market conditions improve,” the statement concluded.

However, the announcement has triggered concern and criticism from political figures and the public alike.

Speaking to Public Eye, Basotho National Party leader and Member of Parliament, Machesetsa Mofomobe, called the decision to cut jobs “worrying,” especially in the wake of government declaration of national state of disaster of socio-economic effects on high rates of youth unemployment and job losses in Lesotho.

“Although not only youth need jobs – because everyone needs to put bread on the table – this is worrying to see job losses of so many people,” Mofomobe said.

He further raised suspicion over the motives behind the press release, pointing to alleged political interference in the company’s affairs.

“The relationship of Letšeng and the Prime Minister still raises eyebrows, and it’s absurd that the government has direct interest in Letšeng. Thus, I suspect the statement is to protect the Prime Minister’s interest,” he charged.

Mofomobe also highlighted broader global factors as contributing to the crisis, including geopolitical conflicts like the Russia-Ukraine war and instability in the Middle East.

“Despite what we see happening at the mine, wars have an impact on what is going on in the world economy, so this might be some of the cause of the loss of employment,” he noted.

He pointed to the rise of synthetic diamonds, or lab-grown diamonds, as another factor putting pressure on the natural diamond market. These diamonds, which are physically and chemically identical to natural ones, are disrupting the industry due to their affordability.

According to the Financial Times, natural rough diamond prices have dropped by 26 percent in recent years, with demand weakening in major markets such as the United States and China. After a pandemic-era boom, oversupply has left miners struggling.

De Beers, alongside Russia’s Alrosa – two companies controlling two-thirds of the global rough diamond supply – reported major drops, with De Beers alone noting a 23 percent decline in sales in the first quarter. Meanwhile, polished diamond stocks have soared, with values exceeding $20 billion at the end of 2023.

Making matters worse for natural diamond producers, lab-grown diamond prices have fallen to 15 percent or less of their natural counterparts, shaking long-held beliefs that consumers would always prefer natural stones.

As Lesotho grapples with this crisis, concerns are mounting over its ripple effects on the national economy. Diamonds are the country’s second-largest source of mineral revenue after water, and the job cuts could deepen Lesotho’s existing unemployment crisis.

Commenting on the impact of US tariffs on Lesotho’s diamond exports, Mofomobe expressed frustration with the government’s slow response.

“This needed immediate attention, but since we are led by people who know nothing, we are still nowhere regarding the negotiations,” he said, adding that South Africa had acted swiftly when faced with similar tariffs.

“After SA was hit with a 30 percent tariff, it should have been a wake-up call to our government that this might also have a negative impact on us due to the high number of Basotho working in SA’s factories,” he warned.

If Lesotho were hit with a 50 percent tariff, Mofomobe said, the consequences would be disastrous: “It would mean loss of jobs, high crime rate and a total disaster.”

As the global diamond market faces one of its most significant transformations in decades, Letšeng’s announcement may be the first of many shifts for Lesotho’s mining sector – raising urgent questions about leadership, transparency, and the country’s economic future.