CUTTING EDGE: Brothers in lucrative business . . . AS BENEFICIATION PROCESS YIELDS RESULTS
Since 2007 when a partnership between the AMC Group of Belgium and Gemxcel Diamonds of Namibia, was struck brothers Hanganee Gurirab and Dantagob Gurirab who are the directors of AMC-GEMEXCEL have seen their multi-million dollar business hit cloud nine in the cutting and polishing industry.
With a combination of a cutting and polishing licence, local expertise, global knowledge, technical expertise and the financial clout, they talk about how they have made their lives a reality.
PF: Five years since establishment how do you describe business?
Hanganee: Generally speaking the diamond industry is a challenging industry but also a potentially lucrative industry. Without getting into specifics the lucrativeness depends on what is happening in the market, the changing circumstances, and the market for jewellery products. That should be understood in the context of the changing circumstances that may affect this business.
When the global economic crisis began in 2008, times were tough in our industry, we saw a recovery somewhere around 2009-2010. Currently, circumstances are a bit uncertain due to the current European crisis that has an effect on the rest of the world.
So, yes it is a good business but at any given moment everything is determined by the prevailing economic conditions.
PF: But besides the economic crisis, diamond reserves are also shrinking. What does this mean for a company like yours?
Hanganee: We have confidence in the strength of the business we have created, it is a competitive process, and you have to reapply to be a stakeholder every three years. We are focused on the objectives we set for ourselves as a company.
The source of the reserves of the diamonds has changed definitely, however Namibia has a tremendous potential in the offshore mining and there is a great future in that and we rely heavily on the technology, the partnership of government as well as DeBeers and Namdeb to ensure that supplies are conducive to business.
Dantagob: The time horizons of companies like DeBeers are not ten years, they are closer to 100 years. Reference to dwindling reserves excludes the discovery of new deposits and no one in this industry has projections which are so brief. Resources will not be exhausted in our lifetimes.
We, as an industry, receive a very small portion of diamonds that are mined here in Namibia. So when one talks about opportunities in future we as AMC-GEMXCEL always hold out that if we, in the diamond industry, demonstrate the effectiveness and value of our operations, as government and DE BEERS renegotiate agreements in future, a larger share of local supplies may be made available and this gives us hope.
PF: With the on-going global economic crisis, how are you cushioned to ease the storm?
Hanganee: When it comes to diamond mining, the diamonds industry has not been stockpiling diamonds it is a reaction to demand conditions that will determine how much will be extracted by mining operations. It is not a question of saying we mined x tones of diamonds now what are we going to do with them. The feedback and the relationship between the mining operations existing in the market conditions are quite profound. Namdeb during the last economic crisis made some quite dramatic changes in response developing economic conditions. That is where the adjustments are going to begin. It is going to start with how much is being extracted from the ground. The diamond polishers respond by adjusting what they get, but you do not buy and polish what you cannot sell once polished
PF: Earlier on mentioned the issue of supplies, do you mean to say that you only polish the Namibian diamond?
Hanganee: Through the Namibia Diamond Trading Company (NDTC), the majority of our supply comes from Namibia, with a smaller quantity from the DeBeers global supply, they have sources all over the world, which we called the aggregated diamonds, and the Namibian diamonds are the un-aggregated.
PF: Most countries in Africa including Sierra Leon, DRC Zimbabwe have consolidated their move on the diamond industry by boosting production, Does this scale down market access for your company?
Dantagob: No it does not. Our markets for polished diamonds are primarily in Asia. Diamonds are not uniform or homogenic in the sense that individual diamonds possess characteristics unique and related to their region of origin.
We are often asked how come we don’t see the price of diamonds along, gold, zinc and so forth. Diamonds cannot be priced that way, one diamond can only be priced individually depending on its various characteristics. So every diamond is a unique product.
PF: Why preference for the Asian market?
Hanganee: that is growth area of the global economy is currently. Everyone is aware of the Chinese economic growth rate, even more excitingly because of the growth in the middle class in much of Asia. The economies have been growing quite rapidly in terms of middle income spending power. During the 2008 economic crisis, Asia felt the impact least of all major economic regions.
PF: What are the major challenges that are faced by diamond polishing, cutting and producing companies in Namibia?
Dantagob: DE BEERS is our key upstream partner and supply will always be a critical challenge because it determines how our businesses will grow. We will always be interested in further clarity in how supply will be determined by the NDTC in the future.
This is an industry that, due to recent economic factors, is a lot more delicate than it used to be. Diamonds are not stockpiled either by us as polishers or Namdeb and NDTC. So in terms of the diamonds made available to the polishing companies there are constraints in the sense that everything is determined by what has been mined in a quite recent time frame. Their challenge becomes a challenge for us, in that regard. That being said, NDTC has done a great job of satisfying the demands of the industry in the face of that constraint.
PF: But, Hanganee is there room for more players in this industry?
Hanganee: There is a delicate balance we have in this industry if one looks at how much supply can support in existing cycles.
We are looking to the future when supply will allow for growth in this industry.
Government and DE BEERS are challenged to allow more players in the game but in doing so are taking into consideration the importance of not squeezing that supply thinner and thinner to a point where we might have more but weaker companies instead of fewer but stronger companies.
PF: But what is the contribution of the local market to the diamond industry?
Dantagob: Our diamonds are marketed internationally, locally, we have made our brand, the Atlantis Namibian diamond available in Adrian & Meyer retail shops. However, we understand the capacity to consume diamond jewellery is very limited, because a significant portion of our population is economically disadvantaged. So the amount of diamonds we are able to sell to Namibians is definitely limited by those economic factors. However, opportunities exist in the form of a rapidly expanding tourism sector.
PF: As entrepreneurs, do you partake in strategic decisions on supply challenges of diamonds?
Hanganee: At the moment we have no formal platform, those are issues that we often raise with our supplier, NDTC.
Those issues are addressed in terms of the board that is represented by government and DE BEERS. For us as polishers there isn’t yet such a platform which has been developed. It is something that has been discussed in the past and we hope that something potentially will emerge in future.
PF: What do you say of the monopolies of multinationals like De Beers?
Dantagob: DeBeers accounts for approximately just 40% of direct global supply. There was a time when monopoly may have been an accurate term but it is not the case anymore.
PF: By nature the diamond industry is very capital intensive, do you think Namibia has reliable and sound financial institutions to cover for the loans and capitalisation needed by your industry?
Dantagob: We do not rely on institutions here for capital investment or any bridging financing. It is privately funded.
Quite frankly, even if you look at many mining operations they obtain financing outside the country as well.
The more modest financial requirements such as overdrafts are probably the only commercial transaction, which can be done locally, at this point.
PF: You recently launched your own brand, the Atlantis Diamond brand. How successful has this brand been and how was it received in the international markets?
Hanganee: The brand is, “Atlantis Namibian Diamond”; which was launched first in Singapore several years ago. Upon launching here we thought it was meaningful to bring that brand home so to speak. Obviously there is a very different scale; we are talking about a large Asian market (Singapore, China, Taiwan etc) in terms of consumer sheer numbers versus Namibia. However we did not look at it as a gesture of some kind as we do believe particularly with the market strength of our partner Adrian and Meyer, there was commercial legitimacy in what we were doing.
We believe the brand has been received well; Adrian and Meyer have done an exceptional job pushing the brand we look forward to growing the brand more in Namibia. We are happy with the reception and sales thus far.
PF: Have you taken the brand in SA our biggest trading partner?
Dantagob: We have not yet thought about extending our brand to the regional markets not to say that this would not be happening in the future.
PF: So what economic benefits has your company contributed to the local economy?
Dantagob: All the non-technical requirements of our factory are met by Namibian companies. We have seen companies selling diamond manufacturing equipment establishing operations in Namibia as the industry has grown. They are many companies preparing to set shop here in Namibia.
PF: Training of locals?
Hanganee: Yes, training. We employ one hundred and twenty five people, six of which are expatriates.
We don’t employ expatriates to polish the diamonds; in addition to training they do the planning of diamonds that is the strategic decision-making process which determines the final outcome of a diamond and which requires decades of experience.
Dantagob: Another thing is that our objective is that skills should be transferred. So we have a training academy which we train people with no previous experience to polish diamonds. That is one way of ensuring we have more skills in future. There are more factories and there is competition for people who know how to polish. We aim to create our own skills base.
PF: Generally there have been reports that the diamond industry in the country pays their employees under par as compared to other countries; this has resulted in constant strikes in the country. How do you respond to that?
Dantagob: This is a very young industry, the employment base of which is primarily young people, many of whom have not been employed elsewhere prior to working in the industry. As a result, many are susceptible to advice, sometimes to agendas of individuals whose purpose is not related to terms and conditions of their employment.
Very often the manner in which the situations are handled are reflective of that, it is a question of not having had sufficient work experience to inform someone how to respond in a working environment.
PF: But you were also once caught off-side. Employees of your company staged a demonstration in March this year claiming unfair labour practices?
Dantagob: This had nothing to do with working conditions; it was a personal conflict between one of our managers and some employees. That is something that needs to be corrected and understood, it was a very personal issue which unfortunately was handled in a very bad way and we issued a statement to set the record straight.
PF: How did you two negotiate the Belgian merger? Such a complex and highly technical deal?
Dantagob: I would say it was not easy in a new industry, it was a new sector five years ago and it was an opportunity for Namibian business people to be involved in this industry of which for a very long time was closed.
We had no intention of being window dressing for any of our partners. That was very important for us and that informed the choice of our partner. It must be said that not every company coming to Namibia had the same aim and potential perspective on what local partnership would mean.
There were many companies prepared to set shop in Namibia but would say ‘I will cut you a cheque’ but don’t worry about the rest of what is happening in the business.
So that priority informed our negotiation and with whom we were prepared to sit down and negotiate. It was not only about looking for black Namibians who will satisfy the expectations of stakeholder and government.
It is important to say that was our objective when we went in and we have achieved that objective. We are both active participants in decision making as directors and partners in our company.
PF: So what would you say informed your values to maintain your grounds?
Hanganee: This was a completely new dispensation and the mere desire to engage in this business would itself require a certain level of courage, to embark on a journey fraught with so much uncertainty.
Courage is not mustered at the point when you sit down with a potential partner; but rather it starts at a point when you decide to embark on that journey.
The NDTC and other systems that exist today did not exist then. We knew nothing more than in terms of negotiations between the government and DeBeers that they will be local suppliers. There were vast different expectations on how things were going to function, and when the system would function.
That in itself was a situation that would make you think you need to have courage in order to make that decision. There are people who are interested in coming to Namibia and you are interested in being involved with them.
So that is a less daunting prospect than trying to set up something in a situation that was so lacking in clarity, as we did. What local beneficiation was going to look like in terms of the system that would facilitate supply, no one knew. We did not even know how the goods would be supplied. The only thing we knew was there was going to be Namibian diamonds going to be supplied to local diamond polishing companies, (laughing), perhaps there was going to be guy coming around with a trolley asking who wants diamonds!
Once you make a decision to own your business no matter what it may be, that should be the moment when you should look around whether or not you have the courage. Once you have decided to move forward, no matter what venture, there is really no place for meekness. We moved forward boldly because we already had made a decision that this is what we wanted to do.
The diamond industry is an environment you learn as you go along. We are now six years, we are far wiser than we were six years ago.
PF: Gentlemen, thank you for your time. PF