De Beers’s relocation set to boost economic growth

By Prime Focus Reporter
December 2013/January 2014
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The Ministry of Mines and Energy as a custodian of Namibia’s mineral, geological and energy resources has an enormous task to ensure that these natural resources  benefit all Namibians. The creation of the Department of Diamond Affairs is a sure sign that the Government is committed to the letter and spirit of exploiting the mineral wealth in Namibia. Its Mission Statement reads, “To protect the Diamond Industry of Namibia from smuggling and other illicit activities and to promote the diversification and integration of the industry into the rest of the economy so as to maximise its contribution to the socioeconomic development of Namibia,” says it all. We spoke to Diamond Commissioner Kennedy Hamutenya and he unpacked some of the important and critical areas of the diamond industry in the country.

 

Q: Give us an overview of the Diamond industry in Namibia. What have the key highlights been?

 

A:Despite a difficult global macroeconomic outlook (polished diamond prices not catching up with rough diamond prices; the liquidity crisis in India; slow economic growth in the largest diamond market (USA); and continued economic woes in Europe), diamonds continue to play a significant role  in Namibia’s economy.

 

In 2013 alone, Namdeb Holdings contributed up to N$2.5 billion to Government coffers in terms of taxes, royalties and dividends. We expect this trend to continue for some years to come, unless there is a global economic meltdown or a significant decline in consumer confidence.

 

Q: Are diamonds still forever?

 

A:Yes indeed! Diamond jewellery will continue to be the jewellery of choice globally. The tradition of diamonds as a symbol of love and commitment cannot easily be eroded.  Many cultures around the world see diamonds as a mystical stone that represents beauty and love.

 

For as long as the diamond industry continues to invest in promoting diamonds, and for as long as the industry continues to safeguard the good image of diamonds, by ensuring that they are not tainted (as in conflict or “blood” diamonds), the allure of diamonds will continue to last for eternity.

 

Q: Would you say that diamonds are impacting on the livelihoods of average Namibians?

 

A:Yes indeed.  As already stated, diamonds continue to contribute disproportionately towards Government revenue. The proceeds from our diamonds, are used to build roads, bridges, schools, clinics and hospitals and by so doing improve  the standard of living of every Namibian, unlike in some other countries. 

 

There is no denying that Namibia is one of the more progressive African countries, with some of the best infrastructures and communication networks. Some of these good developments would not be possible without the diamond revenue which enables Government to budget appropriately. But apart from taxes, royalty and dividends,     here are other indirect benefits enjoyed by Namibian citizens. 

 

First, there is employment and pay-as-you-earn. For every Namibian employed in the sector, there is an average of five people dependent on that person. This includes school children. Then there is local procurement on goods and services (catering, security, etc).

 

Q: The process of beneficiation seems to be an exclusive right for the elites. How come? Will the poor ever accrue optimal benefits?

 

A: This appears to be so at face value, but the reality is different.  Diamond cutting and polishing is a unique and specialised skill which involves sophisticated technology. Before the promulgation of the Diamond Act, Act 13 of 1999, in 2000, all rough diamonds were exported, unbeneficiated.  The new Act made provision for a number of downstream activities to take place in Namibia. We started from “ground zero”. 

 

 

Our initial focus was to attract the right investors (sightholders who have an excellent track record cutting and polishing diamonds,  and who are vertically integrated all the way downstream into the diamond value chain (jewellery manufacturing and branding), to set up business in Namibia with a view to transferring valuable skills and technology. This is indeed a unique industry in that people are cutting and polishing high value stones and therefore skills transfer is an imperative. Otherwise value is destroyed. 

 

We have been building up a critical mass of skills and making sure that the economic fundamentals are right to enable the creation of a solid foundation for an infant industry. Otherwise we run the risk of having a white elephant (as in Ramatex). 

 

Our vision is that in the future, these young Namibians who now work in the industry will also become entrepreneurs and open their own factories on a small, medium or large scale. But they also have to develop some business acumen. Nonetheless, most of the existing sightholders in Namibia have previously disadvantaged Namibians as partners in their business. 

 

This is not a shebeen type business where everyone jumps in because everyone else is doing it.  People need to master diamond processing and diamond trading skills first. We believe we have made significant strides in that direction. We are now currently reviewing and renegotiating our Sales and Marketing Agreement with De Beers. Some of the things we are looking at is how we can take the beneficiation agenda to another level and explore what else we can do to enhance a conducive environment for people (Namibians and investors) to succeed in this business and to ensure that this sector is viable an dsustainable in the long run.

 

Q: The De Beers office is relocating to Botswana. What influenced this decision? is it not a little bit too late?

 

A:It is never too late to do the right thing.  If the diamond resources of Botswana were depleted at this juncture, I would agree that it is a little bit too late. But both Botswana and Namibia still have enough diamond resources to last another generation. Already in Botswana one can see a lot of positive economic spinoffs that are trickling down to the masses, as well as other vertical and horizontal linkages to the rest of the economy.

 

The move was obviously triggered by the Botswana Government, and has been supported by the rest of SADC. Better Gaborone than London. Botswana aims to create a diamond trading centre  as is the case in Antwerp or Tel Aviv. It is still early days, but by the look of things they are doing very well so far.

 

Q: What impact will this move have on the Namibian diamond industry?

 

A:For starters, we are now importing rough aggregated diamonds into Namibia from Botswana, as opposed to London. Therefore in terms of time and efficiency, we will score. We are also now exporting our rough diamonds to Gaborone instead of to London.  Our trade balance with Botswana is now different, although it affects our trade balance with Europe. I have no idea how it impacts our proceeds from the Southern African Custom Union (SACU).

 

Namibia also stands to benefit from the volume of business going to Gaborone.  If Air Namibia resumes the route to and from Gaborone, Namibia will benefit from business people travelling here to do business.  There are other benefits that might be realised from this move but it is premature to speculate on this pending the outcome of current negotiations with De Beers.

 

Q: The Kimberley Process has long been a thorny issue. What is the latest on this issue?

 

A: The KP has been a tremendous success. Today it is fair to say with confidence, that 99.99% of the diamond pipeline is conflict free.  There is no more civil war in Angola (and Savimbi is no more).  There is no more civil war in the Democratic Republic of Congo (DRC), Liberia, Sierra Leone and Ivory Coast, where rebels once caused mayhem and destabilised legitimately elected Governments.

 

Unfortunately, some Non Governmental Organizations (NGOs) are reluctant to give credit where it is due (which is that the KP has been instrumental in cleansing the trade from such practices of funding conflicts with proceeds from diamonds.  Rebels no longer have access to diamond money.

 

Perhaps it is time that NGOs divert their attention to curbing the proliferation of small arms.  Child soldiers around the world have access to lethal automatic machine guns and the NGOs are silent on that score. They would rather pick on the diamond trade because they get immediate media publicity from doing that – which helps them to raise more money for themselves.

 

Q: What does the future look like for the diamond industry?

 

A:It all depends on the following elements – the global economic outlook, consumer confidence and demand and supply issues.  Currently there has been no major discovery of new diamond deposits anywhere in the world.  This means that at some point in the future demand will outrun supply.

 

This bodes well for the price of rough diamonds, and is good news for a diamond producer  such as  Namdeb Holdings.  But we have to continue giving consumers the confidence that our diamonds are conflict free, otherwise they might chose to spend their money elsewhere. After all, diamonds are a luxury, and no one feels compelled to buy them.

 

Q: What message do you  have for the Namibian nation as we celebrate the festive season?

 

A:                  Let us continue to work hard to turn our God-given heritage (our resources) into wealth for this and generations to come, and to turn our country into an Eden where we live in peace, in harmony with one another and enjoy the fruits of our labour. PF