By Tiri Masawi and Rosalia David
June 2016
Prime Business

Government and De Beers’ watershed agreement that will see at least 15 percent of rough diamonds produced by NamDeb being cut and polished by locally registered companies has still not provided the silver lining on the cloud for most diamond cutting firms.

The historic agreement which will last for 10 years was signed by Minister of Mines and Energy, Obeth Kandjoze, and De Beers outgoing Group Chief Executive Officer Phillipe Mellier in the capital, signalling a new engagement between the two parties (Government and DeBeers).

If anything, the agreement has left many wondering whether Government was in control of the negotiations or put to the negotiating table on preconceived outcomes.

The agreed settlement points to an insignificant manoeuvre by Government from gaining control of the local diamonds, which De Beers has been exploiting for longer than a century; thanks to the exploits of one Cecil John Rhodes, who made sure that large conglomerates cement control on African resources so firmly that even after political independence the resources are still not liberated.

While achieving a milestone for Government’s strong agitations on value addition and cementing local jobs, the deal comes at a time when the diamond cutting and polishing industry is facing severe structural and operational challenges emanating from an inadequate supply of precious stones leaving thousands of jobs hanging by the thread.

Namibian diamonds are the country’s cash cow, providing billions in tax revenues and royalties, alas their existence has somewhat failed to shine on the promising diamond cutting and polishing industry and see as many Namibian eating a slice of the cake from the heavy revenues derived from their minerals. Perhaps the deal aside, the story of Namibian diamonds failing to emancipate the country’s impoverished is one reminiscent of any country with natural resources that fails to accrue optimum benefits for the locals beyond royalties and taxes. Surely De Beers and Government should know that with the shining stars of a desert diamond’s infrastructure development and housing provision could easily be wiped out. One only needs to look at United Arab Emirates or Libya who turned the fortunes of a desert people through optimisation of their local oil resources.

As if that is not enough analysts feel Government negotiated from a weak point with University of Namibia Dean and Senior Lecturer Ndumba Kamwayah saying in one of his columns published in a local daily that the Government should have engaged De Beers from a 100 percent ownership perspective as they are the custodians of Namibian diamonds.

Was Government taken for a ride?
Kamwayah feels De Beers have enjoyed an upper-hand on the exploitation of Namibian germs for too long since the inception of the company by capitalism centuries ago.

A rather critical Kamwayah feels Government needed to be in control of the engagement with DeBeers if the notion of benefiting from local resources is anything to go by.

Perhaps his critics will serve a purpose for another day but Government feels the deal will see a significant increase in rough diamonds made available for beneficiation locally as a result of the agreement as the best under the circumstances.

Among its targets, the deal will see US$430 million (Approximately N$6.450b) worth of   rough diamonds being offered annually to Namibia Diamond Trading Company (NDTC) customers. As part of the agreement, all Namdeb Holdings’ Special Stones will be made available for sale in Namibia.

In addition, the agreement provides for 15 percent of Namdeb Holdings’ run-of-mine production per annum to be made available to a Government-owned independent sales company called Namib Desert Diamonds Pty Ltd.

The agreement builds on the socio-economic contribution the partnership has made to Namibia since it was formally established in 1994. Namdeb Holdings is one of Namibia’s largest taxpayers and the country’s biggest foreign exchange generator, contributing more than one in every five Namibian dollars of foreign earnings

Ironically, the much publicised agreement brokered by the Attorney General, Sackey Shangala, has not yet evoked positive emotions in the industry as most companies in the diamond cutting and polishing firms that spoke to Prime Focus Magazine believing it is too early to celebrate and insist that until they start reaping the fruits of the engagement, the industry still faces serious operational challenges.
Most diamond cutting and polishing companies in the country are either operating below 50 percent capacity while others have since closed shop because of poor supply of rough diamonds from the Namibia Diamond Trading Company. Statistics on the ground actually show that the lack of supply had only left about four polishing firms in full operation while more than 12 were in hibernation or had shelved operations.

A survey done by Prime Focus’s sister publication, The Villager Newspaper a month ago shows that more than 5000 jobs in the diamond polishing and cutting industry were on the line because the industry had become less viable and less lucrative for local diamond cutting and polishing firms who did not receive enough diamonds from Namdeb

Who is calling the shorts?
Perhaps what many are missing is that while Government has finally made the bold move to use Namibian gems to improve the livelihoods of locals and also drive the local industry, most analysts still feel Namibia did not get the best deal out of the engagement with De Beers.

De Beers has been creaming off from Namibian gems since the dawn of the colonial era and most people expect Government to now be in the driving seat on any negotiation that has to do with extraction of diamonds.

Shangala, as Government’s chief negotiator, feels while the negotiations were protracted, Namibia received a reasonable deal under the circumstances.

Perhaps Shangala being bounded by client confidentiality comes short of admitting that Government would have preferred a better negotiation from De Beers as Government was initially pushing for no less than 20 percent of the diamonds mined by De Beers to be polished locally.