Windhoek-Diamond export data from the Office of the Diamond Commissioner indicates that only about 20 percent of the total beneficiation sales made by the Namibia Diamond Trading Company (NDTC) during 2016 was processed locally. It is believed this mass export of rough diamonds is not only a loss to the country but more importantly undermines government’s efforts to eradicate poverty and unemployment, as well as its efforts to improve the lives of ordinary citizens.
“I would like to make it categorically clear that the current trend of high rough exports is of grave concern to the Ministry of Mines and Energy and the Namibian government,” said mines minister Obeth Kandjoze during an engagement with the diamond industry at a local hotel on Monday evening.
“We do appreciate the need for a flexible business environment that allows you to manage your Namibian business in a sustainable manner. However, the practice of exporting in some cases 100 percent of rough diamonds meant for beneficiation purposes is in our view totally against the spirit of beneficiation and I would like to put it on record that we condemn the continuation of this practice in the strongest terms,” Kandjoze said.
“Let me assure you that the Namibian government considers sustainable downstream diamond beneficiation activity as crucial to achieving the national development objectives and goals as set out in the National Development Plan (NDP4-5) and the Harambee Prosperity Plan. It is for this reason that negotiations between the government and De Beers took the better part of two and a half years,” said Kandjoze.
On the back of this agreement, coupled with the sustained improvement in market conditions compared to 2015, NDTC achieved record beneficiation sales for 2016.
Kandjoze noted that some diamond and polishing factories might argue that by exporting a large proportion of their rough diamonds purchased from NDTC they are actually capable of keeping employees on their payroll. However, he castigated this practice, saying having employees come to work “every now and then” is neither conducive to an environment that allows for effective skills transfer nor sustainable.
“It is within this context that the government as a shareholder in NDTC could no longer stand by and support a rough distribution strategy that does not take into consideration the level of rough diamond exports in 2016 and the negative impact that it has on the diamond beneficiation aspirations of the government,” he said.
It was on this basis that the ministry requested NDTC to design an approach that takes into consideration each sight holder’s rough diamond allocation for the 2017/18 selling period.
“I can confirm that the approach by NDTC has, in the same way that it has reduced the allocations of those sight holders that have exported a large proportion of their purchases, resulted in an increase in the allocation of those sight holders that have processed more of their rough purchases in Namibia,” Kandjoze explained.
What this means is that Kandjoze would like to see an increased proportion of NDTC’s supply go to those sight holders that continue to dedicate a larger portion of their purchases from NDTC towards their local value addition.
The government and De Beers signed a new Diamond Sorting, Valuing, Sales and Marketing Agreement in May 2016 of which one of the key outcomes was the increase of the Local Offer Threshold to a price indexed annual amount of US$430 million (equivalent to N$5.4 billion at yesterday’s exchange rate.)
In addition to the increased Local Offer Threshold, the local diamond cutting and polishing industry has seen NDTC offering all the +10.8 carats, including exceptional, to its Namibian customers.
These changes were anticipated to have a significant positive impact on the growth and long-term sustainability of the Namibian cutting and polishing industry. Other suspected benefits include increased opportunities for job creation and skills transfer, investment in infrastructure (including technology) and further integration and empowerment of Namibians at all stages of the diamond value chain.
NDTC has since introduced a minimum supply level of US$15 million (N$189 million at yesterday’s exchange rate), with the objective of starting all local diamond cutting and polishing factories off at a level of supply that ensures reasonable viability and sustainability.
“I sincerely hope that when we review the situation in October 2017, we will see a positive impact as a result of concerted efforts from the industry to process more of the purchases from NDTC in Namibia,” said Kandjoze.