The cutting and polishing of diamonds was considered not to be a valuable trade for Africa because of the high wages and little or no skills. The continent was also considered to be far removed from the market. However, this has changed and the diamond trade is now migrating to Africa with every sightholder scrambling to acquire a cutting license in southern Africa, says Kennedy Hamutenya, Namibia's diamond commissioner.
Speaking at the 8th annual meeting of the World Diamond Council recently, Hamutenya futher said that not all sightholders rushing "to our countries has the beneficiation agenda and development of Africa at their heart."
"We know that some people really just want to get their hands on the rough to trade and make quick margins whilst others want to send the rough elsewhere to cut and polish where the cost of labour is much cheaper. And some are really not interested in forming genuine win-win partnership with Africans but would rather have them as window dressing partners who know nothing about the running of the business and the bottom line.
"Most sightholders treat their cutting factories as cost centres and do not give a damn about profitability at the factories. To them the cut and polished stone is just a raw material with value to be added elsewhere. Some African partners in the process see the cut and polished as the pinnacle of beneficiation and want profits announced and dividends declared," Hamutenya emphasised.
Namgem, a joint venture between De Beers and government, was the first diamond cutting and polishing factory in Namibia. It was first established in 1999. Namgem currently employs 120 people.
Namibia has also enacted a law in 2000 to enable the development of the country's cutting industry as it made provision for licenses for cutting, dealing, tool-making and research in diamonds. The Diamond Act (1999) also created the position of diamond commissioner, removing the regulating authority from the Diamond Board - which was made up of captains of industry who were self regulating.
"In effect we levelled the playing field and paved the way for new entrants into the industry and the diversification of the industry from the downstream to upstream. Today we have established and commissioned 14 new factories- amongst them some of the biggest names in the business- such as Steinmetz, LKI, LLD, Tiffany, Schachter, Julius Klein, Trau Blau and now Pluczenik, amongst others. We had great success. We created more than two thousand jobs - a big number in a country of only 2.2 million and with unemployment figures of more than 40% - a big headache for the government," said Hamutenya.
However, the global financial crisis had a huge impact on the industry and hundreds of jobs were lost, he further said.
"But things are now getting better as we are en route to recovery. But the recovery process is fragile as the liquidity crisis in India, the worsening economic situation in Europe, militant trade unions in Namibia and constrained supply to the factories continue to hamper the growth and potential of the sector," Hamutenya added.
According to the diamond commissioner, the security of supply is a major stumbling block and hinders the growth of diamond manufacturing in Namibia.
He said that if the supply to the polishing and cutting factories are increased, the factories will become more viable and sustainable.
Although the number of sightholders increased from 11 to 13, the supply of diamonds to these sightholders have decreased.
Companies are now barely keeping their head above water and operating way below capacity, according to Hamutenya.
"Of course we hope to engage our partners on these pertinent matters in good faith and hope that they live up to their commitment to beneficiation in our countries, otherwise this infant industry would quickly become a white elephant. I know that there is a shortage of supply throughout the pipeline, I think we can work together as suppliers throughout the continent to ensure security of supply," he concluded.