13 December 2012

Namibia: Global Meltdown Erodes Diamond Revenue

Windhoek — The diamond industry is being negatively impacted by uncertainty created as a result of the volatility in the exchange rate, the protracted Euro Zone crisis, a slowdown in demand in China and India and the general lack of liquidity in international markets.

This was the sentiment expressed by the CEO of the Namibia Diamond Trading Company (NDTC), Shihaleni Ndjaba, who yesterday said 2012 proved to be much more challenging for the industry. Despite this overview of the year under review, Ndjaba remained positive about the medium- to long-term future of the industry.

"The challenges are further compounded by the amount of midstream rough and polished stocks in the pipeline, resulting in reduced demand for new rough in the short-term from NDTC sightholders (clients), with total sales to local cutting and polishing companies estimated at approximately N$1.5 billion for the 2012 calendar year, decreasing by approximately 7 percent when compared to total sales of N$1.6 billion for 2011," said Ndjaba.

According to NDTC sales manager, Brent Eiseb, about 40 percent of Namibia's total diamond production is processed locally by cutting and polishing companies.

Namdeb Holdings produced about 1.6 million carats of diamonds during 2012.

"NDTC's primary strategic objective is to drive local beneficiation from diamonds by growing and supporting the downstream diamond industry in Namibia, with the broad aim to ensure the maximum, long-term value from Namibian diamonds through world-class sorting, valuing and sales practices in Namibia," explained Eiseb.

Meanwhile, Ndjaba noted the local diamond industry faces various challenges such as longer production cycles, bureaucracy, high labour and production costs in comparison to other cutting centres, as well as outdated legislation that further compound the demanding market conditions.

However, despite these obstacles, Ndjaba noted that NDTC had achieved significant milestones during 2012. These include the fact that the NDTC is now 100 percent localised, with all 86 staff members being Namibian citizens, as well as the signing of three-year agreements with 12 Namibian cutting and polishing factories.

"The three-year supply agreements are at the core of the Namibian government's objective of promoting value addition activities of Namibian raw materials and underpins one of NDTC's primary objectives, which is to facilitate the creation of a sustainable diamond cutting and polishing industry in Namibia," said Ndjaba.

In addition, through the three-year supply agreements the NDTC facilitated the creation of about 1 300 jobs in the local cutting and polishing industry.

Established in 2007, NDTC, a joint venture between government and De Beers as part of a sorting, valuing and marketing agreement, generated N$6.5 billion in 2010.

The company's revenue grew to an all-time high of N$7 billion during 2011. The joint venture agreement has enabled the sale of rough diamonds mined in Namibia to selected local clients, who in turn cut and polish the diamonds for sale to local jewellers and for export.

So far this year NTDC has paid over dividends of N$80 million to shareholders (government and De Beers), Ndjaba adding that more dividends could be expected in the coming months.

Since its establishment until 2011, the NDTC has so far paid over N$620 million to its shareholders.

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