16 June 2017

Namibia: De Beers and Namibian Government Partnership

Photo: De Beers
A selection of rough diamonds (file photo).

This week, a new dawn will break on Namibia's future, with the launch of the mv SS Nujoma, Debmarine Namibia's new diamond exploration and sampling vessel.

Constructed at a cost of N$2,3 billion, the vessel is the largest and most advanced of its type anywhere in the world - and will help secure Namibia's diamond supply well into the future.

The fact that this most advanced vessel launches ahead of schedule and ahead of budget is testament to the emergence of Debmarine Namibia as a truly world-class company. It is also testament to the partnership between the government of Namibia and De Beers.

Now in its twenty-third year, our partnership is the leading corporate tax contributor to the Namibian treasury, with only Sacu revenue surpassing our partnership's contribution.

In 2016 alone, our partnership contributed more than N$3,7 billion in taxes, royalty and dividend payments to the treasury. This income is crucial for government, as it enables the provision of schools, healthcare, social grants, housing and other social support services.

Although De Beers' partnership with the Namibian government will not fall within the strict definition of public-private partnership (the recent enactment of PPP legislation in Namibia in mind); the new PPP act is testimony to government's view that the private sector is critical for the growth and development of Namibia. Our 50/50 model of joint ventures in Namibia is without a doubt in the forefront in ensuring government's partnership with a global private sector leader.

But with success comes scrutiny, and as a global business with operations in more than twenty countries, we understand and support the need for transparency.

We support both the principle and spirit of transparency - and have taken significant steps to increase this further in recent years.

That is why we publish independently-audited accounts twice per year, detailing price, cost and profit for our Namibian operations, along with their production volume.

Of course, there will always be some areas where it is neither possible, nor in the best interests of Namibia's competitiveness to publish every element of a commercial contract - and the individual prices of diamonds are one of these elements.

Individual diamond prices are determined following a valuation by government diamond valuators. These prices are visible to government at any point in the transaction. The amount of diamonds produced is determined by the budgets set by the respective companies, Namdeb and Debmarine Namibia (both owned in equal shares between government and De Beers).

As with all commercial enterprises, some of our data is both proprietary and commercially confidential. However, not publishing it does not mean that De Beers enjoys favourable regulatory or contractual terms at the expense of government. The facts simply do not bear that out.

Namibia earns more than 80 cents of every dollar generated by the partnership. In Namibia, diamond mining tax is set at 55%, while royalties levied on diamond sales are set at 10%. Contrast that with other mineral companies which pay a mining tax of 37%, and royalty tax of around 3%.

A recent study showed that while the De Beers-Namibia partnership delivers revenue of N$10 - N$11 billion, it pays between N$3 and N$4 billion in taxes annually. The study made a comparison with another Namibian industry, with similar levels of revenue, however, that sector pays only N$130 million in taxes.

There can be no greater measure of a company's worth to a nation than its payment of applicable taxes, quality employment, and adherence to the laws of the country. In this regard, De Beers knows that our partnership has set an impressive benchmark in Namibia.

We in De Beers are hugely proud of our contribution to Namibia and its people. As the leading diamond company in the world, we know that we are unmatched in what we bring to our partnership with the government of Namibia and its people.

As the mv SS Nujoma readies to unlock further value, we trust, just like the vessel's namesake, Founding President Sam Shafiishuna Nujoma has done for decades, that it will be another positive contribution to the people of Namibia.

* Daniel Kali is resident director for De Beers in Namibia.


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