The Namibia Diamond Trading Company (NDTC), a joint venture between the Namibian government and De Beers, said it expects to supply rough diamonds worth $390 million this year.
The diamond trader, which has 11 sightholders, had a fixed supply of diamonds worth $430 million under a new 10-year deal signed last year.
NDTC chief executive Shihaleni Ndjaba told Rough & Polished on the sidelines of a diamond conference in Gaborone, Botswana in November that the figure, however, fluctuated annually because it was index-linked to price so that volumes do not decrease relative to any price increases.
He said that the future of diamond manufacturing in Namibia was bright and he would want to see small-scale operators being established as was the case in South Africa.
Below are excerpts from the interview.
You have been at the helm of the Namibia Diamond Trading Company (NDTC) since 2008. Correct?
Can you share some of your experiences as the NDTC boss since you embarked on this journey?
We started that journey from the beginning of an establishment of a diamond industry in Namibia that is in 2008 or rather from 2007 when we started with the journey of cutting and polishing diamonds in Namibia. Today we have a fully-fledged operational diamond industry, which has created jobs to young people, close to 1000. Of course, at some point more than 1000, but due to the economic dynamics in the industry, the number of employees has come a little bit down to close to 1000. Skills have also been created we have seen a pronounced reduction in expatriate experts because most of the roles they were doing are now being occupied by Namibians because they acquired the required skills.
Technology has also been upgraded. Most of the factories are using state-of-the art technology that is helping them for cutting and polishing diamonds and there are also other spin-offs that went to the economy through utilization of the service by the industry like transport services, catering and we have also seen some business activities that have established in Namibia to come and support the industry…
How many jobs were created at the peak of the industry?
We had about 1600.
What is the current state of diamond manufacturing in your country and what were the problems that saw the number dropping from 1600 to the current 1000?
I would say the situation is now stable, the drop of the number from what it was to where we are, was in line with the activities and challenges that the industry experienced. 2008 and 2009 was bad globally and a lot of jobs were shed. 2015 was also a bad year because there was a low demand for rough because the manufacturers felt that the polished prices were very low and they were not making earnings and their demand for rough reduced and some jobs were also shed and these are normal cycles in the diamond industry.
How many sightholders do you have in Namibia?
We have 11 sightholders.
Of those, how many are local companies?
Of course, all of them are locally registered companies but most of those firms are kind of subsidiaries of traditional cutting and polishing companies from oversees. So, they came and registered as local companies in Namibia and we require them to take on board local shareholding maybe 20-25 percent. So, they are local in the sense that they are registered locally, although they are owned by overseas subsidiaries and that is the case elsewhere in the region, anyway.
Do they all cut and polish diamonds they acquire from NDTC in your country?
The sightholders are supplied diamonds on fixed term supply contract by NDTC and one of the requirements is that they should put up a factory in Namibia, employ people and create the required skills and then utilise the rough diamond being provided to them locally. Of course, here and there we battle cases were these factories would want to export rough, but we have put measurements in place. For instance, we consider the level of local utilisation in the annual allocation. When we see that you have performed well in utilising your previous year allocation then we can give you more rough and when we realise that you have exported to some extent then we penalise you by reducing your allocations. We have those mechanisms to enforce that as much as possible can be utilised locally. We also recognise that there are some materials that we supply to them that might not be suitable for cutting locally, that’s why we have a flexibility of 80:20 that they can utilise 80 percent and 20 for one reason or another they are not able to utilise it, we are not going to penalise them for that.
What if someone comes to you and say Namibia should not export all the diamonds produced by Namdeb Holdings. What would you say to that person?
You know whatever we do at NDTC is based on service agreement that was negotiated between government and De Beers from time to time. Currently we have an agreement for the first time, a period of 10 years. The previous agreements were for five years. That agreement was signed after extensive negotiations between government and De Beers and in the process of negotiating governments take the best consideration in coming up with the formula of what diamonds to be utilised for the local industry because am sure they look also at other requirements of exporting rough for earnings, but they also have to figure out what balance should be used locally for instance under the current agreement, NDTC was allowed more diamonds to allocate to the sightholders, which was an increase from the previous available diamonds. I am sure it is up to the government in its negotiations with De Beers to find wisdom of the proportion of what is to be utilised for local companies and what should be still exported. So, if one day they come up with 100 percent supply am sure it should come from their wisdom because they also have a lot to consider in coming up with the proportion to be utilised locally.
Can you shed some light on the increase of NDTC allocations to sightholders?
Previously, 10 percent in value of all production was reserved for the local market, but in addition to that we also had a provision for what we call aggregated diamonds and maybe in the end if you put them together it came to close to 30-40 percent. Currently we are allowed a fixed amount of $430 million (in value) under the current agreement to allocate to sightholders which is of course fixed to the price index of the value of the diamonds. Also under the current agreement all the large stones above 10.8 carats and the special stones in terms of colour and quality, are required to be sold locally. Previously they were all exported but under the current agreement they were added to the package that NDTC can sell to its clients. So, you can see that the government from time to time, in their negotiations with their partners always come up with changes.
Someone outside Namibia might not understand the role that you play as NDTC with the advent of the state-owned Namib Desert Diamonds (Namdia). Can you explain the difference in terms of roles both companies play?
The difference is we handle the whole production of Namibia diamonds from the Namdeb Holdings (Namdeb land and De Beers marine), we handle the whole production which entails sorting and valuing the diamonds produced by those companies and then distribute the diamonds in line with the service agreement. A portion going to De Beers for export, a portion going to the sightholders for local beneficiation and then 15 percent to Namdia to perform their role of price discovery. So Namdia is actually one of our clients, not a sightholder, because the amount they use for their mandate is specified in the agreement and should be supplied to them by NDTC.
When are you going to choose new sightholders?
The sightholder election is an ongoing process because for instance now we have what we call accredited buyer system where somebody can come and put a plant or factory on their own and then they can start feeding with the rough that they can source from their own sources and once they have developed some capacity we will assist them if we find that they have good standards. We can allow them a status of accredit buyer, meaning that we can allow them to compete for diamonds at NDTC like maybe your buybacks or refusals that our sightholders are leaving on the table. They can access those. Once they have proved to have the capacity they can then apply to become sightholders, so it’s a continuous process.
How many companies are operating under the accredited buyer system?
At the moment we only have one.
Do you know the polishing capacity of rough diamonds in the country?
All I can say is that we have $430 million worth of rough that is supplied on an annual basis to the sightholders in Namibia. I know it’s not necessarily 100 percent of it that is being utilised. It’s a fixed amount, it just changes because its price indexed, so probably this year it will be lower than the $430 million, maybe it will be $390 million.
What do you think will be the future of diamond manufacturing in Namibia?
I think it is positive that is why we have been putting up all these measures to grow the industry, facilitate the creation of skills among our local people, to facilitate the upgrading and growing of technology so that at some point Namibia can become a serious diamond manufacturing centre. So, we have hope that the industry will grow and we also hope that we will venture into encouraging locals to also venture into that business, maybe through programmes like small-scale diamond beneficiators.
Who issues licences to diamond manufactures in Namibia?
All the cutting and polishing licences are issued by the ministry of mines and energy and I think the most important thing is to access the rough because under the current circumstances NDTC is the only distributor of rough diamonds, but as I said we do it in line with the service agreement unless if it is something that was considered to be part of our brief to also be supplying. Like I said with the learning from South Africa maybe we can come up with something that can also incorporate them.