Nam diamond industry to remain key revenue contributor despite problems

THE diamond industry in Namibia will remain a major revenue contributor to Government despite the expected drop in 2003 and 2004 due to a much stronger local currency.

The diamond industry currently contributes more than 10 per cent of the country’s gross domestic product (GDP). According to a latest research report by the Institute for Public Policy Research, entitled: “Managing Diamond Dependency: Should Namibia Risk More to Gain More?”: “The overall contribution of the diamond mining industry to Government tax and non-tax revenues has almost tripled to 14,7 per cent in 2002/03 from 5,7 per cent in 1990/91.”The report adds that in 2002 rough diamonds comprised half of all merchandise exports by value.That year government received N$1,25 billion from Namdeb, the part government, part De Beers mining company that produces the raw stones.Although this figure is expected to drop considerably for 2003 and 2004 due to a much stronger local currency, there is no doubt that Namibia’s importance in the international diamond industry, as the sixth largest producer by value, will continue into the foreseeable future.However, the IPPR report points out that “only a limited amount of information is available to the public on the extent of existing diamond resource deposits or on their economic viability”.Nevertheless over the last five years Namdeb has been recovering around 1,5 million carats a year and early this year this target was raised to 1,7 million carats.Industry insiders say this rate can be continued for at least 50 years and in February the Economist Intelligence Unit estimated Namibian diamond reserves to be least 1,5 billion carats even though most of the ocean floor, and some of the land sites, have not been explored yet, the IPPR reported.Namibia’s diamonds are 98 per cent ‘gem- quality’, according to the report, increasing the value of the country’s diamond produce and placing it behind Botswana, Russia, South Africa, Angola and Canada in world value rankings for 2002.In 1994 the Government and De Beers took equal joint ownership of Namdeb which still produces more than 80 per cent of all rough diamonds from Namibia.A secret 5-year business agreement determining the share of profits each receives is to be renegotiated this year.Since then Namibia has also allowed other companies to enter the previously monopolised diamond mining market with Ocean Diamond Mining (ODM) coming in in 1990.In 1998 Namibian Minerals Corporation (Namco) started operations and took over ODM the next year.Then Namco went bankrupt in 2003 when many of her key assets were bought by Sakawe Mining Corporation (Samicor).Samicor is owned by the international Lev Leviev Group from Israel with 8 per cent owned by the Namibian government, and 17 per cent in the hands of the Longlife Mining Corporation empowerment group, the Namibia Youth Service and the Samicor Employees Trust.Other companies mining diamonds in Namibia include Trans Hex, Diamond Fields, Lazig Limited and Gemfarm as well as Diaz Point but all these currently work for or with Namdeb or Samicor, the report showed.Since most of Samicor’s interests are still unexplored and its 2004 production target of 150 000 carats is unlikely to represent a market share of more than 10 per cent; Namdeb currently produces almost all the diamonds from Namibia one way or the other, the research shows.Value addition through cutting and polishing of Namibian diamonds has been backed by the government through allocation of Export Processing Zones (EPZ) and training grants.Seven cutting and polishing companies were established in Namibia including NamGem, NamCot Diamonds, Tornado Enterprises, Mars Investment, Hard Stone Processing and LLD Diamonds Namibia with NamDiamonds having already gone out of business.The cutting industry faces considerable opposition with India and China dominating the low cost cutting activities and Antwerp, New York and Tel Aviv having cornered the high skill sector.According to a latest research report by the Institute for Public Policy Research, entitled: “Managing Diamond Dependency: Should Namibia Risk More to Gain More?”: “The overall contribution of the diamond mining industry to Government tax and non-tax revenues has almost tripled to 14,7 per cent in 2002/03 from 5,7 per cent in 1990/91.”The report adds that in 2002 rough diamonds comprised half of all merchandise exports by value.That year government received N$1,25 billion from Namdeb, the part government, part De Beers mining company that produces the raw stones.Although this figure is expected to drop considerably for 2003 and 2004 due to a much stronger local currency, there is no doubt that Namibia’s importance in the international diamond industry, as the sixth largest producer by value, will continue into the foreseeable future.However, the IPPR report points out that “only a limited amount of information is available to the public on the extent of existing diamond resource deposits or on their economic viability”.Nevertheless over the last five years Namdeb has been recovering around 1,5 million carats a year and early this year this target was raised to 1,7 million carats.Industry insiders say this rate can be continued for at least 50 years and in February the Economist Intelligence Unit estimated Namibian diamond reserves to be least 1,5 billion carats even though most of the ocean floor, and some of the land sites, have not been explored yet, the IPPR reported.Namibia’s diamonds are 98 per cent ‘gem- quality’, according to the report, increasing the value of the country’s diamond produce and placing it behind Botswana, Russia, South Africa, Angola and Canada in world value rankings for 2002.In 1994 the Government and De Beers took equal joint ownership of Namdeb which still produces more than 80 per cent of all rough diamonds from Namibia.A secret 5-year business agreement determining the share of profits each receives is to be renegotiated this year.Since then Namibia has also allowed other companies to enter the previously monopolised diamond mining market with Ocean Diamond Mining (ODM) coming in in 1990.In 1998 Namibian Minerals Corporation (Namco) started operations and took over ODM the next year.Then Namco went bankrupt in 2003 when many of her key assets were bought by Sakawe Mining Corporation (Samicor).Samicor is owned by the international Lev Leviev Group from Israel with 8 per cent owned by the Namibian government, and 17 per cent in the hands of the Longlife Mining Corporation empowerment group, the Namibia Youth Service and the Samicor Employees Trust.Other companies mining diamonds in Namibia include Trans Hex, Diamond Fields, Lazig Limited and Gemfarm as well as Diaz Point but all these currently work for or with Namdeb or Samicor, the report showed.Since most of Samicor’s interests are still unexplored and its 2004 production target of 150 000 carats is unlikely to represent a market share of more than 10 per cent; Namdeb currently produces almost all the diamonds from Namibia one way or the other, the research shows.Value addition through cutting and polishing of Namibian diamonds has been backed by the government through allocation of Export Processing Zones (EPZ) and training grants.Seven cutting and polishing companies were established in Namibia including NamGem, NamCot Diamonds, Tornado Enterprises, Mars Investment, Hard Stone Processing and LLD Diamonds Namibia with NamDiamonds having already gone out of business.The cutting industry faces considerable opposition with India and China dominating the low cost cutting activities and Antwerp, New York and Tel Aviv having cornered the high skill sector.