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ECONOMY-NAMIBIA: Plans Afoot as Diamonds Dwindle after 100 years
By Brigitte Weidlich
WINDHOEK, Aug 30, 2008 (IPS) - Namibia’s once rich diamond deposits are dwindling after a century of exploitation, forcing miners to look for the hard stones offshore while the country’s fledgling cutting and polishing sector could shrink as fewer and smaller stones are found.
Namibia's diamond industry is the sixth largest in the world and is the south-western African country's economic backbone, dominated by international diamond giant De Beers.
The company mined 2,17 million carats in 2007 in the country - mainly average stones sizes of 0.44 carats. It achieved a turnover of 585 million dollars the same year.
‘‘We can now longer guarantee the supply of big stones to local diamond cutting and polishing companies because we are receiving smaller sizes of diamonds over the past few months,’’ Shihaleni Ndjaba, chief executive of the newly established Namibia Diamond Trading Company said this month.
A century ago, in April 1908, a railway worker found the first diamond in the Namib Desert near the southern port of Lüderitz and showed it to his supervisor.
The country was then called German South West Africa and was under German colonial rule. The ensuing diamond rush brought riches to individuals and the Berlin government for seven years until the outbreak of the First World War halted production.
Germany lost the war, South West Africa was declared a mandate and put under British rule administered by neighbouring South Africa. The diamond mines were sold to Sir Ernest Oppenheimer of the company Anglo American in 1920 for barely 3,5 million British pounds at the time (6,4 million dollars at current rates).
A few years later, Anglo American secured the majority shareholding in South Africa’s De Beers, which remained the only diamond mining company in Namibia until the country’s independence from apartheid South Africa in 1990. A few other players only came in afterwards.
The new Namibian government sought shareholding in the diamond sector. In 1994, it inked a 50-50 ownership deal with De Beers involving its Namibian diamond mining operations and the company Namdeb was formed.
Despite enjoying a mining monopoly which exploited Namibia’s diamonds for seven decades, De Beers never created the capacity for beneficiation or value-adding to take place inside the country.
The first democratically elected government to rule the country had to nudge De Beers to set up a diamond cutting and polishing factory, NamGem, which eventually became operational in 2000 and is 100 percent owned by Namdeb.
By 2001 the increasing offshore diamond mining operations necessitated setting up De Beers Marine Namibia (DBMN), with De Beers holding 70 percent share capital and Namdeb 30 percent.
This boosted Namdeb’s total diamond production from 1,3 million carats annually to just over 2 million carats in the last two years.
Diamonds earn 35 percent of the country's export revenue and account for 10
percent of Namibia's gross domestic product (GDP), although Namdeb and De Beers only produce a fraction of De Beers annual output of around 49 million carats.
Neighbouring Botswana is the jewel in its crown with around 31 million carats produced per year.
Both the land and marine diamond licences of De Beers in Namibia expire in 2020.
On 30 January 2007, the Namibian government and De Beers signed a new agreement. This led to the establishment of the Namibia Diamond Trading Company (NDTC) a year ago with a 50:50 equity, which for the first time enabled local diamond sightholders (cutters and polishers) to buy diamonds found in Namibia.
Until then, Namibian firms had to buy parcels containing De Beers diamonds mixed from various countries and sourced through its London selling arm as De Beers did not allow direct sales here.
NDTC sorts, values, markets and sells Namdeb’s diamonds and must make 16 percent of Namdeb’s annual carat production – about 320,000 carats - available locally plus an ‘‘aggregated mix’’ of diamonds coming from London’s Diamond Trading Company, the De Beers marketing firm.
Mining Minister Erkki Nghimtina hailed the 2007 deal as a ‘‘landmark agreement’’ then, but only two days later froze the issuing of new diamond cutting and polishing licences, which 12 companies had already obtained, in order to secure adequate supply to them from NDTC.
‘‘Unfortunately the quantity of diamonds available to ensure a viable and sustainable sector is a constraint,’’ the Ministry declared.
The moratorium on cutting and polishing licenses is still in place.
By June this year, NDTC sold 156 million dollars worth of diamonds locally, albeit small in size and no details are disclosed about the quotas that local buyers receive.
The selection raised eyebrows as eight of the 11 Namibian sightholders are also from the exclusive London ‘‘club’’ of De Beers/DTC sightholders.
The NDTC agreement will be reviewed in 2013.
In 2004, Israeli-Russian diamond tycoon Lev Leviev, De Beers' archrival, set up his own factory employing 500 Namibians and obtained the offshore mining licences from a liquidated company, Namco.
Now called Sakawe, Leviev’s marine mining outfit, in which the Namibian government has an eight percent stake, mined 145,125 carats last year. But that is not enough to supply its Namibian factory.
‘‘We could cut and polish 25,000 carats per month, which would require 300,000 carats annually which is already the ceiling of what NDTC can sell locally,’’ says Kombadayedu Kapwanga, managing director of Lev Leviev Diamonds (LLD) Namibia.
With the costs of mining soaring and land deposits with diamonds virtually depleted – 100 tons of soil must be moved to obtain one carat - Namdeb has so far not announced plans for what will happen beyond the diamond age.
‘‘Regarding land operations, we are constantly looking at new ways for optimising the run of mine and remnants as well as exploring for other minerals outside of our traditional focus areas,’’ Inge Zaamwani, managing director of Namdeb told a diamond conference in Israel recently.
‘‘We have an advanced exploration programme looking for kimberlites in the north eastern part of Namibia,’’ Zaamwani added.
‘‘A more specific economic challenge for Namdeb is the declining land reserves and the investments we must make to access increasingly difficult reserves which are physically, environmentally, technologically and economically more challenging to mine.’’
Local economist Emile van Zyl believes that Namibia’s dwindling diamond resources could be compensated for by other mining activities.
‘‘Uranium mining would compensate for the loss of diamond revenues and there are also untapped coal and copper reserves in southern Namibia. Although, I would like to see the economy less dependent on mining,’’ he told IPS.
‘‘Tourism, which is a fast growing industry in Namibia, can hopefully gain far more importance next to mining.’’
The diamond commissioner in the mining ministry, Kennedy Hamutenya, agrees: ‘‘Our ministry recently started charging royalties on some minerals other than diamonds since minerals are a resource that can be depleted,’’ he told IPS.
‘‘A royalty will soon be charged on all minerals like uranium, which has a big future in Namibia. The funds generated from this royalty will be used to develop other economic sectors.
‘‘As for the diamond mining town of Oranjemund, tourism will play a major role. Once the nearby offshore Kudu gas field is developed, which is 140 kilometres west of the town, it will have a future,’’ according to Hamutenya.
(END)
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