India, Namibia in gem deal

DTC sidestepped in deal to save Namdeb

Namdeb has sold a large number of diamonds to India to save the company from ‘collapsing’, The Namibian has established.
The sale, and in particular the identity of the buyer, that had been kept under wraps was unusual in the sense that Namdeb – with the help of Government – sidestepped the usual sales process with the Diamond Trading Company (DTC).
It has now emerged that Namibia and India engaged each other about the sale of diamonds to India among other issues during a two-day visit of the Indian Minister of State for Commerce, Jairam Ramesh to Namibia early last year.
During the visit the two countries also investigated the possibility of India setting up a ‘training facility to polish and cut diamonds in an initiative to establish systems for the direct import of diamonds from Africa to India.’ On the eve of that visit, Ramesh was quoted as saying that India intended to buy rough and uncut diamonds directly from African countries, reportedly to cut out the middleman in diamond transactions and thereby reduce costs.
The Diamond World News Service reported that ‘the direct deal with the Namibian miner will decrease costs by about 5 to 7 per cent, freight charges and eliminate traders’ commissions. This comes as a boon to the local diamond exporters who operate on margins of three per cent and have been bearing a 20 to 25 per cent increase in rough diamond prices since November 2008’.
The buyer, which has now turned out to be Diamonds India Limited (DIL) is a consortium of 58 leading diamond and jewellery manufacturers and exporters in India. It was formed with the objective of directly sourcing rough diamonds from mining companies and countries, and selling them directly to the manufacturers in India.

Mines and Energy Minister, Erkki Nghimtina, yesterday told The Namibian that the direct deal with the Indian company was Government’s way of assisting Namdeb with its cash flow problems given the strain of the global financial crisis.
‘The aim was to solve the cash problem…and to assist Namdeb to get the cash which De Beers could not give it,’ he said.
He quelled questions on how much cash the transaction generated by saying the aim of the deal was more important than the size of the deal, though international reports have quoted ‘highly-placed industry officials’ as saying the deal was ‘a large-sized transaction’.
‘What was needed was cash,’ says Nghimtina. ‘Namdeb had the stock, so we had to find a way to sell some of that stock,’ he said, critical of the fact that even while on a three-month production holiday, the company was still paying full salaries to its employees.
Early this year, Namdeb asked Government and De Beers to stand by their 50 per cent stakes in the company by providing ‘letters of comfort’ in order to maintain its N$650 million overdraft facility among all four commercial banks. At the time, Namdeb MD, Inge Zaamwani-Kamwi noted that such surety is provided in the ‘unlikely event of Namdeb being unable to pay off the overdraft,’ she said.
Nghimtina said yesterday that the DIL deal was one of the Government-initiated ideas to deal with the cash problem reflected by this issue, as well as by De Beers’ recent request to Government to waiver the payment of royalties until the company is in a sound financial position.
He also said the deal does not mark the end of Namdeb’s current sales agreement with the Namibia Diamond Trading Company (NDTC) and DTC International, which is set to be reviewed in 2013. When asked last week if the alternate sale signified a loss of trust between Government and De Beers, he simply stated that ‘the relationship between the Government and De Beers is intact.’
Nghimtina added, however, that the global financial crisis – which he described as ‘not ordinary but extraordinary’ – has deeply affected Namdeb, thus requiring extraordinary measures to ‘save’ the national diamond mining giant from ‘collapse’, which would be ‘detrimental’ to the economy.
According to India’s Economic Times, the deal, which took place two weeks ago, marks a ‘breakthrough in procuring roughs directly from a miner in Africa.’ Official sources were quoted by the newspaper as stating that ‘the deal is also significant since no other company in the world, apart from Diamond Trading Company, which belongs to the De Beers group, has been able to access roughs directly from Namibia.’
De Beers holds a 50 per cent shareholding, along with the Namibian Government, in Namdeb.
The usual Namdeb sales process is conducted through the Namibia Diamond Trading Company (NDTC) – also a 50:50 joint venture between the Namibian Government and De Beers. NDTC then deals directly with DTC, the distribution arm for the De Beers family of companies, for the local and international sale of Namdeb’s diamonds.
Attempts to get immediate comment from DIL Chairman, Praveen Shankar Pandya, on the nature of the sale proved futile, but he promised to call The Namibian back by today.
India is the world’s largest importer of rough diamonds and exporter of cut and polished diamonds, accounting for over 90 percent of the international market.
nangula@namibian.com.na