Namdia denies underselling gems

NAMIB Desert Diamonds (Namdia) denied selling the country’s diamonds cheaply to Dubai, claiming that they sold two parcels for N$376 million this year.

Namdia’s board chairperson Shakespeare Masiza said the new parastatal sold its diamonds on an arms-length transaction basis between September and October.

Investopedia.com describes an arm’s length transaction as a business deal in which the buyer and seller act independently with no interest in the other’s benefit.

“When two parties engage in an arm’s length transaction, acting solely in their own interest and with equal access to information, there is a reasonably good chance that the sale price of the asset will be close to its fair market value,” the website said.

The Namibian reported last week that Namdia, a 100% state-owned company, deliberately sold the country’s diamonds cheaply to Dubai – for five times less than the price they eventually fetched in the Middle East.

“Namdia did not undersell its purchase entitlement. Namdia has not and will not engage in any illicit business. The purpose of Namdia is to independently discover the true market value of Namibian diamonds, and to report to the shareholder what we have discovered in order for government to inform its national resource optimisation strategy,” Masiza said.

He said Namdia sold 50 260,53 carats in their two parcels to Dubai companies for N$376 million.

In one incident, The Namibian is told, a parcel worth US$2,7 million (more than N$30 million) was sold in Dubai below its real value.

People familiar with the industry insisted that Namdia sold the diamonds in Namibia to Dubai-based companies for US$500 (around N$7 100) a carat. But the same diamonds were then sold on for US$2 500 (N$35 600), per carat by Dubai companies.

This is termed illicit financial flows as the country does not receive income from its natural resources.

“Casting aspersions over Namdia’s objective with tags like illicit financial flows seek to undermine the genuine pursuit of price discovery, and makes one wonder in whose interest you wish to report such,” Masiza said.

Namdia contracted Dubai-based diamond dealer Neil Haddock, who has also worked for De Beers and its Namibian subsidiaries.

Using Haddock as a consultant has raised questions about a conflict of interest, and whether Namdia can really claim to test the market outside of De Beers’ pricing system.

Experts questioned why Namdia used Haddock as their marketing and sales consultant because it will defeat the alleged price discovery mission, as Haddock works for the same institutions Namdia wants to be independent from.

“What conflict? Does Neil still work for De Beers? Do you understand that De Beers has had a global monopoly of the diamond industry, and that most people who are skilled in diamond trading invariably obtained such knowledge and experience through association with De Beers?” Masiza asked.

He said Haddock was appointed as consultant to continue advising Namdia, and that his consultancy fees are confidential.

“We are informed that Neil does not work for De Beers. If your sources are certain that he does work for De Beers, will they please forward such information?” he questioned.

The Namibian, however, understands that Haddock has been travelling to Namibia over the past five years to facilitate diamond deals in a De Beers-dominated sector.

Namdia has been a briefcase company since it started operating in August. They were asked what plans they have to ensure that the parastatal is not a mere briefcase parastatal which outsources most of its work to middlemen companies, an arrangement that has been criticised in countries like Zimbabwe because of the high consultation fees of the middlemen. Masiza answered that Namdia is in the process of erecting its own building.

“Once the building is ready around June 2017, Namdia will employ its own sorters and polishers, and a full contingent of staff. Namdia already has personnel who are learning from people like Neil, with the purpose of skills transfer,” he noted.

According to him, Namdia is also in the process of appointing its senior executive team, and once this recruitment process is completed, Namdia will share its business plans with the nation.

“While we build this organisation, paying consultation fees is inevitable. Namdia will, however, ensure that we obtain maximum value for our money,” he added.

Mines minister Kandjoze defended Namdia at a press conference on Friday. At the event, the minister was flanked by diamond officials from government such as Namdia’s acting chief executive Kennedy Hamutenya, middleman Neil Haddock and Chris Nghaamwa, the chief legal adviser in the attorney general’s office.

Kandjoze did not allow the media to ask questions to those officials, and said he cannot comment on the appointment of Haddock since it is an operational matter.

“Namdia is not a vehicle for self-enrichment for middlemen or existing buyers of our diamonds through the De Beers sightholders system,” the minister said.

Kandjoze also defended the decision to appoint C-Sixty Investment, a company owned by businessman John Walenga and Tironenn Kauluma, to evaluate Namdia’s diamonds.

He further stated that Namdia will disclose to the relevant public bodies and authorities all relevant information as and when such may be required.

“Namdia will release its financial statements at the end of its financial year, and will declare dividends to government (if any),” he said.

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