New diamond cutting factory threatens De Beers monopoly

NAMIBIA’S diamond industry is to be revamped in a move that will undercut the nearly century-old influence of De Beers in the marketing of precious gems.

Government leaders gave signals of the impending changes last week, despite assurances not to upset the authorities’ cosy relationship with the diamond cartel after Prime Minister Gurirab was quoted as telling diamond industry representatives: “We have been brainwashed! We have been indoctrinated! There has been deliberate programming. “We were told that it was not good to have a processing facility like yours too close to the mines.And you have taught us it is a lie.”The Prime Minister was speaking at a local hotel following the opening on Monday of one of the largest diamond polishing and cutting factories in Africa by Israeli tycoon Lev Leviev.Leviev has agreed to process Namibian stones at the factory before they are exported, which will be a break with the De Beers practices of the past.A South African newspaper reported that Gurirab “signalled a wind of change” for Namibia’s diamond industry.He reportedly said Government would even be willing to invoke a dormant section of the Diamond Act and force De Beers to supply gems to the polishing factories.Such a move would loosen the hold that De Beers has had on the Namibian diamond business for nearly a century.But the Minister of Mines and Energy, Dr Nicky Iyambo, said in an interview yesterday that the Government was not about to change things yet.”The Government is not under pressure to revoke section 58 or 59 [of the Diamond Act].Our agreement is up for negotiations next year,” Iyambo said.The two sections have remained dormant since Namibia enacted its own legislation governing the diamond industry, and the situation has been largely to the benefit of De Beers.The Government’s agreement with De Beers, a joint shareholder of Namdeb with the State, provides for Namdeb selling all the gems it mines only to the London-based diamond monopoly controlled by De Beers – the Diamond Trading Company (DTC).The DTC markets nearly all Namibian and Botswana diamonds raw (uncut) from its London headquarters.”A process of change has started and it has manifested itself in different ways.We are not saying to De Beers to pack and go, but there is room left for Lev Leviev to come in and do what he wants to do,” Gurirab was quoted in an interview with Business Day.Currently, Namdeb’s production is sold to De Beers, which mixes them up with stones from other countries and sells some of them back to factories in Namibia for polishing.The Lev Leviev Diamond factory, which was opened on Monday, will cut and polish gem quality diamonds from the Namibian shore and seabed before exporting them.A change in the present arrangement between the Government and De Beers could upset the cartel and caused a stir as happened two years ago when the Cabinet tried to change the arrangement.In May 2002, American diamond merchant Maurice Tempelsman wrote an extra-ordinary letter offering to raise US$80 million (N$800 million at the time) and to hand over N$500 million as a loan to cover the budget deficit.The loan was meant as a sweetener to the Government in return for an improved concession to De Beers and to dissuade the Cabinet from invoking section 59.The Cabinet had decided at the time to invoke the dormant part of the law allowing Government to bypass De Beers and sell diamonds on the open market to test its prices.Tempelsman is one of the most favoured clients – known as sightholders at the DTC – of De Beers.They buy gems from the monopoly but are given carefully selected packages containing a variety of quality diamonds.De Beers is said to use Namibia’s gems as “sweeteners” when selling its diamonds around the world because of their high quality.Iyambo suggested that the dormant parts of the law would only be invoked if there were not enough diamonds to supply the factories.It is not clear what option the Government will take when negotiating a new marketing agreement with De Beers next year, but industry players speculate that the diamond giant was worried.”We were told that it was not good to have a processing facility like yours too close to the mines.And you have taught us it is a lie.”The Prime Minister was speaking at a local hotel following the opening on Monday of one of the largest diamond polishing and cutting factories in Africa by Israeli tycoon Lev Leviev.Leviev has agreed to process Namibian stones at the factory before they are exported, which will be a break with the De Beers practices of the past.A South African newspaper reported that Gurirab “signalled a wind of change” for Namibia’s diamond industry.He reportedly said Government would even be willing to invoke a dormant section of the Diamond Act and force De Beers to supply gems to the polishing factories.Such a move would loosen the hold that De Beers has had on the Namibian diamond business for nearly a century.But the Minister of Mines and Energy, Dr Nicky Iyambo, said in an interview yesterday that the Government was not about to change things yet.”The Government is not under pressure to revoke section 58 or 59 [of the Diamond Act].Our agreement is up for negotiations next year,” Iyambo said.The two sections have remained dormant since Namibia enacted its own legislation governing the diamond industry, and the situation has been largely to the benefit of De Beers.The Government’s agreement with De Beers, a joint shareholder of Namdeb with the State, provides for Namdeb selling all the gems it mines only to the London-based diamond monopoly controlled by De Beers – the Diamond Trading Company (DTC).The DTC markets nearly all Namibian and Botswana diamonds raw (uncut) from its London headquarters.”A process of change has started and it has manifested itself in different ways.We are not saying to De Beers to pack and go, but there is room left for Lev Leviev to come in and do what he wants to do,” Gurirab was quoted in an interview with Business Day.Currently, Namdeb’s production is sold to De Beers, which mixes them up with stones from other countries and sells some of them back to factories in Namibia for polishing.The Lev Leviev Diamond factory, which was opened on Monday, will cut and polish gem quality diamonds from the Namibian shore and seabed before exporting them.A change in the present arrangement between the Government and De Beers could upset the cartel and caused a stir as happened two years ago when the Cabinet tried to change the arrangement.In May 2002, American diamond merchant Maurice Tempelsman wrote an extra-ordinary letter offering to raise US$80 million (N$800 million at the time) and to hand over N$500 million as a loan to cover the budget deficit.The loan was meant as a sweetener to the Government in return for an improved concession to De Beers and to dissuade the Cabinet from invoking section 59.The Cabinet had decided at the time to invoke the dormant part of the law allowing Government to bypass De Beers and sell diamonds on the open market to test its prices.Tempelsman is one of the most favoured clients – known as sightholders at the DTC – of De Beers.They buy gems from the monopoly but are given carefully selected packages containing a variety of quality diamonds.De Beers is said to use Namibia’s gems as “sweeteners” when selling its diamonds around the world because of their high quality.Iyambo suggested that the dormant parts of the law would only be invoked if there were not enough diamonds to supply the factories.It is not clear what option the Government will take when negotiating a new marketing agreement with De Beers next year, but industry players speculate that the diamond giant was worried.