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NAMIBIA DIAMOND TRADING COMPANY

www.debeersgroup.com

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Moves by Namibia to capitalise on its extensive diamond resources have stepped up a gear since the creation of the Namibia Diamond Trading Company. Andrew Pelis talks to CEO Shihaleni Ndjaba to find out more

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amibia has long been renowned for its extensive diamond resources, yet until recently its reputation for turning rough diamonds into gems was far from the finished article. All that changed in 2007 with the creation of the Namibia Diamond Trading Company (NDTC), a business that focuses on sorting, valuation, sales and marketing the country’s most glittering resource.

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N a m i b i a D i a m o n d Tr a d i n g C o m p a n y

N a m i b i a D i a m o n d Tr a d i n g C o m p a n y

“The company is relatively new and its main function is to sort, value and sell diamonds produced by Namdeb (the joint venture responsible for all mining activities in Namibia),” NDTC’s CEO Shihaleni Ndjaba explains. “We are a fifty/fifty joint venture between De Beers and the Namibian government.”

De Beers and the various companies within the De Beers family of companies are in the diamond mining, diamond trading and industrial diamond manufacturing sectors. It is by far the largest company in all these categories and is active in every category of diamond mining: open-pit, underground, large-scale alluvial, coastal and deep sea.

Namibia had been seen as a centre for diamond mining for many years; however, Namdeb’s entire production was exported to London for aggregation purposes. So in 2007, De Beers and the Namibian government decided to pool resources with the view of building the country’s profile and generating dividends that could be reinvested into the Namibian education and health systems.

“One of the key considerations for creating NDTC was to increase diamond value addition activities within Namibia, using Namibian skills,” Ndjaba says. “Today we run a training academy with a focus on two categories: generic management (which requires an understanding of diamonds, the diamond pipeline and marketing) and the technical aspects. The technical issues are very important to us and the people sorting the diamonds. Providing valuations needs an in-depth technical knowledge in order to differentiate the different colours and qualities of each diamond,” Ndjaba emphasises.

The sorting process is a mixture of automation and manual techniques and Ndjaba says that NDTC operates within De Beers’s guidelines, which provide assistance in the art of sorting diamonds by shape, clarity and size. “Each individual goes through several months of training until they are fully conversant on diamonds, and we also provide continuous refreshment courses.

This has been an important development tool and is good for Namibia as it is introducing new skills to the country—as we didn’t previously have these efforts to add value to the diamonds.”

It has also played an important role in ensuring that each of the sightholders (purchasers of the

“One of the key considerations for creating NDTC was to increase diamond value addition activities within Namibia, using Namibian skills” diamonds) has the right schedule information and that diamonds arrive on time, so that NDTC does not lose out to its rivals. “We also purchased state of the art machinery in 2007 that helps us to determine the colour of each diamond. In addition, we recently updated the software linked to this machinery,” adds Ndjaba.

Among the changes that the move brought about was a focus on selling to companies within Namibia. “Previously all of the diamonds were sold to sightholders in London, but today we supply over N$1 billion worth of diamonds which includes unaggregated diamonds equal to 10 per cent of the value of Namdeb’s production to the Namibian market,” Ndjaba continues. “We have forged links with local companies who have trained Namibians in skills like cutting and polishing of diamonds.

Today we have selected eleven local companies as sightholders, who we supply diamonds to on a regular basis.” The required level of competency was not readily available in Namibia; and NDTC initially involved individuals from renowned diamond cutting countries like Belgium, India and Israel to share their knowledge with the local workforce.

NDTC is located in Namibia’s capital city of Windhoek and with one exception the sightholders are situated in close proximity. The relationship between the parties has proved successful, in spite of the economic downturn, which Ndjaba says hit hardest last year. “2009 was a nightmare for many businesses and the diamond industry did not escape. There was a demise in the price of diamonds, especially in the United States (our biggest market), but we managed to pay out dividends regardless.

“As our sightholders have gained more experience, they have been able to add more value to Namibian diamonds. In April this year we announced plans to offer a one year extension to their current three year supplier of choice [SoC] contracts in order to give the companies more time to concentrate on their recovery efforts. The extension will start on 31st March 2011 and run until 30th March 2012.”

The result of this stability has paid dividends for shareholders and Ndjaba says that both the De Beers family of companies and the government have received good shareholder returns off the back

of the operation’s quick success. However, despite the return on investment, 2009 was a challenging year and saw the company reduce its workforce from around 105 to just over 70 employees.

On a more positive note, Ndjaba feels the industry may now be turning the corner. “We have seen a marked improvement in the markets this year and comparing last year to 2010 is like comparing zero to a lot,” he asserts. “That said, we will remain cautious for now with our business approach.”

One of the initiatives that NDTC is party to is an aggregation policy whereby the sorted diamonds from Namibia and neighbouring Botswana and South Africa arrive in London before being aggregated according to size and shape. A certain amount of these goods are then brought back to Namibia for the local market. This supports the efforts of the government and De Beers to develop a sustainable local downstream diamond industry in Namibia; and the manufacturing jobs the move has created will support the country’s economic imperative to drive job creation and value creation from its diamond resources. “We have already helped to create employment through the supply of diamonds locally, while the dividends we pay to the government help to fund the construction of hospitals and schools,” Ndjaba reflects.

With government investment ensuring Namibia has an excellent transport infrastructure, Ndjaba says that the country has a distinct advantage and that this is an attractive proposition for overseas investment in the country.

NDTC has also worked on several ad-hoc social programmes and in recent years has assisted people displaced as a result of terrible floods that engulfed areas of Namibia. As Namibia develops its own infrastructure, businesses like NDTC have an integral role to play. “We have the idea to create a local Namibian brand; and when we started out, it was important to tell the world what we do and how we differentiate from Namdeb. We still need to do more work on this and ultimately want to see NDTC as a leading diamond marketing company in the world.

“We want to build a vibrant diamond polishing, cutting and manufacturing sector in Namibia and help to establish the country as a diamond centre,” he concludes. www.debeersgroup.com

N a m i b i a D i a m o n d Tr a d i n g C o m p a n y

NAMIBIA DIAMOND TRADING COMPANY

www.debeersgroup.com