“We are a little wiser now, than we were years ago. We know there is a market out there,” Namibia’s information minister Tjekero Tweya was quoted as saying by a local daily, The Namibian in June 2015 when it was reported that De Beers had “agreed in principle” with Windhoek to introduce changes in a new diamond sales and marketing contract.
The above quote captures the general feeling amongst politicians in Africa, particularly southern Africa, which produces the majority of the world’s diamonds, on the need to derive maximum benefits from their minerals.
With the countries having shackled colonialism and finding ways to empower the increasingly economically uncomfortable natives, there had been calls for value-addition.
As for Namibia the “wisening” moment, one might argue, came when Botswana successfully negotiated with De Beers for a 10 year sales agreement in 2011.
We shall look at this in detail later.
Dear reader, as you might have already learnt, Namibia and De Beers inked a new 10-year rough diamond sales agreement on 16 May, 2016.
The deal, said to be the longest ever signed between the two partners, provides for 15 per cent of Namdeb Holdings' run-of-mine production per annum to be made available to a government-owned independent sales company called Namib Desert Diamonds.
Namdeb Holdings was a 50/50 joint venture between the Namibian government and De Beers and was the parent company for Namdeb (land) and Debmarine Namibia (marine) production.
Reports indicated last year that Windhoek had demanded that 25-30 percent of the diamonds produced by Namdeb stay in the country for local cutting and polishing.
Namdeb’s rough diamonds were being exported to Botswana for aggregation by De Beers, while a small percentage was returned to Namibia to be sold to approximately 12 local sightholders via the Namibia Diamond Trading Company (NDTC), which was also jointly owned between the Namibian government and De Beers.
The deal would allow a “significant” increase in rough diamonds made available for beneficiation with $430 million of rough diamonds being offered annually to NDTC customers, the group said.
All Namdeb Holdings' “special stones” would also be made available for sale in Namibia under the deal, which took long to be concluded.
"This sales agreement…not only secures long-term supply for De Beers, but also ensures that Namibia's diamonds will continue to play a key role in national socio-economic development long into the future,” said De Beers chief executive Philippe Mellier.
Dear reader, at this point, I would like us to juxtapose the deals De Beers reached with Botswana and Namibia.
Table 1: De Beers rough sales agreements with Botswana and Namibia
It is clear, as shown in the table above that Namibia managed to get a 10-year deal as was the case with Botswana.
A newly formed government-owned diamond trading company, Namib Desert Diamonds, will get 15 percent of Namdeb’s run-of-mine production per annum.
The country managed to get started with that figure this year, unlike Botswana which was forced to start with a 10 percent of Debswana’s run-of mine production per year in 2011, which only accumulated to 15 percent this year.
Botswana also established a diamond trading company, Okavango, which had been auctioning rough stones since then.
Furthermore, Namibia managed to convince De Beers to support the local auctioning of “special” stones as opposed to shipping them out of the country.
Botswana didn’t have to negotiate for that as all diamonds mined by De Beers in Canada, Namibia and South Africa were exported to Botswana for aggregation as part of the 2011 sales agreement.
These together with Debswana’s output were sold in Gaborone at the monthly sightholder sales and online auctions.
Botswana managed to push De Beers to abandon its 100-year tradition of sending African gems to London for the simple reason that it had a 15 percent stake in the company.
The remaining 85 percent stake was owned by Anglo American, meaning no other country where De Beers mines diamonds had a stake in the group.
Secondly, Botswana, through Debswana, was also the largest contributor of De Beers’ diamonds in terms volume.
Debswana contributed 5.3 million carats during the first quarter of 2016 to De Beers’ total output of 6.9 million carats, while Namdeb added 444,000 carats.
De Beers Consolidated Mines (South Africa) and De Beers Canada contributed 932,000 carats and 162,000 carats, respectively.
In 2015, De Beers produced 28.7 million carats just shy of its production guidance of about 29 million carats.
Of this output, Debswana produced 20.4 million carats, while Namdeb Holdings contributed 1,8 million carats.
De Beers South Africa recorded an output of 4,7 million carats, while De Beers Canada added 1,9 million carats during the same period.
Clearly, Botswana had much clout compared to Namibia when it negotiated with De Beers, hence it managed to arm-twist the group into submission regarding the need to have diamond sales moved to Gaborone.
To their credit, the Namibians managed to get huge concessions from De Beers, which are not far from what Botswana got, despite their weak contribution to the group’s overall output, for now, when compared to their neighbours.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
