There is an old axiom, which says “funny how things change” and when one compares what was the state of diamond mining in Namibia last year to the current situation, this maxim comes in handy.
By this time last year, Namibia’s diamond mining industry had gone on the so-called production holiday, all in a desperate bid to salvage mines, which were teetering on the brink of total collapse.
On the other hand the country's leading diamond mining company, Namdeb was busy laying-off its workforce to break-even.
It was not surprising it reported last May a 555 million NAD (73 million USD) loss before tax in its annual results of 2009.
Its sales plummeted by 25 percent, while revenue from sales dropped by 40 percent and came to 3.37 billion NAD (429,5 million USD), against 5.65 billion NAD (712 million USD) in 2008.
The diamond miner’s production in carats also slumped by 56 percent in 2009 compared with the previous year.
However, if one looks at the current state of diamond mining in Namibia it can be safely concluded that the fortunes of the industry have changed for the better.
Diamond production figures released recently by Namibia’s mines and energy ministry show that the country’s diamond output for the first five months of 2010 was more than half the entire output recorded last year.
It said production levels reached 580 000 carats during the period (between January and May), compared to 929 006 carats produced the whole of last year.
Diamond production increased by 2.9 percent in the first quarter of 2010 compared to the last quarter of 2009.
It said production levels reached 580 000 carats during the period (between January and May), compared to 929 006 carats produced the whole of last year.
Diamond production increased by 2.9 percent in the first quarter of 2010 compared to the last quarter of 2009.
It stood at 298, 000 carats, a 138.1 percent rise compared to the same period last year.
The mines ministry attributed the increase in production to a positive sentiment returning to the diamond industry following a bashing by the global financial crisis, which forced demand for gems downwards by about 60 percent.
Reuters cited Bank Windhoek economist, John Steytler as saying that if the current production trend was maintained, the southern African country would likely produce over a million carats this year.
"If current production levels continue during the remainder of the year, total diamond production could reach a respectable 1.4-million carats, an increase of 48 percent over 2009,” he said.
He further noted that the levels in diamond production would recover to the strength of 2007, where over 1.1 million carats were mined and produced within the first five months of the year.
The mines ministry also noted that over the first quarter of 2010, diamond sales had reached 239,000 carats, which is 193 percent higher than the amount recorded during the same period in 2009.
Sales throughout April and May stood at 216,000 carats, which brought the total number of carats sold for the first five months of 2010 to 455,000 carats.
Diamond royalties also rose by 169 percent during the first quarter of the year, in contrast with the same period last year.
"This sharp increase over the year is still far off the pre-crisis first quarter average of (117 NAD million or 15,6 million USD)," Steytler was quoted as saying.
The Namibian economy just like that of Botswana is heavily reliant on mining, which contributed 12 percent to the county’s GDP in 2009.
When the mining industry is in trouble, the economy suffers too and the reverse is true.
Namibia's central bank last month left its repo rate flat at 7 percent amid signs the country's economy was convalescing.
The central bank had cut interest rates by 350 basis points between December 2008 and June last year to try to boost abating growth, as the downturn had hit demand for mining exports.
"Good performance is expected to continue, especially in the primary sector, which is driven by improved global demand and firmer export prices as a result of global economic recovery," said Bank of Namibia Governor Ipumbu Shiimi.
He said the economy would likely grow by an estimated 4.2 percent this year on the back of a recovery in commodity prices, after a 0.8 percent contraction in 2009.
“There is an improved demand and the economy is gaining some momentum. Some real sector indicators are performing well and we expect this trend to continue ... We see commodity prices increasing and there are some positive developments around inflation," he added.
There is no doubt that halcyon days are slowly coming back to Namibia’s diamond industry, and indeed to that of other diamond producing nations, such as Botswana.
Botswana, which saw its diamond exports falling by 31 per cent to 2.18 billion USD, in 2009, said exports of gems in the southern African nation for the month of May had accrued 255.1 million USD.
It said this was a 9.2 percent increase when compared to April when the southern African country exported 233.6 million USD worth of diamonds.
Botswana’s diamond exports totaled 1.25 billion USD between January and May this year, the central bank said.
Recent forecast of the global market show that diamond prices and production would likely go up close to pre-crisis levels.
The Russian diamond-mining giant Alrosa projected that rough diamond production would return to 2008 levels (165 million carats) no earlier than 2015.
It said output would be expected to be between 165 and 167 million carats per year as a result of a limited supply of new projects and depletion of existing mines, adding that demand would be expected to grow by 33 percent over the next eight years.
Namdeb also said it expected a recovery in 2010 but was quick to point that it would continue to take a cautious and prudent approach to production and sales due to what it called the sensitive state of the global economy.
Mathew Nyaungwa, Rough&Polished, from Namibia
