Dull diamond future - BoN
The euro zone problems are catching up with diamond producers in Namibia.
Europe is the major consumer of N amibian gems although the country has also been trying to open up other markets.
Diamond production nets 5% of Namibia’s Gross Domestic Product with Namdeb netting close to N$500m in profit last year from 1.5m carats.
BoN Governor, Ipumbu Shiimi said the ongoing uncertainty in Spain, Greece and Italy will have adverse effects on the diamond sector.
“It has reduced the buying power of most of the luxury consumer items especially on issues like jewelery,” said Shiimi.
According to the BoN industrial action also affected Namdeb’s operations last year to the tune of close to N$120m.
The bank also says the effects of the industrial action could take longer than usual to be curbed if the ongoing market unrest continues worldwide.
Shiimi reiterates that the effects of the debt crisis which are reminiscent of the 2009 global economic crunch started gripping the diamond industry in the mid 2010 and the trend is expected to continue for an uncertain future although he maintains diamond production will be stimulated when the demand swells.
The issues of possible reduction in previous mineral earnings also comes at a time when Namdeb, which is in a 50-50 venture with the Namibian Government, has been trying to expand the life span of its mines to 2015 amid hopes that onshore diamonds in the country are running low.
“Economic activities in the emerging economies remained weak mainly as a result of a moderation in export volumes due to suppressed global demand. In this context, growth in China weakened to 8.9% in the fourth quarter of last year as compared to about 9.1% in the preceding year. This slow growth in the developed market has not gone unnoticed by emerging economies especially in the extractive sector,” Shiimi said.
According to the BoN and statistics released by the Central Bureau of Statistics, the mining sector as a whole also suffered heavy loses to the weather uncertainities including floods last year.
This has seen production in the diamond mining going down and the country failing to capitalise on the market when demand was high.
Diamond production is also one of Namibia’s largest employers directly and indirectly with most diamond cutting firms in the country relying heavily on the locally produced gems to keep their balance sheets ticking.