Diamond-cutting industry in murky waters As 1300 jobs hang by the thread

About 600 to 1300 workers in the diamondpolishing and cutting industry in Namibia have their jobs hanging by a thread because of the high cost of production which has left about 12 companies in hibernation, The Villager can reveal.

There are about 16 registered diamondcutting and polishing companies in the country. The lucrative industry employs 600 people on usual days, and easily reaches between 1200 and 1300 during peak periods.

Investigations done by the paper in the past week show that only four diamond-cutting firms are operating at full capacity because the price of acquiring rough diamonds has soared beyond the reach of many.

Remedies needed Chamber of Mines of Namibia (CMN) president and also Managing Director of Sakawe Mining Company and Lev Leview Diamonds (LLD), Kombadayedhu Kapwanga concurred that the diamond-cutting and polishing industry is in murky waters, although he could not give much away.

“The issues you are raising are very pertinent and true. The industry is going through rough times, but Government is working on these issues. In fact, the minister really dwelt on this together with the Diamond Commissioner in the past, so we foresee a change in the future,” Kapwanga said.

Global phenomenon While the scenario is not peculiar to Namibia, most diamond-cutters who spoke to The Villager both officially and on condition of anonymity revealed that most employees are going to work and being remunerated for doing nothing, and also raised the alarm that should the volatility in the diamondcutting industry continue, it might not be long before the industry starts shedding labour.

Ironically, India and China, which also have large- scale cutting and polishing industries, are also facing challenges. But they have managed to withstand the downside risks associated with market challenges because of the size of their economies.

Government’s cash cow Viewed as a woman’s best friend, diamonds have been carrying the Namibian economy with huge cash injections to State coffers through royalty and tax payments. However, the cutting and polishing industry which has potential to employ many youths, even those who benefit from on-the-job training, is just not shining bright anymore. 

In fact, the diamond industry is viewed as one of the largest contributors to State coffers from downstream production. Statistics published by the Chamber of Mines of Namibia show that the diamond industry contributed a whopping N$10.87 billion to the Namibian economy in the 2014/2015 financial year, although the figure does not show a breakdown on how much mining brought in as compared to the cutting and polishing division.

Most of the diamondcutting and polishing experts also feel that there is need for Government to come up with modalities which will feed the local diamond-cutting industry to sustain its operations in trying times.

“This is most likely to be a temporary situation, and one that is also not only affecting us alone, but all the industry players worldwide. We are literally in hibernation, and to be honest, there are only four or so companies which are viable. Some of the companies are just open and employees coming to work, but the cost of production is not good to maintain production. We will see how the situation improves in the future, but the days are not as rosy anymore,” said a General Manager of one cutting and polishing firm, who spoke to The Villager on condition of anonymity.

Although the mining sector contracted in real terms, CMN noted that significant investments by the industry continued in 2014. Chamber statistics show that fixed investments doubled from N$8.5 billion in 2013 to N$17.26 billion in 2014. Of this, Swakop Uranium injected approximately N$11 billion into the Namibian economy, which equates to approximately 7.5 percent of Namibia’s nominal GDP.

Statistics also reveal that in 2014/15, the Ministry of Finance (MoF) received taxes from the mining industry totalling N$1.97 billion from diamond mining, and N$71.2 million from other mining activities, according to their preliminary figures. Diamond royalty tax contributed N$734.8 million, and royalties from other minerals provided N$117.4 million to the fiscus.

Total revenue received from mining in 2014/15 amounted to N$3.6 billion, a significant increase from the N$1.45 billion collected in the previous financial year. According to statistics produced by the Chamber of Mines, in 2014 the mining industry paid out a total of N$3.39 billion in corporate taxes and royalties, a 22.8 percent increase from the 2013 total of N$2.76 billion.

Better fortunes Responding to a question-and-answer session on NBC’s Business Today, Diamond Commissioner Kennedy Hamutenya acknowledged challenges faced by the diamond polishing and cutting industry, although he says the future will be brighter. The Diamond Commissioner also told the State broadcaster that the problem in the diamond-cutting industry is not a Namibian scenario alone.

“The option might also be in subsidising this industry, but how practical is this, bearing in mind that it will cost a lot of money from taxpayers?” he said rhetorically.

Hamutenya, however, revealed that the country’s diamond mining is benefiting from the weak exchange rate as this will bring in more money. He said while the cutting and polishing industry might be doing badly, the mining part of the industry is enjoying a better period, and the future certainly remains bright.