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KEYNOTE ADDRESS AT MINISTER'S ENGAGEMENT
SESSION WITH THE DIAMOND INDUSTRY
BY
HON. OBETH M. KANDJOZE, MP
MINISTER OF MINES AND ENERGY
HILTON HOTEL
March 27, 2017
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Hon Kornelia Shilunga, Deputy Minister
MME
Mr Simeon Negumbo, Ps of MME
Mrs Miina Auene- Gahutu, Acting
Diamond Commissioner
Mr Sihaleni Ndjaba, CEO of NDTC
Ladies and Gentleman,
Good Afternoon,
Please allow me to start this meeting by
taking the opportunity to wholeheartedly
thank you all for making the time to attend
this, the first of its kind, industry engagement
session. I see this as the first of many such
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engagement sessions with all the relevant
stakeholders in the diamond industry.
The Ministry of Mines and Energy together
with NDTC see you as key catalyst and
enablers of downstream diamond
beneficiation industry in Namibia and are
delighted that you made the effort to heed
our call for an honest and candid
engagement on some of the challenges
faced by the industry. The primary objective
this evening is for an open dialogue on a
number of issues and more importantly how
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we can work together in the quest to create
a conducive environment for sustainable
downstream beneficiation in Namibia.
Before I get into the specifics of today’s
meeting please allow me some time to
provide the following context.
As I am sure all of you are aware that the
Government of the Republic of Namibia and
De Beers signed the Diamond Sorting,
Valuing, Sales and Marketing Agreement in
May 2016 with one of the key outcomes
being the increase of the Local Offer
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Threshold to a price indexed annual amount
of US$430 million. In addition to the increased
Local Offer Threshold, the local diamond
cutting and polishing industry has seen NDTC
offering all the +10.8cts (including
Exceptionals) to its customers in Namibia.
It is the Namibian Government’s expectation
that the changes stated above are
anticipated to have a significant positive
impact on the growth and long-term
sustainability of the Namibian cutting and
polishing industry. Other expected benefits
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include increased opportunities for job
creation and skills transfer, investment in
infrastructure (including technology) and
further integration and empowerment of
Namibian citizens at all stages of the
diamond value chain.
Esteemed NDTC Sightholders and industry
stakeholders, let me assure you that the
Namibian Government considers sustainable
downstream diamond beneficiation activity
as crucial to achieving the national
development objectives and goals as set out
7
in the National Development Plan (NDP 4 -5)
and the Harambee Prosperity Plan. It is for this
reason that the negotiations between the
Government and De Beers took the better
part of two and a half years.
I am very happy to report that NDTC
implemented in full provisions of the new
Agreement in October 2016, with you the
NDTC Sightholders seeing the impact of the
Agreement as of November 2016. On the
back of this and the sustained improvement
in market conditions compared to 2015,
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NDTC achieved record beneficiation sales for
the year 2016.
Having said this, I am sure you will understand
my disappointment when the Department of
Diamond Affairs brought it to my attention
that a significant proportion of the rough
diamonds sold by NDTC to its customers in
2016 has been typically exported instead of
being cut and polished in Namibia. Based on
export data provided to me by the Office of
the Diamond Commissioner only about 20%
of the total beneficiation sales made by
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NDTC during 2016 was processed in locally. I
would like to make it categorically clear that
the current trend of high rough exports is of
grave concern to the Ministry of Mines and
Energy and the Namibian Government.
We do appreciate the need for a flexible
business environment that allows you to
manage your Namibian businesses in a
sustainable manner; however the practice of
exporting in some cases 100% of the rough
diamonds meant for beneficiation purposes
is in our view totally against the spirit of
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beneficiation and I would like to put it on
record that we condemn the continuation of
this practice in the strongest of terms.
Furthermore, it is our belief that the continued
mass exports of rough diamonds sold for the
purposes of beneficiation is not only a loss to
Namibia but more importantly totally
undermines the concerted efforts
Government is making to eradicate poverty,
unemployment and improve the lives of
ordinary Namibian citizens. I would hereby
like to make a plea to those that are
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exporting a significant proportion of the
rough purchased from NDTC to reconsider
this practice and to refocus their efforts on
working closely with the Ministry and NDTC in
addressing some of the challenges that the
country is currently facing.
Some of you might well argue that although
you have exported a large proportion of the
rough diamonds purchased from NDTC you
continue to keep employees on your payroll;
however it is our view that just having
employees on your payroll and having them
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come in every now and then is neither
conducive to an environment that allows for
effective skills transfer nor is it sustainable. The
question that I have is how we as an industry
can talk about meaningful job creation and
skills transfer if a large proportion of the rough
diamonds meant precisely for this purpose
continues to be exported?
It is within this context that Government as a
shareholder in NDTC could no longer stand
by and support a rough distribution strategy
that does not take into consideration the
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level of rough diamond export in 2016 and
the negative impact that it has on the
diamond beneficiation aspirations of the
Namibian Government. It is on this basis that
we requested NDTC to come up with an
methodology and approach that takes into
consideration each respective Sightholders
rough exports when determining the level of
rough diamond allocation for the 2017/2018
ITO Selling Period. I can confirm that the
approach taken by NDTC has, in the same
way that it has reduced the allocations of
those Sightholders that have exported a
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large proportion of their purchases, resulted
in an increase in the allocation of those
Sightholders that have processed more of
their rough purchases in Namibia.
Testament to the fact that the allocation
methodology and process fully supports
Government’s objective of seeing more of
NDTC beneficiation sales going to those
Sightholders that process a larger proportion
of the purchases in Namibia.
What we are effectively saying is that just
purchasing rough from NDTC is no longer
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sufficient and we demand to see the
increased rough diamond supply levels from
NDTC translating into increased beneficiation
activity on the ground.
NDTC in an effort to further support
beneficiation activity will from now on be
offering a part of its ITO availability as a
Beneficiation supply allocation. Your ability to
compete for a beneficiation supply
allocation will be based on how well your
Namibian operations performs in respect to
the agreed Beneficiation Criteria relative to
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the rest of the Sightholder operations. What
this effectively means is that Government
would like to see that an increase proportion
of NDTC’s supply goes to those Sightholders
that continue to dedicate a larger proportion
of their purchases from NDTC towards their
beneficiation activities in Namibia. I can
assure you that the Ministry, as the
Government entity primarily responsible for
the successful delivery of downstream
beneficiation objectives, will be monitoring
and holding NDTC accountable in this
regard.
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You would have noticed that NDTC
introduced a minimum supply level of US$15
million. The objective of the minimum supply
level is to start off all Namibian factories at a
level of supply that ensures reasonable
viability and sustainability. Having said that, it
is also important to highlight that it is up to
each respective Sightholder to either
maintain or increase the annual allocation
from NDTC. I want to make it clear that NDTC
will not continue to allocate at minimum
supply levels to those Sightholders that either
through non purchases or significant export
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levels receives an allocation that is below the
minimum supply levels. I am sure you would
agree that this is tantamount to supporting
non-performance. To this end, the minimum
supply level will only be applicable for the
2017-2018 ITO Selling Period and that in
subsequent ITO periods the only two
considerations in determining the level of
allocation will be the Sightholder’s ability to
purchase and process in Namibia the rough
offered by NDTC in support of its downstream
beneficiations activities in Namibia.
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We do understand that some of these
measures/approaches may not have been
expected at this stage; however it is our view
that it shouldn’t come as a surprise as these
are not totally new concepts and more
importantly it underpins the overall
expectation that a larger proportion of rough
diamonds supplied by NDTC should be
utilized towards supporting increased
beneficiation activity on the ground. I
sincerely hope that when we review the
situation in October 2017, we will see a
positive impact as a result of concerted
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efforts from the industry to process more of
the purchases from NDTC in Namibia.
Finally, we understand and appreciate that
downstream beneficiation in Namibia can
only be successful on the back of a successful
tripartite partnership between the
Government, NDTC and the cutting and
polishing industry. Further to this, there is
appreciation the Ministry’s part that
Government needs to play an active role in
helping to create a conducive environment
that will support sustainable growth of
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downstream beneficiation in Namibia. To this
end we will be focusing on the following
initiatives over the next few months:
1. Effective monitoring of rough exports
and imports:
We understand the importance of timely
and accurate monitoring of rough
exports and the Office of the Diamond
Commissioner has over the last few
months been working very closely with
NDTC in strengthening the Department’s
ability to monitor rough exports. The
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Acting Diamond Commissioner and her
team will in due course communicate
additional measures aimed at making
this process much more effective and I
urge you to please support the team in
this regard.
Some of you have also raised, both with
the Department and NDTC, your
concerns around the fact that NDTC’s
allocation process does not at this stage
take into consideration import of rough
diamonds to either augment or
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supplement the rough purchased from
NDTC. I do appreciate that rough
imports ultimately supports beneficiation
activity on the ground and have tasked
the Department and NDTC to come up
with a solution around this. I would
however like to make it clear that we will
under no circumstance entertain a
situation where this is taken advantage
of and will once again like to request
your support in making whatever
solution we come up with work to
everyone’s benefit.
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It has been resolved that the Office of
the Diamond Commissioner and NDTC
will share relevant data on a regular
basis so as to enable meaningful
conversations between all concerned
parties throughout the year.
Kindly take note that the Department, in
particular the Diamond Inspectors, will
undertake regular visits to the factories
to ascertain the state of each factory
and the industry in general. In addition to
this the Department will undertake an
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official biannual technical verification
visit in conjunction with NDTC.
2. Exploring ways to streamline the process
governing the movement of rough
diamonds within the borders of Namibia:
This is an issue that has been highlighted
on a number of occasions by the
industry and we fully understand the
impact that it currently has on the length
of the manufacturing cycle in Namibia.
We will be engaging with Customs and
PRU to see how we can streamline this
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process whilst at the same time making
sure the industry continues to adhere to
the provisions of the Diamond Act.
3. Support services to the industry:
During a number of consultation
meetings with NDTC and the
Department, the industry has highlighted
the lack of funding and the fact that
none of the grading laboratories have a
presence in Namibia as two major
factors that are hampering and/or
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could further hamper the growth of the
cutting and polishing industry in
Namibia. In an effort to enhance and
improve the services provided to the
Namibian cutting and polishing industry,
I have tasked a team made up of
colleagues from the Directorate and
NDTC with the mandate to engage with
various financial institutions and grading
laboratories with the expressed aim of
finding solutions to this issue. In the
meantime Government will also explore
alternative funding mechanism aimed
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at easing some of the funding pressures
the Namibian industry is currently facing.
Allow me to conclude by thanking you for the
effort that each and every one has made so
far in helping Namibia on the journey to
realizing its aspirations of developing a
sustainable downstream diamond industry.
We have come a long way from exporting
the vast majority of our diamonds to seeing a
large proportion of our rough diamonds
offered and sold in Namibia and more
importantly contributing to the betterment of
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ordinary Namibian citizens. Having said this
we have more to do and we all need to
refocus our efforts in order to take the industry
to the next level. I am a firm believer in
partnership but of course being partners also
means having challenging conversations no
matter how difficult it may be as long as it is
done in a manner that promotes progress. It
is within this spirit of partnership that I would
like to urge you to continue engaging with
the Acting Diamond Commissioner and her
team at the Ministry as well as with NDTC on
issues effecting your businesses in Namibia. I
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would also like to suggest that we make these
engagement session a standing
arrangement.
THANK YOU.