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Covid takes bite out of Namdia’s profit

2021-11-08  Maihapa Ndjavera

Covid takes bite out of Namdia’s profit
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Namib Desert Diamonds (Namdia) full year profit after tax amounts to N$13.3 million, which is down by 86% from the prior year’s N$95.2 million. The company’s performance from the sale of rough diamonds amounts to a profit after tax of N$44.2 million, mainly as a result of the state of the diamond market in times of the Covid-19.

During the year under review, the entire diamond industry witnessed reduced diamond production and output. Group CEO Kennedy Hamutenya said this was largely due to the closure of diamond mines, disrupted supply chains and the impact on the workers as a result of the pandemic. The Covid-19 and lockdown of several countries around the world adversely affected the diamond industry.

According to Namdia’s newly released group annual report for 2020/21, some N$32.3 million was paid in taxes to the finance ministry which also received a dividend of N$40 million for the year under review. Hamutenya noted due to various factors, Namdia managed to achieve a profit of N$73 million before tax.  Furthermore, he stated in respect of rough diamonds, all parts of the diamond supply chain were severely impacted by the global lockdown measures introduced in response to the pandemic in the first half of 2020. 

“Rough diamond sales have also been materially affected by lockdowns and travel restrictions, delaying the shipping of rough diamonds into cutting and trading centres and preventing buyers from attending sales events. Because of the heterogeneous nature of the product and the myriad of offerings available, it is imperative that diamantaires physically view the product they are purchasing, especially in the high value categories that typify the Namdia assortments,” explained Hamutenya.

Subsequently, the CEO stated the volume of transactions has been minimal due to the travel restrictions and ultimately a lack of downstream demand as closed jewellers have no need to replenish inventory. He further explained that in response diamond mining companies reduced production and offered significantly increased flexibility to customers. 

“Due to the crisis, major mining companies adopted a price-over-volume strategy and took initiatives to support the midstream segment of the value chain. They reduced rough diamond production and allowed customers to defer purchases,” Hamutenya elaborated.

In Namibia, rough diamond production decreased by 15% to 1.4 million carats, mainly due to the suspension of marine mining during part of the third quarter of 2020 in response to lower demand. Debmarine Namibia, the company that produces the disproportionate value of Namdeb production, also took advantage of the downturn to in port their vessels to dry dock facilities in Cape Town for what is usually a phased service: “Production at the land operations decreased by some 21%, largely as a result of the Covid-19-related shutdown”.

Bryan Eiseb, Namdia board chairperson, stated that rough diamonds negative impact from the pandemic resulted in reduced demand which led to a decline in sales volumes and softening of prices. Looking ahead, Eiseb said the board will approve and ensure the implementation of the Integrated Strategic Business Plan (ISBP) for the period 2022 - 2026. “The board is expecting the diamond industry to recover fully as we have seen the diamond trade picking up during the last quarter of the period under review, with optimism, following a relatively successful holiday season. Looking into technology: One of the key technological outcomes as a result of the pandemic is to ensure that Namdia’s systems permit us to sell diamonds. The board will ensure that management procures and implements an online trading platform that can be utilised for the sale of diamonds, ensuring the continuous smooth operations of the group,” he outlined.

2021-11-08  Maihapa Ndjavera

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