Namdia should have happened 20 years ago … An exclusive interview with Namdia CEO Kennedy Hamutenya
Since Namib Desert Diamonds (Namdia) was established by government in 2016 it has come under fire from various quarters. Critics of the new diamond trading entity, which was basically started to search for better prices for Namibia’s high-quality gem diamonds, have accused the company of selling the country’s diamonds for below market value and of selecting a valuation company with little to no experience in the industry. An alleged disagreement between the board and CEO Kennedy Hamutenya, and the mines ministry, also played out in the media as unsubstantiated reports of a power struggle ensued. This week New Era’s Senior Business Reporter, Edgar Brandt (EB), sat down for an exclusive interview with Hamutenya (KH) to clarify Namdia’s role in the market and to provide some insight on the alleged power struggles. EB: What does Namdia’s operations entail? KH: Namdia’s key objective is to serve as a price discovery mechanism for the Namibian Government. This essentially means that although there is a real appetite for the highest gem quality diamonds Namibia offers, there is a real need to find out what the discerning markets are really willing to offer and are offering for these disproportionally high quality stones, which for the most part have hitherto been sold only in mixed parcels – (meaning that they are mixed with low quality stones from other producing countries) and therefore, in effect subsidizing the diamond industries of those other countries. Therefore, Namdia participates directly in the diamond value chain by trading and distributing its allocation (which it buys) of Namibian rough diamonds to discerning international markets, obtaining attractive margins in the process. In short then, Namdia trades in Namibian rough diamonds directly into the international market without using middlemen and not through De Beers as is the case with the rest of the 85% of the diamonds marketed and sold through them. EB: How exactly are Namdia’s operations different from NDTC? KH: We are different from NDTC in a number of ways. The NDTC provides an invaluable service to Namdeb Holdings (Pty) Ltd in that it receives all the diamonds mined from the various Namdeb mines in what is called run-of-mine form (unsorted and unvalued). It then performs the arduous task of sorting the diamonds and putting them into some 13,000 different categories or price points using skilled and highly trained people and machines based on the four diamond characteristics or 4Cs. In line with the agreement between the Government of the Republic of Namibia and De Beers, NDTC then sells those diamonds, on behalf of Namdeb Holdings to 1) De Beers for their 85% entitlement and 2) To Namdia for its 15% entitlement of the goods. De Beers in turn sells some of its entitlement, about US$430 million worth of goods per annum including some mixed diamonds from other countries, to the diamond manufacturing companies (sightholders) in Namibia and takes some of those goods to Gaborone to be mixed with other diamonds from that country, South Africa and Canada (so-called “aggregated goods”). EB: So, how are the two entities’ operations different? KH: NDTC is not involved in direct sales to the international market. But Namdia does sell directly into the international market. NDTC is owned 50% by De Beers and 50% by the Government of the Republic of Namibia. Namdia is owned 100% by the Namibian government. Therefore, a key difference is that Namdia is a 100% sovereign company with no foreign ownership. Our policies, strategies and decisions are sovereign-driven. Namdia also does not deal in or handle diamonds mixed with those of other producing nations. We sell diamonds mined exclusively from Namdeb Holdings’ mines. When a client is buying Namdia diamonds they can be guaranteed they are buying 100% Namibian-mined diamonds. This is particularly important for those clients who want to give assurance to their end user client that they know the source of the diamond – that it was not involved in child labour; that it is not tainted as a conflict or blood diamond and that it has no links with money laundering or financing of terrorism. The modern consumer is very discerning and highly informed and they take these matters (Good Practice Principles) very seriously – especially millennials who form a big percentage of diamond consumers. EB: Does Namdia compete with NDTC or how do the two entities complement each other? KH: I have just explained our major differences. Namdia operates outside of the confines of De Beers pricing mechanisms and outside of the De Beers sales and marketing channels. The NDTC complements us in that they sort and help to put value on our own diamonds before we buy them. Otherwise we would have to do that tedious work ourselves. We only compete with NDTC in that the volume of goods we are now selling would have been sold through them and therefore there is that opportunity cost on margins derived from our 15% allocation, and also maybe compete for knowledge and skills. But at the end of the day we have more in common because we are both involved in the process of adding value to our diamonds and maximizing value to our shareholders and stakeholders. In fact, NDTC must be commended for helping in the establishment of Namdia as they allowed us to use their facilities whilst we are busy setting up our own logistical base. The other difference is that the proceeds from our sales exclusively benefit the Government of the Republic of Namibia (the shareholder) but at the NDTC we have to split everything in half – to De Beers and to the Namibian government. Also we do not sell to local sightholders. The NDTC is tasked to sell to local sightholders (local diamond cutting and polishing factories) in line with the provisions of the agreement between GRN and De Beers. In fact US$430 million worth of diamonds were earmarked for local manufacturing – which is actually an increase from the US$200 million in the previous agreement which lapsed on 16 May 2016 when we signed the new agreement. Our 15% or a minimum of US$150 million was earmarked for international sales and not for the local market. This was a deliberate policy decision by the government in order to make inroads into the international market and reduce our reliance on the middleman in selling our stones. This was done to give us better insights into this very secretive and opaque industry. It was also done to increase our skills, our capacity to value and to negotiate and sell our own diamonds ourselves as Namibians. This was done bearing in mind that diamonds are an economically strategic commodity, which contributes disproportionally to our state coffers. It therefore only makes sense that we develop our skills, knowledge and capacity to market and sell our own diamonds instead of relying on a foreign multinational company. Angola sells its own diamonds and has offices in Antwerp, Hong Kong and Dubai, but we Namibians seem to have a diamond phobia and would rather trust someone to do it on our behalf. Zimbabwe is also selling its own stones although they are new to the diamond world. Namdia is a brave idea and a revolution that should have happened 20 years ago. Better late than never though and finally we are pushing sovereignty over our natural endowment of resources to a new plateau. EB: In terms of the set-up of Namdia, have all strategic positions been filled and when will the corporation have a full staff complement? KH: Namdia’s Human Resources Development Plan (HRDP) has been developed and presented to the board of directors, which has approved it. Namdia is now in the process of recruitment and selection to fill some posts. I say some posts because our structure reflects our ambitions and we know that we cannot fulfil our ambitions overnight. We had a candid discussion with our Minister of Public Enterprises and he advised us to resist the urge to create a bloated structure. Therefore, we resolved not to fill all positions on our structure but to fill positions in line with our needs. We strive to operate with a lean and mean structure. However, we cannot compromise on security and the quality of our sorting and valuation services that feed into our selling operations – our core business. But we do not intend to fill positions just for the sake of creating employment. We are a very technical and specialized diamond-selling and marketing organization and so we are not able to employ people en masse as you would typically see with a mining operation. Therefore, we are filling positions in phases and in line with the growth trajectory of the company and as needs arise and the job becomes complex. The management positions are all filled and we are now busy recruiting at the next level. The process is a bit slow because we are deliberately seeking human gems that will be the right fit for our new organization. You must also bear in mind that we sell diamonds – and a diamond is the smallest product with the highest concentration of value. Some people want to join our organization for the wrong reasons and therefore we are doing a lot of due diligence and security checks on people before we hire them. It doesn’t matter how good you are at IT, if you stole a sweet from Shoprite in 1998 or whenever we are just not employing you. We do not compromise when it comes to security, honesty and ethics. Yes, we do use lie detector tests and check people’s backgrounds profoundly and robustly. EB: In terms of compliance, legitimacy and transparency how exactly does Namdia operate within the global diamond market? KH: We had “deep-dive” sessions on all the international and local legislation, regulations and accords that Namibia has acceded to. We are cognizant of the fact that in order to protect our brand and our position in the market we must be compliant with all legal and other requirements and contracts. Namdia is a signatory to the Kimberley Process Certification Scheme (KPCS) and as such Namdia has to subscribe to all the KPCS requirements. The KPCS is regulated under Namibian law to meet the minimum requirements of the KPCS. We have a diamond dealing licence – among other licences – as prescribed under the Diamond Act, Act 13 of 1999. Everything we do must comply with the provisions of the Diamond Act (Act 13 of 1999) and in fact any other Namibian law. We are not exempted from any law. Under the terms of the KPCS, participating states must meet ‘minimum requirements’ and must put in place national legislation and institutions; export, import and internal controls; and also commit to transparency and the exchange of statistical data. Participants can only legally trade with other participants who have also met the minimum requirements of the scheme, and international shipments of rough diamonds must be accompanied by a KP certificate guaranteeing that they are conflict-free. All our shipments are handled during export and import in the presence of diamond inspectors, customs officials and the diamond police (Protected Resources Unit). All documentation pertaining to our buying and selling is submitted to the relevant authorities. We have never sold a single diamond outside Namibia or in Dubai as alleged. We sold all our stones in Namibia, over the table and above board and not on the streets or in dark places. We are very serious about our processes and procedures. We aim to be a world-class operation that operates on world-class standards. At Namdia, we mean business and aim to establish a robust brand that is internationally recognized and revered. We don’t have the energy and appetite for shortcuts and unscrupulous deals and do not deal with questionable buyers. EB: Since Namdia’s creation it has been besieged with negative reporting. In terms of institutional set-up, have issues that have divided the board been resolved? KH: This might be a question best posed to the board of directors. However, for what it is worth, I might add that it must be remembered and understood that prior to the appointment of the management team, members of the board of directors had to step into certain operational roles (as the company was not yet adequately capacitated) to ensure that operational issues are attended to and that the business commences and gains momentum going forward. Clearly when the board and management are both involved in operational issues there is bound to be some form of friction due to overlapping role conflict. Once the management team was on board, members of the board of directors resumed their oversight duties, ensuring compliance to good corporate governance and the like. As with any business, there may be differences in thinking. However, it is precisely these differences and a mature approach to resolving them, which allows a business to take informed decisions in the best interest of the business and in this instance, for the country. These sorts of things are normal in business – especially with start-up infant organizations. I can assure you that we are now operating as a team at Namdia. I and management enjoy the full support and encouragement from the board. There are no petty issues at Namdia. Once again, Namdia belongs to all Namibians and whatever we do here must be in their best interests. We obviously cannot run Namdia like our own private business. Whatever we do must be in the best interests of the shareholder and our stakeholders need to be satisfied with what we are doing. So I am devoting a lot of attention to creating a conducive environment for us to do our work in an efficient and effective manner. Therefore, I resolved long ago to invest lots of time and energy building relationships with our key stakeholders, and obviously enhancing relationships with my board of directors is top of mind in my hierarchy of priorities. It doesn’t mean that at some point we shall not disagree here and there. But when that happens, I am sure we are all mature enough to meet eye to eye, listen truly and resolve differences based on facts, logic and critical thinking and with a spirit of mutual respect for one another. EB: What is Namdia’s strategic direction for the next five years? KH: We have a very comprehensive Strategic Plan that defines our values, our mission and our vision. A lot of time and effort has been put into developing this plan with the board and management having interrogated it ad nauseam, and we are now on the verge of finalizing it. I have just completed reviewing it together with management and our inputs have now been forwarded to our consultants for finalization. Similarly, the board had an opportunity to peruse it and provide its inputs. In early April (next month) our board and management will have a strategic retreat during which final touches will be made to the plan and we can then all sign off and own the plan. We will then socialize it with our shareholder and key stakeholders. I know we keep emphasizing that we are a selling organization. But we are more than that. We are actually an international sales and marketing organization. Our mandate is very wide and we have the discretion to embark on a kaleidoscope of activities in order to optimize and maximize revenue for the shareholder. Yes, today we are selling rough diamonds, but we are also only doing direct sales to clients. As our competencies improve we would become bolder and conduct tenders and auctions. As our organization matures, we will cut and polish some of our diamonds – yes, we do have a diamond cutting and polishing licence as well. We also have the opportunity to turn some of our stones into jewellery and we are in fact already exploring some strong partnerships in the market that would help us to accelerate the development of our brand and our foray further downstream – closer to the consumer. Namdia will go places where we Namibians have never dared to go before. We are brave, courageous and bold enough to do that. With our ever-improving capacity and expertise and with the knowledge that we are selling the best quality and the most sought-after diamonds in the world, the sky is the limit for Namdia. EB: It was reported that Namdia sold Namibia’s diamonds at a lower price than usual. Was this done and does this increase the country’s exposure on international diamond markets? KH: These allegations are nothing but lies. This was nothing else than … some detractors whose agendas are best known to them. There is no truth in those allegations. It must be made clear that there is no homogenous price for diamonds. In simple terms, diamonds are valued based on the four ‘Cs’ of each diamond, which are carat weight (size); clarity (quality), cut (shape of the diamond) and colour. Each stone is unique in character in terms of colour, clarity, shape and carat which is a measure of weight. It is crucial that each individual stone is valued according to those criteria. And so it stands to reason that there cannot be a one-size-fits-all price for diamonds. One common indicator is the average price per carat, which is calculated by dividing the sums of the prices of all individual diamonds by the total carat weight. The people making these allegations know nothing about the science of selling diamonds. Let me reiterate once again that we never sold a single stone in Dubai. Prior to operating from our new building we sold every single stone in the Namdeb Centre. We sold all the stones above and beyond De Beers’ selling price. We have answered this lie exhaustively and I hope that we can now put it to its final resting place. There is no way we will damage our brand by lowering the value of such beautiful diamonds. There is no way we shall ever do that. We want to do the opposite – squeeze as much margin out of the stone as possible. Without killing our client of course. EB: Namibia is one of the pioneers and strictly adheres to the Kimberly Process, so how does Namdia ensure that its operations, which thus far have been shrouded in controversy, does not taint the clean image the country has created on international diamond markets? KH: Legitimate diamantaires are proud of what Namibia has done in creating Namdia. Some of our neighbours envy us. Namibia is a model for good diamond governance throughout the world. Last year Namibia was peer reviewed by the KPCS and we passed with flying colours. It is then not surprising that Namibia was requested to consider chairing the KPCS as we did in 2008, at the KPCS plenary meeting in Australia in November last year. This is because we are considered a model for good governance and transparency. We have been concerned at the negative publicity we received last year, most of which was based on hearsay and therefore unfounded and unsubstantiated information. We have resolved going forward to be more transparent and to educate and inform all our stakeholders about what we are doing. We respect the role that the media plays as the fourth estate of good democratic governance and trust that they will view Namdia as the most authoritative source of information on all things Namdia. We have appointed a very experienced and seasoned communications expert who will always endeavour to answer media queries truthfully and with the respect they deserve. We must, however, be cognizant that we need to maintain confidentiality in our commercial dealings as we are trading in a very cut-throat and competitive environment. We cannot shoot ourselves in the foot by rendering ourselves naked in the eyes of our buyers and suppliers. This would make negotiating at arm’s length a daunting proposition for us. EB: We have read about differences of opinion on how Namdia should operate at board level, with board members resigning. As the CEO, how would you describe your relationship with the board? KH: The relationship between the board of directors and the office of the CEO has always been professional and cordial. What differences there may have been on a personal level have now been resolved and we move forward committed to carrying out the mandate of Namdia in the best interest of our shareholder, the Government of the Republic of Namibia, for the socio-economic development of Namibia and her people. EB: Certain media reports suggested that companies were formed specifically to take advantage of Namdia’s valuation needs. What is your take on these accusations and how have you dealt with them? KH: I know nothing about that. And therefore have no opinion on the matter.
New Era Reporter
2018-03-22 08:57:30 1 years ago