Namib Desert Diamonds (Namdia) says it has had a very successful business run since its establishment some two years ago. But New Era Senior Journalist Albertina Nakale wanted to hear more from CEO Kennedy Hamutenya, especially the negative Namdia headlines in the local press.
New Era (NE): What is Namdia and what is its mandate?
Kennedy Hamutenya (KH): Namdia is Namibia’s only sovereign international sales and marketing company. The company was created out of a Cabinet resolution. Before Namdia was created the government assembled an inter-ministerial team, which is a government negotiating team (GNT). At the time I was appointed as the lead negotiator. We were given terms of reference by Cabinet to achieve three things. One was to increase supply of rough diamonds to our factories which we successfully did. We were given a threshold of 20 percent to increase the volume of diamonds to the manufacturing companies- the diamond cutting and polishing factory by some 20 percent. The second mandate was to create a window on the market, meaning to give the government its own avenue of selling diamonds other than through De Beers channels. What the government really wanted was to create its own capacity to sort, to value and to negotiate the price of diamonds in the international market on our own without the help of third parties from outside the country. The objective was to create a level of independence because we were starting new, we were only getting 15 percent that is our starting point and that is where we are now.
And the third mandate we were given by Cabinet was to remove a clause in the agreement called the delivery entitlement which allowed De Beers to buy only when they wanted to as they could choose not to buy when the market was bad. We had to remove that from the previous agreement.
Those directives came from Cabinet. The company was established through the office of the Attorney General. At the time I was the sole director of the company as mandated by the government.
In August 2016, then Minister Obeth Kandjoze in consultation with Cabinet appointed the board of directors and they were given their mandate in August 2016. I was then instructed to resign as the sole director and those seven directors at the time [now six as one resigned] were appointed in consultation with Cabinet and I was then appointed as the acting CEO of the company. At the time I then applied for my job as CEO.
NE: Who owns Namdia? Please break down shareholding, if any.
KH: Namdia is 100 percent owned by the Government of the Republic of Namibia, which is the shareholder representative of the Namibian people. So Namdia is actually 100 percent owned by the Namibian people. That is the short and sweet answer that it’s owned by the Namibian people and there is no joint venture with foreign companies or anything - it is 100 percent owned by the Namibian people.
NE: How do you respond to media reports from last week that government didn’t know it owned Namdia?
KH: The Minister [of Mines and Energy Tom Alweendo] didn’t say that he didn’t know anything about the creation of Namdia, this is just the newspaper twisting it. What the Minister is essentially saying here is that Namdia was established in 2016 and at that time the list of SOEs was already gazetted. So, we were late in terms of the list which was already out there so in order for you to declare Namdia as a state-owned enterprise you have to go and gazette it again. So, it wasn’t gazetted at the time. As I explained to you, it was established as a private company owned by the government of Namibia. For you to be an SOE you have to be gazetted. You can be owned by government but not called an SOE. Let me go back, when we started, we were basically starting a company from scratch, there was zero. There was nothing here, there was no company, so what we had was an acting CEO. There was no way that I personally, Kennedy Hamutenya, could establish a company by myself without the help of others. So, the Minister then appointed a team of directors who had certain competencies whether it’s IT, HR and others and he then asked them at the inception that they were appointed to help me set up the company. It was then agreed and acknowledgement that these [board] directors were going to spend disproportionate amount of their time sitting with me trying to set up the company whether it’s the IT, HR, whether it’s the policies procedures.
So, they were spending disproportionate amounts of their time working with me to set up the company. There is no way you can set up something of this magnitude alone. Based on this disproportional amount of work they were doing here; the Minister said their board fees are at the level that they did because he realised that they would actually spend more time than ordinary board member would. Usually what you have with normal boards is four meetings annually, sometimes only three meetings a year and because it was a new company it was acknowledged that they will be spending so much time on this company.
At that general annual meeting, the Minister appointed the board members and he also told them that he will lower board fees once the management was in place. So, we had to recruit management and once management was in place the board would step back from operational issues and they will concentrate on strategic issues. At that point, then the board fees would be realigned to be like all other parastatals. When the new Minister came in, he then asked ‘how come you guys are receiving this amount of board fees.’
Then the board members said, look the old Minister was also assigned by the Office of [Attorney] General that Namdia was not an SOE at the time, so based on that rationale the board fees were set at that time. This Minister then set about to gazette this company as an SOE and as soon as he did, we had an AGM and the board were readjusted to be in line with Tier 3 like every other person.
NE: What is the current workforce at Namdia?
KH: The current work force of Namdia is 21. At the time when this structure was put together after we did our strategic planning and had a strategic business plan in place, the establishment was 47 people. We then started with the Minister of Public Enterprises and he advised for the need to be lean and mean and to save government money. We then eliminated a whole layer of managers from the structure and other positions as well. But in order to ensure there is business continuity, there are other six positions we have to hire. So, when we are done our structure will be 27 and it will stay like that. So, we have actually cut 20 positions from our structure for which the Minister of Public Enterprises has commended us.
NE: Where does Namdia source its diamonds from and how does that process work?
KH: Here we have to go back to the Diamond, Sorting, Valuation, Sales and Marketing Agreement between the government of Namibia and De Beers that was signed on 16 May 2016. The Minister announced at that meeting of the signing that there is going to be a company to be formed at that time it was a different name, it was a Nama name, !xami-something. And because we were going to be an international marketing company, we wanted a name that is synonymous with Namibia and that’s why we went with Namib Desert Diamond, named after the oldest desert in the world and is also were the diamonds are being mined. The answer to your question is the Diamond Sales, Sorting, Valuation and Sales Marketing Agreement which we signed on 16 May 2016 makes provision for Namdia to have an allocation of 15 percent representative cut off of all Namdeb Holdings production.
Some people think we get diamonds for free and just sell. Some people think Kennedy Hamutenya put diamonds in a briefcase and go to Dubai and call his friends and buy diamonds. No, all our diamonds were sold in the Namdeb centre, we have never sold any stone outside Namibia. We package the diamonds and ship them once buyers pay our money and we pay De Beers. So, we have an entitlement with Namdeb that allows us to buy and not take. We don’t take diamonds to Dubai or any other country, the buyers come here. The diamonds are sold on top of the table not under the table. We sell diamonds according to what we think is the prevailing market price and not what The Namibian newspaper thinks is the price of the stone. We have always sold above and beyond De Beers’ price for every single shipment and we have done 22 shipments for every five weeks. We borrow money from FNB to buy the stones. We borrow between U$18 million to U$25 million for every five weeks and we buy the stones from Namdeb through NDTC and we sell them and add our margins to our stone. There is not way we are going to buy a stone for N$100 and sell for N$80. We will not be here, we would be broke. It makes no sense that will be under-selling. We are actually overselling.
NE: What’s the difference, in terms of mandates and operations, between Namdia and NDTC and in what areas do the two entities cooperate?
KH: NDTC is on 50 percent Namibia and 50 percent De Beers. A lot of people don’t know what Namdeb stands for - it stands for Namibia De Beers. Namdeb is owned 50 percent by Namibian government and 50 percent by De Beers. Debmarine is 50 percent owned by the government of Namibia and 50 percent by De Beers. All these companies that are involved in trade, all the diamonds that are going through the market are sold through De Beers exclusively. Up until now the agreements have given De Beers exclusivity to sell Namibian diamonds. They sell these diamonds in the international market on behalf of Namibian government, we are not there with them, they are alone when they sell them. Namdia is 100 percent owned by the Namibian people. There is no joint venture with De Beers. Our diamonds are not sold and sorted by third parties, they are sold by us, Namibians.
NE: Why are Namdia diamonds said to be sold for “peanuts” as reported in the media?
KH: These things are said by people who have a vested interest or have an agenda or don’t understand the business. First of all, we have explained many times that diamonds do not have a uniform price like gold, copper, zinc or other minerals - that’s why you go in a newspaper and they tell you what copper is selling for and what uranium is selling for. There is no day that you will go in the newspaper and they tell you what the diamonds are selling for the week or so, why is it so? Because every diamond has an identity, it has a finger print just like you have your fingerprints. It’s not a homogenous commodity, but a heterogenous one. It’s in the eye of the beholder. Sometimes they sell nice at a certain time of the year, but doing bad in other times of year. The price of diamond is determined by its colour, clarity and size. These writers are misleading people because they are making people think that every stone should be sold for N$2500, there is no such thing. Stones come in 13 000 categories. That means there are 13 000 different price points for the diamonds, that’s why we spend a whole five weeks sorting the diamonds in categories before we sell them. That process starts from the mine and it continues to NDTC, putting the diamonds in different categories when they come here, we have to put them in the different boxes for our different clients. This assumption started in 2016 when somebody said we sold diamonds in Dubai in August 2016. That is false because our first sale was in September. The company that sold diamonds in Dubai in August was not Namdia. I know their name, it’s not Namdia, it’s another company that is doing exploration offshore in Namibia and we stated this to the media that it was not us but they continue to write that it’s us. Our first sale was in September, we sold to two guys from our list of 20 which was after we had a road show in July 2016. This road show was headed by the permanent secretary of mines and energy together with the permanent secretary of finance, it had somebody from the Bank of Namibia, from the Attorney General’s office, myself and the mining commissioner. When we went to the bank to ask for money, the minister gave us permission to do a road show as proof to the bank. We identified 20 buyers, and we categorised them according to their financial strength, their credibility and their reputation in the market because we didn’t have the capacity to sort the diamonds, we hired people from NDTC.
NE: How are sales of diamonds going?
KH: We are doing very well, you see, we just made our dividend of N$50 million. If we had government guarantees, we would not use some of our cash flow. We have a N$100 million sitting in FNB right now as collateral. As the company grows, we will give a better and bigger deposit to the government. We didn’t just ask for government guarantee but also for a letter of support because some banks didn’t get. We will make so much money if government gave us a letter of support. But we understand that the economy is not in great shape and its time for consolidation and belt-tightening. So, we will use the model we are using now because its working as we have a good relationship with the bank. They continue to give millions of US dollars to buy the diamonds.
NE: Please unpack for us the contradiction which, on one hand suggests that C Sixty Investments is Namdia’s diamond valuator and, on the other hand, that Namdia has no ties with that company. What’s the truth about suggestions that Minister of Mines and Energy Tom Alweendo single-handedly appointed C Sixty on behalf of Namdia without going on tender?
KH: The services of C Sixty were contracted by Minister [Kandjoze]. The agreement with C Sixty is with the ministry of mines, not with us. However, they are assigned to us because the prices are determined by De Beers and, basically, when we buy the stones we try and sell better than what we get at Namdeb. When we were negotiating, Namdeb said the price book is their intellectual property. So, they said ‘we will not allow you to know our prices’. They said we should go and determined our own prices because they would be accused of price collusion. Since the government traditional valuators have access to their price books, they said these valuators will not be allowed to valuate Namdia books. On that basis, the ministry went to get C Sixty. How they have done is entirely up to them. If the sales agreement allowed for these government valuators, then there would be no need for C Sixty. The law says no diamond can leave Namibia for exports without being valued and sealed. The ministry is compelled to have our goods valued. So, they had to find someone.
NE: Current Minister of Mines and Energy Tom Alweendo in July expressed concern over the current board sitting fees at Namdia, saying they were “excessive”. Who determined the fees and is the company doing anything to address the minister’s concerns?
KH: People need to understand the corperate governance of SOEs. There is a board, which reports to the Minister. I report to the board, so I have nothing to do with board fees. The shareholder determines the board fees and I explained earlier why they were high and reduced later.
NE: What have been the successes of Namdia so far?
KH: When we started, we were renting a small office in Maerua Mall for a year. Now we have our own building. We didn’t use taxpayers’ money as people are saying. We went to the bank and borrowed. Government told us that we can only build and work from this office if we met certain conditions. Number one, we have to make the building safer for the people working here so they can’t be robbed and to ensure no single diamond goes missing. So, what I did is put bulletproof glass and roof. It’s not just protecting the diamonds but also the people. We have police guard 365 days a year to protect us because the resource of the people is here. Our security is IT driven, even to track the diamonds. It takes money to make money. People are complaining about how much money is paid to staff. I need skilled people to work with diamonds. I can’t have someone who doesn’t know diamonds putting value on diamonds, they will be losing value. We are not here selling bananas and potatoes. We are selling diamonds. Our strategic plan is in place, it was approved by the Minister in August. Our structure is in place and all our policies are in place and approved by the board. We secured financing we need to buy diamonds from the bank without government guarantees or letter of support. We successfully sold 22 shipments without any stockpile. We have paid our first N$50 million dividend to the government.
NE: What are some of the major challenges that Namdia face?
KH: We face bad perceptions created by the media which we really think is unfair. They never come to us, they’d rather listen to third parties - unknown sources. Some people are just scared because we are challenging the status quo. I am seeing for the first time in my life De Beers is giving discount to lower quality diamonds. We are operating in a down market but because of strong clients we can still make a margin. Synthetic [products] remain a challenge to our business.
NE: What are some of the major activities (strategic, capital projects etc) at Namdia and what are the company’s key targets in the medium and long term?
KH: We have invited potential clients to apply. We received some 70 applications and 59 of those have paid their non-refundable deposits. We are expanding our client base all around the world from the current five to ten. Ten is a sustainable number for us. We are going to change our sales strategy to optimise revenue.
We want to go big into education, health and sports as part of social corperate responsibility. We want to go into the most impoverished communities and build classrooms and laboratories. We look forward to go into diamond cutting and polishing. We have done a feasibility study and made the proposal to the board. This was part of our business plan all along. We want to create a Namibian brand.