Report: Diamond Beneficiation in Namibia Will Require Large Sacrifices

Finance and Trade
23/02/2016 10:54

Namibia's desire for beneficiation of its diamonds will require large-scale investment and big sacrifices by the country's population, says Professor Roman Grynberg, a senior research fellow at the Botswana Institute for Development Policy Analysis, a nongovernmental research organization. The government and people of Namibia will have to ask themselves if the high costs involved are worthwhile. He also writes that Botswana and Namibia have to recognize that there is currently no commercial advantage to cutting and polishing stones domestically, reports.

"Windhoek and Gaborone have to become better places to do business than the Indian cities of Mumbai and Surat,” Grynberg writes, referring to the fact that cutting and polishing can be more profitably carried out in India. Some analyses over the past year have suggested that due to the decline in demand for diamonds globally, producer states may find it more profitable to market diamonds in the international diamond centers until there is a turnaround in demand rather than polishing stones locally for which there is little, if any, demand. And, given that Namibia and De Beers have yet to sign a final sales agreement for the coming years, despite having agreed last year in principle on a plan, the option to market their rough directly to an international trade hub where they will receive the best price for their stones is still available.

Grynberg suggests that Namibia and Botswana need to cooperate closely on diamonds in the international market to succeed: Namibia needs to find talented locals to develop joint ventures, and also notes that the scarcity of indigenous diamantaires and dysfunctional utility services, such as information technology and electricity in Botswana and high operational costs in Namibia, pose big challenges to beneficiation in both countries. There are advantages for both, however, with Botswana’s unskilled wages being lower than those in India, and the fact that Botswana and Namibia are safe investment destinations for investors. “There is no level playing field in Botswana and, hence, beneficiation is a tax on De Beers. Walking away from a high cost beneficiation location like Southern Africa is a natural commercial response to a bear market,” he wrote. He adds that beneficiation only tends to make sense when transport costs are a significant issue in processing and other important inputs are available domestically. “Diamonds, because the transport of waste is a tiny portion of the cost and the transport of rough is such a low proportion of total cost, do not present an obvious case for local beneficiation.”