State-owned diamond marketing and sales company, Namib Desert Diamonds (Namdia), has had little justification for its existence after managing a paltry N$63m profit for the six months to February 2017, its maiden financial results show.
In the period from August 2016 to February 2017, Namdia sold N$861 million worth of diamonds on the international market, but only made an after-tax profit of N$63 million.
Namdia is a 100 percent State-owned company established in 2016 out of an agreement between government and diamond giant De Beers.
It was formed to “test” whether Namibia was getting the best income through the multinational by going onto the open market.
Namdia Chief Executive Officer, Kennedy Amutenya, recently told New Era that the decision by the government to form the company was to make inroads into the international market and reduce reliance on middlemen in selling diamonds.
Out of a total of US$430 million (N$5,3 billion) worth of diamonds earmarked for local manufacturing, Namdia has been granted the right to 15 percent, or a minimum of US$150 million, for international sales.
The Namibian reported in late 2016, that Namdia had sold the country's diamonds cheaply to companies in Dubai at rates below their real value, an assertion that the state owned diamond marketing and sales company has refuted on many occasions.
The daily quoted sources who claimed that Namdia had sold diamonds for US$500 (around N$7,100) per carat, while the same diamonds were then sold on for US$2,500 (N$35,600) per carat.
Public Enterprises Minister, Leone Jooste, told the Windhoek Observer that Namdia’s profits were understandable since the company was a start-up with high financing costs.
“During the initial period they have to carry high financing costs and overheads to establish the business.
“Going forward we will pay attention to efficiency and optimized returns as initial overhead costs stabilize. Profit margins are likely to increase,” Jooste said.
Notwithstanding the fact that Namdia was formed to bring more transparency in the marketing of Namibian diamonds on the international market, the company has maintained a veil of secrecy on its operations.
Namdia PR consultant, Usi Hoebeb, refused to divulge the markets or clients to which the company was selling its diamonds to and for how much per carat.
“It is unheard of in the diamond industry to publicly divulge client details. This is to not only to maintain client confidentiality, but also for the very safety and security of our clients.
“What I can reveal though is that, as Namdia’s capacity and competencies have increased, the company has also been able to increase its clients from the initial two, to the current five,” Hoebeb told the Windhoek Observer.
The Namdia financial results also show that its biggest single expenditure of N$11,2 million was on consulting fees while board members were paid a total N$4 million, N$200,000 more than the total employee costs of N$3,8 million.
Hoebeb defended the high consultation fees, saying Namdia was not yet fully staffed during the reporting period.
“You will appreciate that during this time, Namdia was not yet fully staffed (being the first six months of operations) and therefore had to outsource a significant amount of work to consultancies.
“This is normal business practice for especially start-ups. The areas/services which were initially outsourced included legal services; IT; Sales and Business development, Payroll Administration, Accounting; Recruitment and a host of others,” Hoebeb said.
The Namdia board comprises of Chairperson Shakespeare Masiza, Deputy Chairperson Tania Hangula, National Petroleum Corporation of Namibia (Namcor) Technology Manager Bonny Konjore, economist Lorentha Harases, human resources professional Florentia Amuenje, geologist Venondjo Maharero and the Chief Legal Adviser in the Attorney General’s Office, Chris Nghaamwa.
In September 2017, the Windhoek Observer correctly reported that Masiza had been paid N$616,597 for the first six months, which translates to over N$102,000 per month, while Hangula was paid N$577,279 or N$96,000 per month.
Other board members were paid N$560,000 each or N$93,000 per month.
At the time, Masiza said the figures were not correct while Hangula said she was not authorised to speak to the media.
Finance Minister, Calle Schlettwein, refused comment on Thursday, arguing that he will only do so after seeing the report.
“It is difficult to comment on the report right now because I have not seen it yet. I can only do so after I have seen it,” Shlettwein said when asked if Namdia was providing value for money to government.
According to the Namdia report, the company paid the John Walenga co-owned C Sixty Investments N$3,7 million as one of its ‘major supplier.’
The Windhoek Observer reported in July 2017 that C Sixty Investments had been sending invoices to the State-owned company for work not done.
This came through minutes of a Namdia board meeting of 27 March, in which Masiza informed the former Mines and Energy Minister, Obeth Kandjoze that the diamond company’s working relationship with C Sixty Investments has been challenging.
The company was appointed as the valuer of Namdia diamonds by the energy ministry without the company’s board input and knowledge.
C Sixty Investments charges an additional fee for valuating diamonds above two carats. Diamonds with carats in the range of 2 to 4.99 are charged at US$50 (N$649) per carat, while those in the 5 to 6,99 carat range are charged at US$60 (N$779) per carat.
Diamonds with carats between 7 to 9,99 attract a US$75 (N$974) charge per carat and those between 10 to 25 carats are charged at US$100 (N$1,298) per carat.