Estrategias metodológicas para trabajar la comprensión

As explained in chapter 3.2.2.1, barriers to entry, trade and rent arise from various sources. Firstly, as proposed by Ricardo, economic rents are based on unequal ownership and access to scarce resources. Second, following the work of Schumpeter, scarcity can be constructed through the intentional actions of the entrepreneur in the process of innovation. Innovation creates so called dynamic barriers to rent, which means that the process occurs in cycles with innovators being able to capture extra profits for some time before competition catches up and pushes rents and prices down again. This dynamic nature of rents is the driver of capitalism and creates continuous change in the economy. (Kaplinsky, 2000). Barriers also refer to another process active within value chains, namely the ability of agents to protect themselves from competition through acquiring scarce resources or constructing other barriers exemplified by branding, certification schemes and designation of origin (Roduner, 2005).

These issues of competition and intentional efforts of agents creating barriers are closely related to the theories discussed in chapter 3. Firstly, it was shown by Sutton (2007b) that global competition exhibits a so-called moving capability window, which sets a lower boundary of quality and productivity which also act as a barrier of entry. This seems particularly relevant in the case of the Namibian diamond value chain when it comes to local value addition efforts. In the case of the middle market of cutting and polishing, the problem seems to be a combination of wage costs, labour legislation, scale effects and location costs that place Namibia under this access threshold in comparison to e.g. India as the hub of diamond cutting and polishing. It is exemplified by the fact Sherbourne (2013) states when he argues that no cutting and polishing company has opted to locate in Namibia without the promise of rough diamond supply from NDTC. In essence, he then states that the fundamental economic realities speak against locating that part of the value chain in Namibia unless there is a bundling benefit for the company evident in the access to rough from NDTC. In a different form the same capability window issue is present when access to global value chains is considered for the end of the chain, namely diamond jewellery. The issue here seems both more complex and beneficial for Namibia. For the middle market the weight of the cost competitiveness on location decisions seems hard to tackle, but in diamond jewellery the case of quality rises in relative importance. It would seem that there Namibia is already able to put forth a unique and differentiated product offering within the global quality capability window. The importance of this was also highlighted by Neary (2015), stating that especially in differentiated products quality competence was very important for successful export companies. Both Neary and

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Sutton then conclude on the cost versus quality competence discussion by saying that on the long run export market competitiveness cannot be based on cost competitiveness but on investments in quality. In this light, when further efforts for local beneficiation are put forth in both cutting and polishing and jewellery manufacturing, the main efforts should be in finding the unique differentiated products that Namibia could truly compete in and focus on raising the quality of these products throughout the value chain steps. In effect, this is what was discussed as a possible value chain strategy under chapter 4.6.6 when it was suggested that a niche group of Namibian diamonds could be identified that would then travel the entire chain within Namibian borders.

Keeping the above in mind, it would seem the beginning of the chain, diamond mining in Namibia, is quite well within the global capability window as suggested by Sutton. As concluded many times throughout this study, De Beers has been particularly successful in acquiring access to diamond resources, applying extensive marketing strategies to enhance the symbolic image of diamonds and governing the value chain in a way that has downstream agents largely dependent on the supply of rough diamonds. In this regard the De Beers/NDTC sightholder system is a significant barrier to entry, trade and rent. As Sherbourne (2013) acknowledges, however, the global diamond industry has changed considerably after the turn of the millennia with De Beers now governing about 40 % of global rough diamond trade compared to as much as 80 % for most of the 20th century. Still, it seems that De Beers sightholders would be extremely reluctant to let go their sightholder status if they were unhappy with the deal they are getting from the lead company. De Beers seems to be able to impose quite extensive restrictions on its sightholders, and, in fact, the status of a sightholder seems a prerequisite of becoming a significant agent in the diamond value chain, again both globally and especially in Namibia. On the national level it is the greatest barrier to entry, trade and rent for the cutting and polishing segment as no companies active in this part of the chain have chosen to locate in Namibia without access to Namdeb origin rough diamonds. On the other hand, it is particularly this power that enables also Namibia to capture much of the value inherent in the first step of the chain. As was seen in financial analysis as well, the Namibian government and the labour force of Namdeb are benefitting substantial amounts through taxes, royalties, dividends and wages. In this regard it seems that the local beneficiation efforts are well advised to concentrate on the remainder of the chain.

On a broader level the previously explained Kimberley Process (KP) is also an industry relevant global barrier to entry, trade and rent, put into place to ensure that economic rents are

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not channelled into conflict areas and to safeguard the rest of the industry from a tarnished image.

The Namibian diamond industry is naturally highly regulated by the Namibian legislative structures, which present the value chain with multiple barriers. The prominent role of Namdeb Holdings through the 50:50 venture of De Beers and the government in all essence guarantees that at least on a larger scale the beginning of the chain will be dominated by a single player into the foreseeable future. The entry into the next downstream link does also not seem considerably easier. When NDTC was set up in 2007, the Diamond Commissioner of Namibia announced a moratorium on the issuing of new cutting and polishing licenses, which tied the number of agents at this step to 17 license holders (Sherbourne, 2013). It is also worth noting that all these companies function under the Export Processing Zone (EPZ) framework outlined in chapter 4.3.1, which sets limitations to the way they conduct their business. In fact, it seems based on the interviews with the end of the chain jewellery agents, that the EPZ legislation in particular sets barriers to the flow of diamonds from cutters and polishers to jewellers. There are first of all restrictions on sales allowed within the South African Customs Union (SACU). In addition, and which pertains to the nature of the diamonds business, the transactions allowed between EPZ companies and Namibian jewellers face significant bureaucratic and security measures. One of the main worries put forth by Namibian jewellers with respect to local beneficiation at the end of the chain was, that in comparison to the local market, sourcing diamonds was considerably easier from abroad for example neighbouring South Africa. In this regard calls for local beneficiation are to some extent in conflict with legislative structures. In the policy sphere advantages of restrictions should be weighed against easing them in search for possible value addition gains, particularly as the economic analysis points to substantial potential in downstream activities.

The national legislative structures and the EPZ are closely related to another barrier rising in importance, namely international trade agreements. It seems that these are particularly relevant in the emergence of new regional value chains, as exemplified by the cases of China and South- East Asia by e.g. Baldwin (WTO, 2013). The problem here is that international agreements seem to substantially hinder the creation of the African value chain due to e.g. local content restrictions (Hoekman, 2013).

The role of Namdeb Holdings, the productivity and quality realities of the global diamond industry, the Kimberley Process, licenses on cutting and polishing and the later moratorium on

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their issuance as well as the EPZ framework and international trade agreements act as the most important barriers to entry, trade and rent within the Namibian diamond value chain. The analysis will now move to the chain link specific challenges learned through interviews and questionnaires. Each chain link is discussed individually. Within each of them segment specific barriers are identified in addition to the ones introduced here.