Rendimiento académico

In contrast to the aggregate financial analysis the aim of the interviews and questionnaires was to give chain participants the possibility to voice their own views on the challenges they are faced with. In this regard they represent the individual agent opinions on reasons behind financial and diamond flow issues discussed earlier. For the first phase of the Namibian diamond value chain representatives of Namdeb Holdings and NDTC were interviewed. The main concern stated by the beginning of the chain representatives had to do with decreasing mining output yields and the subsequent changes in cost structures. According to them, the cost structure of land operations is already such that this part of diamond mining will gradually be phased out. Sherbourne (2013) also states this as a likely event during the ongoing decade. The marine operations still seem to be in a healthy state with growth to be expected.The possible gradual yield changes are a challenge from another perspective, namely financial responsibilities toward the national Government. According to interviewees the changing output and business environment is often neglected in discussions on taxation and royalties. The diamond industry is already the target of differential treatment in comparison to rest of the mining industry with 10 % of all revenues paid as royalties and 55 % corporate tax on profit compared to 32 % being the standard tax on profit for most Namibian companies. These higher tax burdens were, according to interviewees, based on historical financial realities that have since changed and do not today mirror the global market competition very well. In addition to these, legacy issues concerning personnel policies as well as running of schools, hospitals and other services in mining towns were stated as something that should gradually be phased out as they have nothing to do with the core business of Namdeb Holdings and should eventually be part of government service provision. Letting go of these is naturally a political issue, but again reflect the change of business realities and is essential to maintaining a competitive edge on the global market.

On a broader scale the challenge of Namdeb Holdings as part of De Beers is the changing competitive environment, where De Beers is no longer the sole global powerhouse it used to

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be up until 1990s. As seen in figure 9, there is already considerable rivalry among the top four producers, especially bearing in mind that De Beers used to hold up to 80 % of worldwide rough diamond production for most of the 20th century. This raised competition naturally sets boundaries on De Beers governance of the global diamond chain, meaning that at least in theory cutters and polishers have more possible sources to access raw material. In essence this is about creating and managing scarcity in the market, through which extra economic rents can be extracted. It seems plausible to assume that these scarcity management issues are behind the confidentiality agreements between De Beers and Namibian government, as they hold vital information pertaining to output profile information as well as marketing strategies that allow the company to hold on to its global market leadership position. In this regard, and which was stated also by the interviewees, it is also the Namibian national interest to keep diamond mining as profitable as possible, given the revenues the country receives from the industry. This is a plausible argument also based on the value addition share calculations carried out in the previous chapter, identifying the Namibian government as the largest recipient of value added in diamond mining.

Keeping the above in mind, the beginning of the chain, both in Namibia and globally, is faced with higher local beneficiation demands by source countries (McKinsey & Company, 2014). According to the interviews there are two issues that should be considered here. Firstly, the Namdeb view is that in value terms the share of Namibian diamond production viable to be cut locally is approximately 30 %, stated in interviews to be in the range of 1 – 10,6 carats. When diamonds from both Namibia and DTC aggregated parcels are considered, the inputs into local beneficiation are already close to this share. Analysis of NDTC local sales in this study supports this estimate, but global industry studies set the initial value based share of 1 – 10,6 carats into some question. As figure 19 previously showed, for a typical mine the above 2 carat stones account for more than 50 % of all value. Considering, in global comparison, the very high average per carat price of Namibian diamonds stated by Kimberley Process (2014) statistics, the value termed share of 30 % seems low. Of course, this is only based on deductive assumptions, as the carat profiles fall within the core of Namdeb confidential data.

The second concern raised by beginning of chain representatives is that present political opinion seems to favour vertical integration as a means to higher local beneficiation. This is something not seen as viable, lending also from experiences in the beginning of the 2000s, where Namdeb ran the cutting and polishing company NamGem for some time. During that time the company failed to become profitable. De Beers points to similar experiences

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elsewhere, with cutting and polishing operations run in Botswana until 2003 and sold as unprofitable, as well as a factory in Portugal, which also closed down in 2005 (Sherbourne, 2013). Experts argue that these experiences are a recognition of the fact that downstream integration is far from the core capabilities of De Beers and Namdeb, and should thus not be advocated as a viable possibility (Joint Value Addition Committee of Namibia, 2014).