Namdeb has sold a large number of diamonds to India to save the company from “collapsing,” The Namibian reported.



The diamond sale, and in particular the identity of the buyer, that had been kept under wraps was unusual in the sense that Namdeb – with the help of Government – sidestepped the usual sales process with the Diamond Trading Company (DTC), said the report.



It has now emerged that Namibia and India engaged each other about the sale of diamonds to India among other issues during a two-day visit of the Indian Minister of State for Commerce, Jairam Ramesh to Namibia early last year, it said.



During the visit the two countries also investigated the possibility of India setting up a “training facility to polish and cut diamonds in an initiative to establish systems for the direct import of diamonds from Africa to India.”



On the eve of that visit, Ramesh was quoted as saying that India intended to buy rough and uncut diamonds directly from African countries, reportedly to cut out the middleman in diamond transactions and thereby reduce costs.

The buyer, which has now turned out to be Diamonds India Limited (DIL) is a consortium of 58 leading diamond and jewelry manufacturers and exporters in India. It was formed with the objective of directly sourcing rough diamonds from mining companies and countries, and selling them directly to the manufacturers in India.



Mines and Energy Minister, Erkki Nghimtina, told The Namibian that the direct deal with the Indian company was Government’s way of assisting Namdeb with its cash flow problems given the strain of the global financial crisis.



“The aim was to solve the cash problem...and to assist Namdeb to get the cash which De Beers could not give it,” he said.



He quelled questions on how much cash the transaction generated by saying the aim of the deal was more important than the size of the diamond deal, though international reports have quoted ‘highly-placed industry officials’ as saying the deal was “a large-sized transaction.”



“What was needed was cash,” says Nghimtina. “Namdeb had the stock, so we had to find a way to sell some of that stock,” he reportedly said, critical of the fact that even while on a three-month diamond production holiday, the company was still paying full salaries to its employees.



Early this year, Namdeb asked Government and De Beers to stand by their 50% stakes in the company by providing “letters of comfort” in order to maintain its N$650 million overdraft facility among all four commercial banks, said the report.



At the time, Namdeb MD, Inge Zaamwani-Kamwi noted that such surety is provided in the “unlikely event of Namdeb being unable to pay off the overdraft,” she said.



Nghimtina said that the DIL deal was one of the Government-initiated ideas to deal with the cash problem reflected by this issue, as well as by De Beers’ recent request to Government to waiver the payment of royalties until the diamond company is in a sound financial position.



He also said the deal does not mark the end of Namdeb’s current diamond sales agreement with the Namibia Diamond Trading Company (NDTC) and DTC International, which is set to be reviewed in 2013. When asked last week if the alternate sale signified a loss of trust between Government and De Beers, he simply stated that “the relationship between the Government and De Beers is intact.”



Nghimtina added, however, that the global financial crisis – which he described as “not ordinary but extraordinary” – has deeply affected Namdeb, thus requiring extraordinary measures to “save” the national diamond mining giant from “collapse,” which would be “detrimental” to the economy.



According to India’s Economic Times, the deal, which took place two weeks ago, marks a “breakthrough in procuring rough diamonds directly from a diamond miner in Africa.” Official sources were quoted by the newspaper as stating that “the deal is also significant since no other company in the world, apart from Diamond Trading Company, which belongs to the De Beers group, has been able to access rough diamonds directly from Namibia.”



De Beers holds a 50% shareholding, along with the Namibian Government, in Namdeb.



The usual Namdeb sales process is conducted through the Namibia Diamond Trading Company (NDTC) – also a 50:50 joint venture between the Namibian Government and De Beers. NDTC then deals directly with DTC, the distribution arm for the De Beers family of companies, for the local and international sale of Namdeb’s diamonds, said the report.