The need for the beneficiation of Namibian diamond exports and its impact on economic performance

Gawanab, Alex Clive (2010-03)

Thesis (MBA)--University of Stellenbosch, 2010.


Since gaining independence in 1990, Namibia has enjoyed a fairly stable economic performance, but its heavy reliance on its natural resources, especially its mineral resources, is at times worrisome. Historically, the country has depended primarily on diamond exports as a major source of foreign exchange earnings and state revenue. The contribution of diamond mining to government revenue has over the years declined from a high of N$1493 million in 2002 to the levels of N$821 million in 2007. Similarly, the contribution of diamond mining to the Gross Domestic Product has decline marginally from N$4.59 billion (16.9 percent) in 2006 to N$3.56 billion (13.1 percent) in 2007 respectively. It is evident that there has been a steady, but progressive decline in the proportional contribution of diamonds to the national income in relation to the other sectors of the economy. This decline can however not be directly attributed to a corresponding decline in the diamond production output, but perhaps due to a decline in diamond demand and lower prices. Based on the fact that diamond production and expansion thereof to offshore operations in particular will continue for years to come and still make significant contribution to the Namibia economy, this study attempts to formulate value addition strategies that could lead to the optimisation of the Namibia diamond economy potential, especially local benefication, as well as increased international competitiveness within the established world diamond markets. To this end, it evaluates the intricate supply and demand patterns in the world diamond market to understand how Namibia could position itself. The study found that there is a clear case for local diamond benefication as an economic imperative and that it is a feasible proposition. However, it must be approached cautiously and within a clearly defined and structured framework. It is recommended that Namibia should pursue the benefication of her unique gem quality diamonds in conjunction with external manufacturing experts and marketers in order to secure a bigger stake in the global diamond pipeline. To this end the government needs to formulate clear incentive strategies and packages for investors and also open the playing field for local manufacturers, without compromising existing relations and revenue streams. Furthermore, it is suggested that Namibia strive to maintain an amicable balance between rough exports and local benefication, whilst expanding the regulatory and enabling environment. Other proposals that will support local benefication and competitiveness of the Namibian diamond economy are diamond branding and marketing through already existing diamond marketing pioneers such as DTC International. Finally, Namibia needs to embark upon strategies to urgently increase its skills base and improve the productivity of its labour force in order to achieve the vision of a flourishing diamond benefication sector.

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