The business plan of Namib Desert Diamond’s(Namdia) is one the eye cannot miss, and the fact that the company “trades as a private company while started up with taxpayers money makes it even more intriguing.”
NamDia in line with the 10-year sales and marketing agreement between the Namibian government and De Beers, which officially commenced in August 2016 now enjoys its own direct presence on the global downstream market.
Minister of mines Obeth Kandjoze stated at the time that, “73% of all our diamonds will work directly for the Namibian economy (US$430 million through the NDTC and US$150 million through Namdia out of the total N$11.7 billion Namdeb Holdings production),”
In the official business plan NamDia, an entity that is 100% exclusively owned by the Government of Namibia reveals that it intends to be profitable and cash generative from Year two of operations.
The company’s plan dated June 2016, also calls for Namdia to be exempted from paying certain taxes.
Government has provided equity capital of N$20 million for start-up costs and an additional N$30 million as contingency capital.
According to the plan, the capital expenditure for the first year was US$575 000(N$7.2 million) while operational expenditure for the first year was US$595 000(N$8.3 million).
During the same period, the plan indicated that the company will spend about US$2.8 million (N$29.6 million) on staff remuneration. Namdia’s company structure makes provision for 14 employees. The company is likened to a management company, considering the fact that it has three-tier management structure headed by a CEO, general managers for finance, security and operations.
Each GM oversees three managers. More than 18 months since the inauguration of NamDia, management information appears scandalously flimsy.
The first year financials remain outstanding as the annual report is yet to be tabled to Cabinet. The business plan spread over 5 years shows that US$90 000(N$1.26 million) was earmarked for board fees for the first year of operations. The Namdia board is comprised 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(she has since resigned from the board), geologist Venondjo Maharero and the Chief Legal Adviser in the Attorney General’s Office, Chris Nghaamwa.
In early 2017 it was reported that the board earned excessive board fees due to the fact that NamDia is not established as a State Owned Enterprise in terms of the State Owned Enterprises Act. The company trades without a sovereign guarantee as a private company governed by the Companies Act, with limited liability.
Mines and Energy minister Obeth Kandjoze yesterday referred all questions to the Namdia board chair Shakespeare Masiza and CEO Kennedy Hamutenya. Public Enterprises minister Leon Jooste also referred media queries to the company’s board and management.
Hamutenya was not available for comment, while Masiza indicated that the company’s annual report is ready but it cannot be published until it submitted to Cabinet when probed on the availability of the company’s annual report.
NamDia is currently positioned to be Namibia’s rough diamond sales and marketing channel, with the objective of selling 15% of all run-of-mine Namibia rough diamonds through independent channels, excluding Diamond Trading Company (“DTC”).
According to the plan, NamDia will be positioned to create a sustainable route to market for some of Namibia’s diamonds, thus further ensuring Namibia’s place as a major player in the entire global diamond value chain.
NamDia has the right to purchase a 15% representative of Namdeb Holdings’ run-of-mine production per annum from NDTC.
The Purchase Entitlement include an annual minimum total value of US$150 million and a discount of 9.5%.
The annual minimum total value of US$150 million is effective in the event that Namdeb Holdings’ total sales in any Year is 95% or more of the 2014 Business Plan Forecast Sales for that corresponding Year (by carats or value).
According to the share capital and expenditure, the start-up capital of N$ 50 million will be directly financed by an equity capital investment by GRN through the Diamond Valuation Fund.
Also, N$30 million of the share capital will be reserved on a contingent basis to strengthen the company’s balance sheet.
The remaining balance of N$20 million, as per the plan, will be allocated as start-up capital, from which pre-start up expenses and operation expenses will be expended.
Dividend to government will only be paid from the second year, on an semi-annual basis.
“Dividend is paid from free cash flow subject to a minimum working capital balance of 3 months Operating Expenses and 10% of the rolling 12 month average of the cost of inventory.”
Further, on tax affairs, the plan indicates that NamDia should not pay VAT on diamond purchases or sales capital gains tax in Namibia.
“Corporate income tax of 32% is paid semi-annually on Net Profit After Interest, Depreciation and prior tax losses. There is a new proposed export levy that will be introduced in Namibia, however it is expected that NamDia will receive an exemption.”
In July this year, The Namibian newspaper reported that President Hage Geingob is allegedly worried by the manner in which Namib Desert Diamonds (Namdia) has started operating and that state diamonds are being sold for a song.
Mines minister Kandjoze also appointed C-Sixty Investment, to evaluate NamDia’s diamonds, estimated to be worth around N$2 billion per year.
In August, Geingob said he instructed Public Enterprises Minister Leon Jooste to investigate allegations of wrongdoing at Namdia and other State-Owned Enterprises (SOEs).
The president has been criticised for being too quiet on the NamDia question after The Namibian reported that one senior government official revealed that the underpricing of diamonds sold abroad could be costing government about N$1 billion or more per year.
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