Namdia bought into Okahandja-based Namgem Diamond Manufacturing Company – despite lacking the technical capacity to run the factory and has now passed on the management of the company to an Indian entity as a technical partner.
Before the acquisition, Namgem was a 50:50-owned company by the state and Lazare Keplan International, a company owned by 91-year-old American diamond merchant Maurice Templesman.
Namdia, which has in the past faced allegations of selling diamonds to Dubai at low prices, confirmed it paid around US$2 million.
Namdia said the US$2 million is the “fair value” of half of Namgem.
Plans to turn the company around are, however, in place, the factory’s new owners say.
However, critics to the deal have questioned why a better technical company was not appointed before.
The Namibian reported that the buyout deal was most likely called for by the Ministry of Mines and Energy, which approached Namdia to take over 50% from Lazare.
“We did not want the company to shut down entirely, and jobs lost, so we approached Namdia to buy the other half,” mines minister Tom Alweendo said last month.
While it is common for companies to only buy profitable businesses, new management could improve operations and a return to profits could be seen, he added.
“This was the reason we approached Namdia; maybe they can turn it around,” Alweendo said.
Further plans are for Namdia to acquire the other 50% from the state to become the sole shareholder in the company.
Namdia said its decision to buy out Templesman’s company was to allow it to further participate in the diamond value chain, other than just remaining a rough diamond dealer.
It said it will not run the factory, but has appointed M Suresh Co, an Indian company, which also deals with the De Beers Group.
“Namdia presently does not possess the skills and abilities to run a diamond-cutting factory. In order to derisk the operation, so as to not incur potential losses, a technical partner was appointed to operate on own account and at own risk,” Namdia said.
Namdia was formed as a price-discovery agency for the Namibian government by trading in rough diamonds on the global market and creating a Namibian footprint in the jewellery retail market.
In doing so, it would then see whether Namibia was getting the best income through De Beers by going onto the open market.
“The future operation of Namgem depends on the fulfilment of the conditions precedent in the partnership agreement with the appointed technical partner, M Suresh,” Namdia said.
The Namibian reported in September this year that Namdia recorded a US$6.4million profit for the year ending February 2020 – at least US4.4 million less than last year.
The company pointed to the lower profit margins and the competition of synthetic diamonds as some of the causes, while saying the 41% drop in profit was to be expected, given the circumstances.
The results as announced showed that the company sold over 253 000 carats for US$127.6 million which translates to an average price of US$528,64 per carat at year end, the company said.
In February 2020, the company had a healthy balance sheet of US$9.4 million, just edging up slightly compared to the stock of assets at the end of 2019, which stood at US$27.5 million.
Assets are mainly locked in a cash and cash equivalents balance of US$18.3 million or 66%.
On equity, the company boasts a US$22 million balance in retained income.